McDonald's three years of soaring sales are weakened by Middle East conflict

06 February 2024 , 14:39

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McDonald's said same-store sales are likely to increase by 3% to 4% after three years of huge growth

After three years of spectacular sales growth for McDonald's, the fast food chain reveals that sales have slowed down.

The famous burger company said this week that its same-store sales are likely to increase by 3% to 4%, returning to typical figures. This is a decrease from the double-figure growth seen in 2021 and 2022, and 9% growth last year.

"I think we are moving into a 2024 that's going to look more like what you would have considered a typical year prior to COVID and all the things that have gone on," said Chris Kempczinski, the president and CEO of McDonald's. Shares in McDonald's fell by 3.5% in early deals.

The fast food giant got a peek at future trends in the final quarter of last year, when it suffered sales losses in the Middle East and fewer visits from lower-income customers. McDonald's worldwide same-store sales climbed by 3.4% in the final three months of the year, but this was well underneath the anticipated 4.7%.

McDonald's Israel sparked outrage in the Middle East after announcing it was giving free meals to Israeli soldiers. This led to a drop in sales in Muslim-majority countries like Malaysia and Indonesia, as well as nations with large Muslim populations like France.

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McDonald's CEO, Kempczinski, said: "So long as this conflict, this war, is going on... we're not expecting to see any significant improvement in this," and "It's a human tragedy, what's going on, and I think that does weigh on brands like ours." Starbucks also faced boycotts due to its perceived support for Israel.

McDonald's Chief Financial Officer, Ian Borden, said: "We certainly know consumers are more wary - and weary - of pricing and we're going to continue to be consumer-led in our pricing decisions as we look forward to 2024. " Despite consumer sentiment being at an all-time low in China, McDonald's is planning to offer more deals to compete with other brands.

McDonald's had a strong performance overall. Viral marketing campaigns like last spring's Grimace shakes and improved menu items helped increase their annual revenue by 10% to nearly £20 billion ($25bn).

In the fourth quarter, McDonald's revenue increased by 8% to £5 billion ($6.4bn), which met analysts' expectations. Their net income also rose by 7% to £1.6 billion ($2bn).

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Lawrence Matheson