Advertisement

McDonald's sales dented as Israel-Hamas war boycotts bite

McDonald's has reported its first quarterly sales miss in nearly four years amid customer boycotts related to the Israel-Hamas war.

The fast food giant said sales growth for the period in its division including the Middle East, China and India was 0.7% - far below market expectations of 5.5%, according to London Stock Exchange Group data.

It comes after a row was sparked last October when McDonald's Israel announced it had donated thousands of free meals to Israel Defence Forces (IDF) troops involved in the conflict.

The move sparked a furious backlash from critics of Israel's military action in Gaza - which included calls for a boycott of the chain.

Similar boycotts have hit other brands including Zara and Starbucks, which missed market expectations and cut its yearly sales forecasts last week.

In a trading update on Monday, McDonald's said the figures for its international developmental licensed markets division, covering the period from October to the end of December, were "positive... with the exception of the Middle East, which was impacted by the war in the region."

The division accounted for around 10% of the company's total revenue last year.

Money latest: It's National Sickie Day - and poll shows % who fake illness

But overall global same-store sales were also below expectations, rising 3.4% in the same quarter - well below the 4.9% forecast by analysts.

The company's US headquarters has been keen to keep out of the controversy, with sources stressing last year that its franchises in other countries are independent businesses licensed under the McDonald's brand.

Read more from business:
CBI settles legal case brought by sacked boss

Campaign for tourist tax U-turn 'not just about rich shoppers'
Unemployment rate may be much lower than estimated

McDonald's chief executive Chris Kempczinski first revealed last month that the company had suffered a "meaningful business impact" because of the war.

He blamed both the conflict and "associated misinformation", adding: "We abhor violence of any kind and firmly stand against hate speech, and we will always proudly open our doors to everyone."

The row also exposed tensions between McDonald's franchises in other nations. Saudi Arabia, Oman, Kuwait, the United Arab Emirates, Jordan, and Turkey all issued statements distancing themselves from McDonald's Israel, with many of them pledging aid to Gaza.

Revenue up, shares down

Last year McDonald's Malaysia blamed a boycott from pro-Palestinian activists for a dip in its profits, which it said had resulted in closures and job cuts, while the firm's Indian franchisee has also reported its first revenue decline in three years.

However, across 2023 as a whole, McDonald's reported global sales growth of 9% and revenue of nearly $25bn (£20bn), a rise of 10%.

The company credited the performance on factors including "strategic menu price increases" in the US and viral marketing hits - such as its Grimace Shake milkshakes, which have proved popular on social media but are not currently available in the UK.

However, commentators still expressed concern over the results.

Brian Mulberry, a client portfolio manager at Zacks Investment Management, which holds McDonald's shares, said: "The effects [of the war] on earnings durability would be our biggest concern...

"It looks like this is going to be an issue that persists past the next quarter or maybe even two."

Analyst Joshua Long, from Stephens, said it would take "some time" for results to recover in the Middle East.

But he said he was still positive about McDonald's stock, describing it as "one of the best positioned brands" to navigate difficult times.

Shares in McDonald's fell more than 3% in early trading on Wall Street following the earnings release on Monday.