McDonald’s first-quarter results fell short of expectations, hampered by slowing economic growth in the United States and the fallout from the war between Israel and Hamas.
Comparable sales growth, a metric that tracks restaurants open more than a year, was 1.9%, slower than analysts polled by Bloomberg had expected. Each of McDonald’s geographic segments fell short of sales expectations for this metric, including a slight underperformance in the key U.S. market. The business unit, which includes the Middle East, recorded a decline.
McDonald’s has been hit by boycotts related to the war in the Middle East, warning on Tuesday of declining revenue “while the war continues.” Executives also said low-income U.S. consumers, an important part of the company’s customer base, were retreating.
The chain plans to focus on accessibility in the U.S., and in a call with investors, executives hinted at a nationwide menu of values. Chief executive Chris Kempczinski touted the success of offerings such as McSmart, a package available in countries such as Germany.
In its home market, McDonald’s already offers deals through its app and through offers that franchisees come up with, but the approach is “very fragmented,” Kempczinski said.
McDonald’s shares fell as much as 4% to $262.63 in New York, their lowest intraday price since Nov. 1. The stock had fallen 7.7% this year through Monday’s close, while the S&P 500 index was up 7.3%.
Some analysts lowered their forecasts for comparable sales ahead of McDonald’s results, in part due to data indicating slower traffic. After outpacing the rest of the industry in recent years, the burger chain is facing weakening demand worldwide as it embarks on an ambitious expansion strategy.
While comparable sales growth is slowing, the company saw systemwide sales rise 3% for the quarter. This figure also includes new restaurants, which are key to achieving the company’s goals.
McDonald’s hopes products like the limited-time Bacon Cajun Ranch McCrispy will attract customers. The company is also looking to attract customers to its loyalty program and offers packages under $4 at many US locations.
However, traffic may not improve sustainably in the first half of the year, BTIG LLC analyst Peter Saleh said in a note ahead of the earnings report. He believes discounting, which could undermine profitability, will likely remain widespread.
Earnings, excluding certain items, were $2.70 per share in the first quarter. Analysts polled by Bloomberg were expecting $2.72.