The Middle East conflict affected American burger chain McDonald’s international sales, and for the first time in two years, the multinational fast food chain missed quarterly profit estimates as budget-conscious customers ignored its offers.
As per the company, consumers have become more selective with every dollar they spend, resulting in a fourth consecutive quarter of lower global comparable sales growth, at 1.9%. Analysts had projected a rise of 2.35%, based on data from LSEG.
Despite posting a quarterly adjusted per-share profit of USD 2.70, slightly below analysts’ estimates of USD 2.72, the company reported a 1.9% increase in worldwide same-store sales, below the forecasted 2.1%.
“We have seen that our relative superiority on affordability has declined in some markets,” CEO Chris Kempczinski said on a post-earnings call.
McDonald’s said its higher US sales in the first quarter helped it overcome weakness in the Middle East and other markets where consumers have been boycotting the brand.
The venture’s revenue rose 5% to USD 6.17 billion in the January-March 2024 period. That was in line with Wall Street’s estimates. Net income was up 7% to USD 1.93 billion. Earnings, adjusted for restructuring charges, were USD 2.70 per share. That was short of analysts’ forecast of USD 2.72.
Talking about the fast-food chain’s United States sales figures, McDonald’s saw a 2.5% rise in same-store sales. However, customers gravitated towards low-priced menu options, such as breakfast value bundles and items priced under USD 4. However, this growth was significantly lower than the 12.6% growth reported in the previous year, indicating consumer caution amid inflation concerns.
In response to rising costs for eggs and other raw materials, the company has increased prices by mid- to high-single-digit percentages over the past year, despite lower-income budgets continuing to be stretched.
Around 10% of the company’s total revenue in 2023 came from its international licensees; however, compared to that, their sales fell 0.2%, offsetting gains from Europe, Japan, and Latin America. A 0.98% increase for the unit was anticipated by analysts.
Due to the Middle East conflict and a slowing Chinese economy—China is McDonald’s second-largest market after the United States. Besides, the company’s CFO, Ian Borden, had warned in March that international sales would decline sequentially in the first quarter.
Western companies like McDonald’s and Starbucks have been the target of boycotts and protests, because of their alleged support for Israel amid the ongoing Gaza and Middle East military tensions.
Due in part to decreased traffic and sales at its Middle Eastern locations, Starbucks even lowered its annual sales projection last quarter.