McDonald’s Faces Sales Slump Amid Controversy: A Look at Impact and Future Prospects
Watan-After months of boycotts against it, McDonald’s announced its failure to achieve its targeted sales for the first time in four years, affected by a noticeable decline in sales in the Middle East, Malaysia, Indonesia, and France due to boycott campaigns following its supportive stance toward the Israeli occupation in its war on Gaza, as reported by Reuters.
Since the beginning of the “Al-Aqsa Storm” operation last October, numerous calls have been made by activists and human rights organizations in Arab and Islamic countries to refrain from purchasing goods and services from Israeli companies or companies supporting the occupation, with McDonald’s, which sent free “burger” meals to the Israeli occupation army, at the forefront.
McDonald’s suffered a significant loss
The agency noted in the report written by “Debora Marie Sofia” that McDonald’s (MCD.N) announced on Monday its failure to achieve its targeted sales for the first time in four years, influenced by the noticeable decrease in sales.
This is attributed to the events in Gaza and the war waged by Israel, leading to a decline in demand for sales and a 4% drop in the company’s stocks.
The burger giant is among many Western brands that have faced protests and boycott campaigns due to its supportive stance toward Israel in its war on Gaza.
Tangible Impact
McDonald’s stated that the war “has had a tangible impact” on performance in some international markets in the fourth quarter of last year. The company also witnessed an impact on its sales in countries such as Malaysia, Indonesia, as well as in France, according to CEO Chris Kempczinski in a phone call.
He added: “As long as this war continues, we do not expect to see any significant improvement in these markets.”
The source also pointed out that comparable sales in the company’s licensed international developmental markets rose by 0.7% in the fourth quarter, widely missing growth estimates of 5.5%, according to LSEG data. The business accounted for 10% of McDonald’s total revenue in 2023.
Brian Mulberry, director of client portfolio at Zacks, said: “The effects of the war on earnings resilience will be our biggest concern,” expressing his belief that this issue will persist after the next quarter or perhaps even the next two quarters.
McDonald’s in China
Consumer spending in China, the second-largest market for McDonald’s, remained weak despite government support measures. While McDonald’s does not provide sales details in individual international markets, it noted that industry-wide promotional offers increased in China during this quarter as restaurants rushed to revive declining demand.
McDonald’s operations in the United States also showed signs of weakness, especially with low-income consumers reducing order sizes or trading down to cheaper items.
This led to a 4.3% increase in comparable sales in the United States in this quarter, slightly below estimates indicating a 4.4% increase. However, McDonald’s reported earnings per share of $2.95, surpassing estimates of $2.82.
Joshua Long, an analyst at Stephens, said, “It will take some time for results to return in the Middle East,” but he added that he remains optimistic about McDonald’s stock because it is “one of the best brands” going through a tough period.
McDonald’s expects its operating margin for 2024 to be in the medium to high range by 40% and expects to add more than 1,600 restaurants this year. It recorded an operating margin of 45.7% for 2023.
Global store sales rose by 3.4% in this quarter, contrary to estimates indicating a 4.9% increase, marking the slowest sales growth in about three years.
