Business
McDonald's Defies Boycott Consequences and Reports Unexpected Sales Increase
McDonald's defies boycott consequences and records surprising revenue growth, but the US market remains under pressure due to consumer slump and food scandal.
McDonald's recorded an unexpected increase in global comparable sales by 0.4 percent in the fourth quarter, despite analysts expecting a decline of the same amount. Business in the Middle East region particularly recovered after a year of significant losses due to calls for boycotts related to the Gaza war.
The sales of the US fast-food corporation came under pressure after Hamas attacked Israel in October 2023 and the Israeli army launched a large-scale offensive in Gaza. In several Muslim-majority countries, including Indonesia and Malaysia, pro-Palestinian groups called for a boycott of Western brands like McDonald's and Starbucks.
The Israeli McDonald's franchise had provided free meals for Israeli soldiers at the time, which led to further protests in the Arab world. Despite the initial losses, comparable sales in the international licensee division, which includes Middle East markets among others, rose by 4.1 percent in the fourth quarter – the first increase in a year.
McDonald's stated in a report that the improved figures were due to the direct impacts of the Gaza war in the previous year already being priced in. Nevertheless, the company expects geopolitical uncertainty to continue to weigh on sales until the war ends and economic conditions recover.
While international markets stabilized, the US business suffered: Comparable sales in the US fell by 1.4 percent in the fourth quarter – more than expected. Especially the average order values decreased, although customer frequency slightly increased. McDonald's is trying to counteract with discounts and promotions.
Additionally, there was an E. coli contamination from an onion supplier in Colorado, which caused over 100 illnesses and one death. Some restaurants had to close temporarily. CEO Chris Kempczinski expects a full recovery of U.S. sales by early in the second quarter.
In Great Britain, where McDonald’s operates 1,470 branches, the financial burden on consumers is noticeable, said Kempczinski. An unnamed local competitor has also gained market share with aggressive price cuts, particularly in the breakfast segment.
McDonald's total revenue stagnated in the fourth quarter at $6.4 billion, slightly missing analysts' expectations. Net profit fell by 1 percent to $2 billion, also below forecasts. Nevertheless, the stock rose by 4.8 percent on the New York Stock Exchange.
