McDonald’s Faces Sales Challenges in Year-End Period Due to Middle East Boycotts

McDonald's Stock

McDonald’s (NYSE:MCD) experienced a turbulent conclusion to an otherwise successful year, with sales being impacted in various markets due to the conflict in Gaza. Global same-store sales, reflecting sales at restaurants open for at least a year, increased by 3.4% in the October-December period. However, this fell short of the 4.7% growth anticipated by Wall Street analysts surveyed by FactSet.

The Middle East boycotts were triggered when McDonald’s Israel, operated by a local franchisee, announced in October that it would provide free meals to Israeli soldiers. In response, some franchisees, like McDonald’s Oman, declared donations to relief efforts in Gaza. McDonald’s President and CEO, Chris Kempczinski, attributed the sales challenges to “misinformation” in the Middle East and other regions. Alongside customer boycotts, McDonald’s had to temporarily adjust store hours or close locations due to protests.

Kempczinski emphasized McDonald’s stance against violence and hate speech in a LinkedIn post, asserting the company’s commitment to opening its doors to everyone. Despite the unexpected challenges at the end of the year, McDonald’s reported a strong overall performance for 2023, with global same-store sales rising by 9%.

Throughout the year, successful marketing campaigns, including viral hits like the Grimace shakes, and menu upgrades contributed to a 10% increase in full-year revenue, reaching nearly $25 billion. However, the impact of the Middle East boycotts affected the fourth quarter, where revenue rose by 8% to $6.4 billion, meeting analyst expectations. Net income also increased by 7% to $2 billion.

Excluding one-time items, such as a $66 million restructuring charge, McDonald’s earned $2.95 per share, surpassing analysts’ forecasts of a $2.83 per-share profit. In premarket trading on Monday, McDonald’s Corp. shares remained flat. The company’s experience mirrored that of other U.S. entities, as Starbucks reported facing similar boycotts in the Middle East and beyond due to perceived support for Israel.

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About the author: Stephanie Bedard-Chateauneuf has over six years of experience writing financial content for various websites. Over the years, Stephanie has covered various industries, with a primary focus on tech stocks, consumer stocks, health stocks, and personal finance. This stock lover likes to invest for the long-term. Stephanie has an MBA in finance.