McDonald’s experiences a notable decline in sales amidst a boycott movement

The global food chain McDonald’s faced criticism when its Israel chapter announced last year that it had provided thousands of free meals to Israel Defence Forces troops involved in actions deemed as war crimes in Gaza. This led to a worldwide consumer boycott against the fast food giant. Similarly, coffee chain Starbucks also faced similar boycotts.

Now, the latest figures reveal that the McDonald’s boycott has had a significant impact. The company reported its first quarterly sales miss in nearly four years on Monday, citing sluggish sales growth in its business division encompassing the Middle East, China, and India, as reported by The Guardian.

According to data from the London Stock Exchange Group, comparable sales in McDonald’s International Developmental Licensed Markets segment only rose by 0.7 percent in the quarter, falling far short of the estimated 5.5 percent growth. This segment contributed to 10 percent of McDonald’s total revenue in 2023.

CEO Chris Kempczinski expressed concern last month about the “meaningful business impact” in McDonald’s Middle East market and other regions outside the Middle East due to the conflict, as well as the spread of “misinformation” about the brand.

Brian Mulberry, client portfolio manager at Zacks Investment Management, which holds McDonald’s shares, stated, “The effects [of the conflict] on earnings durability would be our biggest concern… it looks like this is going to be an issue that persists past the next quarter or maybe even two.”

Similar boycotts have affected other brands like Zara and Starbucks, with Starbucks missing market expectations and reducing its yearly sales forecasts last week. The company informed investors of a “significant impact on traffic and sales” in the Middle East due to the conflict in Gaza. Starbucks also mentioned that the sales recovery in China was slower than anticipated.

Meanwhile, consumer spending in China, McDonald’s second-largest market, has remained weak despite government support measures.

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