McDonald's records first sales miss in nearly 4 years

MCDONALD’S reported its first quarterly sales miss in nearly four years on Monday (Feb 5), squeezed by weak sales growth in its business division that includes the Middle East, China and India.

However, the company’s overall net profit rose 7 per cent in the fourth quarter, thanks to higher menu pricing and a let up in raw material costs.

Comparable sales in the company’s International Developmental Licensed Markets segment rose 0.7 per cent in the quarter ended Dec 31, widely missing estimates of a 5.5 per cent growth, according to LSEG data. The business accounted for 10 per cent of McDonald’s overall revenue in the first nine months of 2023.

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 Israel-Hamas conflict as well as “associated misinformation” about the brand.

McDonald’s is among several Western brands that have seen protests and boycott campaigns against them over their perceived pro-Israeli stance. Starbucks last week cut its annual sales forecast, partly due to a hit to sales and traffic 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 a sales recovery in China was slower than its expectations.

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McDonald’s Indian franchisee also reported its first revenue decline in three years.

McDonald’s does not break down sales in these markets.

The company’s US business is also starting to show signs of weakness. Traffic at McDonald’s US stores slumped 13 per cent in October, according to Placer.ai data cited by Wells Fargo. It declined 4.4 per cent and 4.9 per cent in November and December, respectively.

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Its comparable sales in the US climbed 4.3 per cent in the fourth quarter, just shy of estimates of a 4.4 per cent rise.

Global same-store sales increased 3.4 per cent in the quarter, missing estimates of a 4.9 per cent rise. That represented the slowest sales growth in about three years.

Excluding one-off items, McDonald’s posted a per-share profit of US$2.95. Analysts had expected a profit of US$2.82 per share. REUTERS