MCD’S PREDICTS MODERATING GROWTH, FEELS IMPACT OF MIDDLE EAST TENSIONS
After three years of exceptional sales growth, McDonald’s appears to be returning to Earth.
The Chicago burger giant said Monday it expects its same-store sales — or sales at locations open at least a year — to rise 3% to 4% this year, which is in line with historical averages. That’s down from double-digit gains 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,” McDonald’s President and CEO Chris Kempczinski said Monday during a conference call with investors.
McDonald’s shares dropped nearly 4%. McDonald’s got a glimpse of what’s to come in the fourth quarter when it lost sales in the Middle East and other markets due to the war in Gaza and saw fewer visits from lower-income consumers in the U.S.
McDonald’s global same-store sales rose 3.4% in the October-December period, well below the 4.7% increase Wall Street was expecting, according to analysts polled by FactSet.
Customers in the Middle East were angered after McDonald’s Israel — which is operated by a local franchisee — announced in October it was providing free meals to Israeli soldiers. In response, some franchisees, like McDonald’s Oman, announced donations to relief efforts in Gaza. Sales have since dropped in Muslim-majority countries like Malaysia and Indonesia as well as countries with large Muslim populations like France.
“So long as this conflict, this war, is going on ... we’re not expecting to see any significant improvement in this,” Kempczinski said. “It’s a human tragedy, what’s going on, and I think that does weigh on brands like ours.”
In the U.S., McDonald’s same-store sales rose 4.3% in the October-December period, fueled by price increases as well as promotions like its Happy Meal collaboration with artist Kerwin Frost. But Kempczinski said there were fewer visits and lower spending by customers earning $45,000 per year or less.
Kempczinski said that as grocery inflation has retreated, those customers are more likely to eat at home. McDonald’s hopes to get those customers back into its stores this year with marketing that emphasizes low-cost options.