McDonald’s missed quarterly profit estimates for the first time in two years as budget-conscious consumers looked past its offers and the Middle East conflict weighed on the burger chain’s international sales.
Global comparable sales growth slid for the fourth straight quarter to 1.9 per cent, with the company saying consumers turned “more discriminating with every dollar they spend”. Analysts had estimated a 2.35 per cent rise, according to LSEG data.
The company has raised prices by mid- to high-single-digit percentage over the past year in response to a rise in costs of eggs and other raw items even as lower-income budgets remain stretched.
Comparable sales from the company’s international licensees, which made up 10 per cent of its overall revenue in 2023, declined 0.2 per cent, offsetting positive trends from Japan, Latin America and Europe. Analysts had expected a 0.98 per cent rise for the unit.
McDonald’s CFO Ian Borden cautioned about a decline in international sales due to the Middle East conflict and China’s sluggish economy. These factors impacted McDonald’s, especially in its second-largest market, China.
Earlier this year, CEO Chris Kempczinski had flagged “meaningful business impact” due to the conflict as well as “associated misinformation” about the brand.
“The impact of the conflict in the Middle East was likely significant on McDonald’s comparable sales as it was noted by the company as the key reason its (international licensees) segment posted a decline in comparable sales Y/Y,” said Matthew Goodman, an analyst with research group M Science.
Furthermore, McDonald’s profit miss underscores the importance of agility and responsiveness in the face of changing consumer preferences.
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