McDonald’s results hurt by Mideast war and slowing US growth

McDonald’s Corp. results fell short of expectations in the first quarter, hampered by slowing growth in the U.S. and the reverberations of the Israel-Hamas war. Growth in comparable sales, a metric tracking restaurants open for over a year, was 1.9%—slower than analysts polled by Bloomberg anticipated. Each of McDonald’s geographic segments fell short of expectations on sales by that metric, including a slight miss in the key U.S. market. The business unit that includes the Middle East recorded a decline. McDonald’s has taken a hit from boycotts related to the war in the Middle East, warning on Tuesday of revenue weakness “as long as the war continues.” Executives have also said that low-income consumers in the U.S., an important part of the company’s customer base, are pulling back. The chain plans to focus on affordability in the U.S., with executives hinting at a nationwide value menu in a call with investors. CEO Chris Kempczinski touted the success of offers like the McSmart, a bundle available in countries including Germany. In its home market, McDonald’s already offers deals through its app and through offers franchisees have come up with, but that approach is “very fragmented,” Kempczinski said. Restaurant news: Chili’s calls out the Big Mac in new value play McDonald’s shares were down 0.16% to $273.12 in morning trading in New York. The shares had declined 7.7% this year through Monday’s close, while the S&P 500 Index was up 7.3%. Some analysts had trimmed their outlook for comparable sales before McDonald’s released results, in part on data pointing to moderating traffic. After outpacing the rest of the industry in recent years, the burger chain is facing weakened demand across the world as it embarks on an ambitious expansion strategy. While comparable sales growth is slowing, the company pointed to a 3% expansion in systemwide sales in the quarter. That gauge also includes new restaurants, which are key to the company’s targets. Also read: How Domino’s is taking on tipping fatigue McDonald’s is hoping items such as the limited-time Bacon Cajun Ranch McCrispy will bring in diners. It’s also looking to attract customers into its loyalty program and with bundles for under $4 at many U.S. locations. Still, traffic might not improve in a sustained way in the first half of the year, BTIG LLC analyst Peter Saleh said in a note before the earnings release. He sees discounts, which can erode profitability, likely remaining prevalent. Earnings, excluding some items, were $2.70 per share in the first quarter. Analysts polled by Bloomberg were expecting $2.72. —Bloomberg News

McDonald’s results hurt by Mideast war and slowing US growth

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