McDonald's records first sales miss in nearly 4 years on slow international business

[February 05, 2024]  (Reuters) -McDonald's reported its first quarterly sales miss in nearly four years on Monday, squeezed by weak sales growth in its business division that includes the Middle East, China and India.
 
However, the company's overall net profit rose 7% in the fourth quarter, thanks to higher menu pricing and a let up in raw material costs. 

The McDonald's company logo is seen on the front of a restaurant in London, Britain, December 10, 2021. Picture taken December 10, 2021. REUTERS/May James/File Photo

Shares of the burger giant were down about 2% in premarket trading.

Comparable sales in the company's International Developmental Licensed Markets segment rose 0.7% in the quarter ended Dec. 31, widely missing estimates of a 5.5% growth, according to LSEG data. The business accounted for 10% of McDonald's overall revenue in the first nine months of 2023.

CEO Chris Kempczinski last month flagged a "meaningful business impact" in McDonald's Middle East market and some areas outside the region due to the Israel-Hamas conflict as well as "associated misinformation" about the brand.

McDonald's is among several Western brands that have seen protests and boycott campaigns against them over their perceived pro-Israeli stance. Starbucks last week cut its annual sales forecast, partly due to a hit to sales and traffic at stores in the Middle East.

Consumer spending in China, McDonald's second-largest market, has also remained weak despite government support measures. Starbucks previously said a sales recovery in China was slower than its expectations.

McDonald's Indian franchisee also reported its first revenue decline in three years.

McDonald's does not break down sales in these markets.

The company's U.S. business is also starting to show signs of weakness. Traffic at McDonald's U.S. stores slumped 13% in October, according to Placer.ai data cited by Wells Fargo. It declined 4.4% and 4.9% in November and December, respectively.

Its comparable sales in the U.S. climbed 4.3% in the fourth quarter, just shy of estimates of a 4.4% rise.

Global same-store sales increased 3.4% in the quarter, missing estimates of a 4.9% rise. That represented the slowest sales growth in about three years.

Excluding one-off items, McDonald's posted a per-share profit of $2.95. Analysts had expected a profit of $2.82 per share.

(Reporting by Deborah Sophia in Bengaluru; Editing by Sayantani Ghosh and Shounak Dasgupta)

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