People dit at McDonald’s outdoor seating after going out on a Saturday night along Rothschild Street on June 11, 2022 in Tel Aviv, Israel.
Alexi Rosenfeld | Getty Images
McDonald’s and Starbucks, two of the largest U.S. restaurant corporations, each said the Israel-Hamas war hurt their sales at the top of last yr.
Shares of McDonald’s fell nearly 4% on Monday, after it reported that a sales slowdown within the Middle East contributed to its fourth-quarter revenue miss. Starbucks’ stock has fallen roughly 2% since Tuesday, when the corporate reported that the war dented its U.S. sales in the ultimate three months of the yr, too.
The 2 restaurant giants became among the largest U.S. corporations to say the Middle East conflict hurt their sales — and can likely hit demand in future quarters, as well. It’s unclear whether other restaurant corporations will see an identical downturn.
Starbucks became a goal of boycotts when Starbucks Employees United, which represents tons of of the chain’s unionized cafes, posted in support of Palestinians, resulting in backlash from conservatives. Starbucks sought to distance itself from the tweet, which the union deleted, and sued Employees United for trademark infringement.
Starbucks CEO Laxman Narasimhan said Tuesday that the corporate’s sales within the Middle East struggled, but boycotts also hurt its U.S. cafes. The chain’s U.S. same-store sales rose 5% in its fiscal first quarter ended Dec. 31, but foot traffic fell.
The lag in U.S. foot traffic largely got here from customers who only visited occasionally, in response to Narasimhan. Starbucks is seeking to revive demand by offering more targeted promotions and introducing latest drinks.
For its part, McDonald’s saw fourth-quarter sales slip within the Middle East after its Israeli licensee offered discounts to soldiers, prompting some boycotts from customers who oppose the country’s offensive in Gaza. The Middle East typically accounts for about 2% of McDonald’s global sales and 1% of its global earnings before interest and taxes, in response to TD Cowen analyst Andrew Charles.
McDonald’s CEO Chris Kempczinski said Monday that the corporate saw weaker sales within the Middle East and majority Muslim countries, like Malaysia and Indonesia, in consequence. France, which has the biggest Muslim population in Europe, also saw weaker sales, although executives said pricing backlash also contributed to softer demand.
McDonald’s doesn’t expect its Middle Eastern sales to recuperate until the war ends.
“The continuing impact of the war on these franchisees’ local business is disheartening and ill-founded,” Kempczinski told analysts on the corporate’s conference call.
Unlike Starbucks, McDonald’s didn’t note any effect on its U.S. sales.
Besides McDonald’s and Starbucks, some activists have also called for boycotts of Domino’s Pizza, Papa John’s, Restaurant Brands International’s Burger King and Yum Brands’ Pizza Hut.
Yum Brands is scheduled to report its quarterly results on Wednesday, while Restaurant Brands is slated to share its earnings on Feb. 13. Domino’s and Papa John’s will not be expected to release their fourth-quarter earnings until the top of the month.
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