McDonald’s Faces Profit Disappointment Amidst Cost-Conscious Consumers and Middle East Conflict
McDonald's, the American fast food giant, finds itself facing profit setbacks, with CEO Chris Kempczinski stressing growing financial caution among consumers and the repercussions of the conflict in the Middle East on its global operations.
In the latest quarter, McDonald's reported modest 1.9 percent growth in comparable sales, below Wall Street expectations. Sales in the United States, driven by higher prices, rose 2.5 percent, although much lower than the 12.6 percent increase recorded the previous year.
Despite implementing menu price adjustments to address rising ingredient costs, McDonald's still faces challenges in meeting the budget constraints of its low-income customer base.
The impact of the conflict in the Middle East is reflected in McDonald's international franchise sales, where a decline of 0.2 percent was observed. This decline, which was attributed to ongoing hostilities in the region, was offset by positive sales trends in other key markets such as Japan, Latin America and Europe.
While total revenue for the first quarter rose 5 percent to $6.2 billion, contributing to quarterly net income of $1.93 billion, CEO Kempczynski acknowledges increased consumer discrimination amid rising prices in everyday expenses, putting additional pressure on restaurant Fast service. industry.
Previous warnings by the group's chief financial officer, Ian Borden, about declining international sales due to tensions in the Middle East and the economic slowdown in China have proven correct. Kempczinski highlights the “meaningful commercial impact” of the conflict, which has been exacerbated by misinformation surrounding the brand.
McDonald's joins a group of Western brands facing boycotts over their perceived affiliations, especially after declaring its support for Israeli issues. In a similar context, Starbucks revised its annual sales forecast in response to the decline in sales and visitor traffic in its Middle East stores.
While McDonald's faces profit challenges, other fast food chains such as Restaurant Brands International and Domino's Pizza are showing resilience. The owner of Burger King beats expectations, helped by renewed demand at its outlets, while Domino's benefits from promotions on its pizzas.
Founded in 1940 by Dick and Mac McDonald in California, McDonald's has grown into a global brand with more than 40,000 outlets in 100 countries. With a market value of $197 billion, McDonald's shares closed slightly lower at $273.06 in New York, reflecting the industry's challenges amid changing consumer behaviors and geopolitical tensions.
