McDonald’s reported mixed quarterly results Monday as turmoil within the Middle East took a toll on its sales in those markets.
Shares of the corporate closed nearly 4% lower on Monday.
Here’s what McDonald’s reported compared with what Wall Street was expecting, based on a survey of analysts by LSEG, formerly generally known as Refinitiv:
- Earnings per share: $2.95 adjusted vs. $2.82 expected
- Revenue: $6.41 billion vs. $6.45 billion expected
The fast-food giant reported fourth-quarter net income of $2.04 billion, or $2.80 per share, up from $1.9 billion, or $2.59 per share, a yr earlier.
Excluding the write-off of software that is not in use, restructuring costs and other items, McDonald’s earned $2.95 per share.
Net sales rose 8% to $6.41 billion.
The chain’s global same-store sales grew 3.4% within the quarter, falling in need of StreetAccount estimates of 4.7%, as its Middle Eastern sales struggled.
The international developmental licensed markets segment saw its same-store sales increase just 0.7%. McDonald’s said the division’s sales lagged consequently of the Israel-Hamas war.
McDonald’s has seen its Middle Eastern sales falter from boycotts after its Israeli licensee offered discounts for soldiers. The corporate has also needed to shutter some locations temporarily to make sure employees’ safety from protests. Boycotts also dented Starbucks’ quarterly sales.
McDonald’s CEO Chris Kempczinski said the corporate is seeing sales in some markets outside the Middle East weaken consequently of the boycotts as well. He named Malaysia and Indonesia, each of which have majority Muslim populations. France, too, saw “some impact.”
“The Company is monitoring the evolving situation, which it expects to proceed to have a negative impact on Systemwide sales and revenue so long as the war continues,” McDonald’s said in a regulatory filing.
All other markets within the segment, like China and Japan, reported positive same-store sales growth for the quarter.
Domestic same-store sales rose 4.3%, about in keeping with expectations, helped by menu price hikes. The corporate also credited effective marketing and digital sales growth.
Within the third quarter, McDonald’s said its U.S. traffic fell as low-income consumers pulled back their spending. It was the primary sign that diners were starting to draw back from the chain’s higher prices. McDonald’s has also been rolling out an improved version of its burgers nationwide, because it tries to persuade customers that its prices are value it.
“The battleground is actually with that low-income consumer,” Kempczinski said.
The corporate didn’t say whether U.S. traffic fell again within the fourth quarter.
The corporate’s international operated markets segment, which incorporates Canada, Australia and Germany, reported same-store sales growth of 4.4% for the period, shy of StreetAccount estimates of 5.1%. Same-store sales shrank in France, nevertheless.
“We’re not pleased with our performance in France right away,” Kempczinski said.
Pricing backlash contributed to France’s weaker sales, he added.
More broadly, the chain is seeing a slower begin to 2024, executives said. They named tough comparisons to a robust quarter a yr earlier and rough weather in January as two contributing aspects.
For 2024, McDonald’s reiterated its forecast from December that recent restaurants will increase its systemwide sales growth by nearly 2%, excluding currency changes. The chain plans to open greater than 2,100 recent locations this yr as a part of a broader technique to speed up its expansion and reach more customers.
The corporate also said it is going to spend between $2.5 billion and $2.7 billion this yr on capital expenditures. Greater than half of that cash will go toward opening recent restaurants within the U.S. and its international operated markets.