- First quarterly turnover missed in almost four years
- But overall profits rose 7% due to higher prices and lower ingredient costs
McDonald’s reported its first quarterly revenue in nearly four years on Monday, sending its shares down slightly.
Global sales of restaurants open at least a year rose 3.4 percent in the October-December period – well below the 4.7 percent increase Wall Street had expected.
Customers in the Middle East were angry after McDonald’s Israel – run by a local franchisee – provided free meals to Israeli soldiers in October.
In response, some franchisees – such as McDonald’s Oman – announced donations to Gaza relief efforts.
But overall, the company’s net profit rose 7 percent in the fourth quarter, thanks to higher menu prices and a drop in raw material costs.
Customers are being warned of more price hikes in California – due to a new law raising the minimum wage for fast food workers, which major chains say means they will have to raise prices.
Last month, McDonald’s CEO Chris Kempczinski warned that “misinformation” in the Middle East and elsewhere was hurting sales.
FILE – A McDonald’s sign is shown at a McDonald’s restaurant in East Palo Alto, California, Friday, April 20, 2012. McDonald’s reports earnings on Monday, February 5, 2024. (AP Photo/Paul Sakuma, File)
In addition to customer boycotts, McDonald’s has had to temporarily limit store opening hours or close some locations due to protests.
Comparable sales in the company’s International Developmental Licensed Markets segment – which accounts for ten percent of sales – rose 0.7 percent in the three months to the end of December.
That’s a big miss from estimates of 5.5 percent growth, according to LSEG data.
It was an unexpected end to an otherwise strong year for the burger giant, which said global sales rose 9% in 2023. Viral marketing hits, just like those from last spring Grimace tremblesAnd improved menu items helped increase annual revenue by 10% to nearly $25 billion.
McDonald’s is one of many Western brands that have seen protests and boycott campaigns against them for their perceived pro-Israel stance. Starbucks cut its annual sales forecast last week, partly due to a hit to sales and footfall 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 its sales recovery in China was slower than expected.
McDonald’s Indian franchisee also reported its first sales decline in three years.
McDonald’s does not distribute sales in these markets.
The company’s US operations are also starting to show signs of weakness. Traffic at U.S. McDonald’s stores fell 13% in October, according to Placer.ai data cited by Wells Fargo. In November and December, interest rates fell by 4.4% and 4.9% respectively.
Comparable sales in the US rose 4.3% in the fourth quarter, just below expectations of a 4.4% increase.
Global same-store sales rose 3.4% this quarter, missing estimates of a 4.9% increase. That represented the slowest sales growth in about three years.
Excluding one-time items, McDonald’s posted earnings per share of $2.95. Analysts had expected earnings of $2.82 per share. (Reporting by Deborah Sophia in Bengaluru; Editing by Sayantani Ghosh and Shounak Dasgupta)