McDonald's said on Monday that ongoing tensions in the Middle East are hurting its business.
The Chicago-based burger chain said in its fourth-quarter and full-year 2023 report released Monday that sales at its licensed market business, which includes most of its stores in the Middle East, rose just 0.7% last quarter. said.
The company said the low numbers reflected the “effects of the war” between Israel and the Palestinian militant group Hamas in the Middle East.
This is less than the company's overall sales growth of 3.4% and the sales growth of its U.S. and other international operations, which each grew more than 4%, the report said.
Monday's report marks a significant change from a year ago, when the company's License Markets business was its strongest performing segment, with sales growth of more than 16%, CNN Business reported.
McDonald's CEO Chris Kempczinski said on an earnings call Monday that the company has been “most significantly impacted” in the Middle East, including other Islamic countries such as Malaysia and Indonesia.
“Also, as we said in our prepared comments, our outlook is that as long as this conflict, this war, continues, we have no plans and we see a significant improvement in this situation. I don't expect that,” Kempczinski said. he told investors. “What's happening right now is a human tragedy, and I think that weighs heavily on brands like ours.”
The fast food company has come under intense scrutiny after McDonald's Israel distributed thousands of free meals to Israel's military and citizens following a surprise Hamas attack on southern Israel. The move prompted calls to boycott the company in protest of Israeli bombing of Gaza that has killed more than 27,400 people since October last year, according to the enclave's health ministry.
According to multiple media reports last November, multiple franchise owners in the Middle East and Asia spoke out against McDonald's move in Israel.
Kempczinski said Monday that backlash against local businesses during the Israel-Hamas war is “disappointing and unfounded” and that McDonald's “will always proudly open its doors to anyone.”
McDonald's is one of several companies facing boycotts over the Middle East, including Starbucks and Coca-Cola over accusations of supporting Israel's war in Gaza.
Last week, Starbucks lowered its sales forecast due to weak spending in China and other markets, according to the Associated Press.
McDonald's stock fell 3.7% on Monday following the announcement.
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