People sat in the outdoor seating of McDonald’s after going out along Rothschild Street on a Saturday evening in Tel Aviv, Israel, on June 11, 2022.
Alexi Rosenfeld | Getty Images
MC Donalds And Starbuckstwo of the largest U.S. restaurant companies both said the war between Israel and Hamas hit their sales late last year.
Shares of McDonald’s fell nearly 4% on Monday after the company reported that a decline in sales in the Middle East contributed to its fourth-quarter sales decline. Starbucks shares have fallen about 2% since Tuesday, when the company reported that the war continued to hurt its U.S. sales in the final three months of the year.
The two restaurant giants were among the largest U.S. companies and said the Middle East conflict had hit their sales – and would likely continue to hit demand in coming quarters. It’s unclear whether other restaurant companies will experience a similar decline.
Starbucks became the target of boycotts when Starbucks Workers United, which represents hundreds of the chain’s unionized cafes, posted posts in support of Palestinians, prompting backlash from conservatives. Starbucks sought to distance itself from the tweet, which the union deleted, and sued Workers United for trademark infringement.
Starbucks CEO Laxman Narasimhan said Tuesday that the company’s sales were struggling in the Middle East but boycotts were also hurting U.S. cafes. The chain’s U.S. same-store sales rose 5% in its fiscal first quarter, which ended Dec. 31, but customer traffic fell.
According to Narasimhan, the delay in foot traffic in the US is largely due to customers who only stopped by occasionally. Starbucks wants to stimulate demand through more targeted promotions and the introduction of new drinks.
McDonald’s, for its part, saw fourth-quarter sales decline in the Middle East after its Israeli licensee offered discounts to soldiers, sparking some boycotts from customers opposing the country’s offensive in Gaza. The Middle East typically accounts for about 2% of McDonald’s global sales and 1% of global earnings before interest and taxes, according to TD Cowen analyst Andrew Charles.
McDonald’s CEO Chris Kempczinski said Monday that the company saw weaker sales in the Middle East and Muslim-majority countries such as Malaysia and Indonesia as a result. France, which has the largest Muslim population in Europe, also saw weaker sales, although executives said price setbacks also contributed to weaker demand.
McDonald’s doesn’t expect its sales in the Middle East to recover until the war ends.
“The ongoing impact of the war on these franchisees’ local business is disheartening and unfounded,” Kempczinski told analysts on the company’s conference call.
Unlike Starbucks, McDonald’s saw no impact on its US sales.
In addition to McDonald’s and Starbucks, some activists have also called for a boycott Domino’s Pizza, Papa John’s, Restaurant Brands International Burger King and Yum Brands’ Pizza Hut.
Yum Brands is expected to report quarterly results on Wednesday, while Restaurant Brands is scheduled to report earnings on February 13. Domino’s and Papa John’s are not expected to report their fourth-quarter results until the end of the month.
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2024-02-05 21:02:11
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