BENGALURU - McDonald’s reported its first quarterly sales miss in nearly four years on Feb 5, squeezed by weak sales growth in its business division that includes the Middle East, China and India.
The burger giant is among several Western brands that have seen protests and boycott campaigns against them over their perceived pro-Israeli stance in the Israel-Hamas conflict.
Comparable sales in McDonald’s International Developmental Licensed Markets segment rose 0.7 per cent in the quarter, widely missing estimates of a 5.5 per cent growth, according to London Stock Exchange Group data. The business accounted for 10 per cent of McDonald’s total revenue in 2023.
Chief executive Chris Kempczinski in January 2024 flagged a “meaningful business impact” in McDonald’s Middle East market and some areas outside the region due to the war, as well as “associated misinformation” about the brand.
Starbucks last week also cut its annual sales forecast, partly due to a hit to sales and traffic at stores in the Middle East.
Consumer spending in China, McDonald’s second-largest market, has also remained weak despite government support measures. Starbucks previously said a sales recovery in China was slower than its expectations.
McDonald’s Indian franchisee also reported its first revenue decline in three years.
McDonald’s does not break down sales in these markets.
The company’s US business is also starting to show signs of weakness. Traffic at McDonald’s US stores slumped 13 per cent in October, according to Placer.ai data cited by Wells Fargo. It declined 4.4 per cent in November and 4.9 per cent in December.
Its comparable sales in the United States climbed 4.3 per cent in the fourth quarter, just shy of estimates of a 4.4 per cent rise.
Still, the company’s overall net profit rose 7 per cent, thanks to higher menu pricing and a let up in raw material costs.
McDonald’s projected 2024 operating margin to be in the mid-to-high 40 per cent range and said it expects over 1,600 net restaurant additions in 2024.
It reported an operating margin of 45.7 per cent for 2023. Shares of the company were up marginally in volatile pre-market trading.
Global same-store sales increased 3.4 per cent in the quarter, missing estimates of a 4.9 per cent rise. That represented the slowest sales growth in about three years.
Excluding one-off items, McDonald’s posted a per-share profit of US$2.95. Analysts had expected a profit of US$2.82 per share. REUTERS
