McDonald's posts rare profit miss as customers turn picky
FILE PHOTO: A sign for the U.S. fast food restaurant chain McDonald’s is seen outside one of their restaurants in Sint-Pieters-Leeuw, near Brussels, Belgium March 4, 2024. REUTERS/Yves Herman/File Photo
By Savyata Mishra
(Reuters) -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%, with the company saying consumers turned “more discriminating with every dollar they spend”. Analysts had estimated a 2.35% 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% of its overall revenue in 2023, declined 0.2%, offsetting positive trends from Japan, Latin America and Europe. Analysts had expected a 0.98% rise for the unit.
In March, McDonald’s CFO Ian Borden had warned of a sequential fall in international sales in the first quarter, pressured by the Middle East conflict and a sluggish Chinese economy, its second-largest market after the United States.
Earlier this year, CEO Chris Kempczinski had flagged “meaningful business impact” due to the conflict as well as “associated misinformation” about the brand.
Western brands like McDonald’s and Starbucks have faced protests and boycott campaigns against them over their perceived pro-Israeli stance. Last quarter, Starbucks cut its annual sales forecast, partly hit by lower sales and traffic at stores in the Middle East.
“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.
McDonald’s results were also in contrast to those from other fast food chains reporting first-quarter numbers.
Burger King-owner Restaurant Brands International beat expectations for quarterly results on Tuesday, while Domino’s Pizza benefited from offers on pizzas.
McDonald’s first-quarter same-store sales grew 2.5% in the United States, sharply lower than a 12.6% growth last year and slightly below estimates of a 2.55% growth, signaling that cash-strapped Americans remained picky about offers at fast-food chains amid still-high inflation.
Adjusted per-share profit came in at $2.70, below an estimated $2.72, according to LSEG data. Total operating costs and expenses increased 2% to $3.43 billion.
The company’s shares were marginally down in premarket trading, after slipping nearly 8% so far this year.
(Reporting by Savyata Mishra in Bengaluru; Editing by Saumyadeb Chakrabarty)