McDonald’s, a global fast-food chain, recently experienced its first quarterly sales miss in nearly four years. This shortfall was primarily attributed to weak sales growth in key markets such as the Middle East, China, and India.
Despite the disappointing sales performance, the company’s overall net profit still managed to increase by 7% in the fourth quarter. This uptick in profit was attributed to strategic measures such as implementing higher menu pricing and benefiting from a decrease in raw material costs.
However, despite the increase in net profit, shares of McDonald’s saw a decline of approximately 2% in premarket trading, reflecting investor concerns about the company’s performance.
In terms of specific market performance, comparable sales in McDonald’s International Developmental Licensed Markets segment only rose by 0.7% in the fourth quarter. This figure fell significantly short of market estimates, which had anticipated a growth rate of 5.5%. It’s worth noting that this segment accounted for 10% of McDonald’s overall revenue in the first nine months of the previous year.
CEO Chris Kempczinski attributed some of the challenges faced by McDonald’s in certain markets, particularly in the Middle East, to the Israel-Hamas conflict. The conflict, coupled with what he referred to as “associated misinformation” about the brand, had a notable impact on McDonald’s business operations in the region.
McDonald’s, along with other Western brands, has been subject to protests and boycott campaigns over perceived support for Israel. Starbucks, another multinational corporation, also faced similar challenges, leading to a reduction in its annual sales forecast.
In addition to geopolitical tensions impacting sales, consumer spending in China, which represents McDonald’s second-largest market, remained subdued despite government support measures. This trend mirrored Starbucks’ experience, as both companies reported slower-than-expected sales recovery in China.
McDonald’s also faced challenges in India, where its franchisee reported its first revenue decline in three years. Despite these difficulties, McDonald’s does not provide detailed sales breakdowns for individual markets.
The U.S. market, traditionally a stronghold for McDonald’s, also showed signs of weakness. Traffic at McDonald’s U.S. stores saw significant declines in October, November, and December, according to data from Placer.ai cited by Wells Fargo. However, comparable sales in the U.S. managed to increase by 4.3% in the fourth quarter, albeit slightly below market estimates.
Globally, McDonald’s reported a 3.4% increase in same-store sales in the fourth quarter, which was slower than anticipated. This represented the slowest sales growth the company had experienced in approximately three years.
Overall, despite the challenges faced in various markets, McDonald’s managed to post a per-share profit of $2.95, excluding one-off items. Analysts had expected a slightly lower profit of $2.82 per share.
