McDonald’s reported its first quarterly sales miss in nearly four years on Monday, 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% in the quarter, widely missing estimates of a 5.5% growth, according to LSEG data. The business accounted for 10% of McDonald’s total revenue in 2023.
The CEO, Chris Kempczinski, last month 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.
“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,” said Brian Mulberry, client portfolio manager at Zacks Investment Management, which holds McDonald’s shares.
Starbucks last week also cut its annual sales forecast, partly due to a hit to sales and traffic at stores in the Middle East.
Meanwhile, 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 would have also seen similar trends in China in the quarter, Zacks Investment’s Mulberry added.