McDonald’s on Monday said the ongoing tensions in the Middle East are putting a dent in its business.
In its fourth quarter and full-year 2023 report released Monday, the Chicago-based burger chain said sales in its licensed markets business — which includes most of its Middle East locations — increased by only 0.7 percent in the last quarter.
The company said the low number is a reflection of “the impact 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 percent and that of their U.S. and other international businesses, which each increased by more than 4 percent, the report stated.
Monday’s report marked a significant shift from a year ago, when the company’s licensed markets business was its best-performing sector, with more than 16 percent sales growth, CNN Business reported.
McDonald’s CEO Chris Kempczinski said during a Monday earnings call that the company is seeing the “most pronounced impact” in the Middle East, with other Muslim countries including Malaysia and Indonesia.
“Also, as we said in our prepared remarks, our outlook is, so long as this conflict, this war is going on, we’re not making any plans, we’re not expecting to see any significant improvement in this,” Kempczinski told investors. “It’s a human tragedy what’s going on, and I think that that does weigh on brands like ours.”
The fast-food company came under scrutiny after McDonald’s Israel gave away thousands of free meals to Israeli forces and citizens following Hamas’s surprise assault on southern Israel. The move prompted calls to boycott the company in protest of Israel’s bombardment of Gaza, which has killed more than 27,400 people since last October, per the enclave’s Health Ministry.
Multiple owners of franchises in the Middle East and Asia came out in opposition against the move by McDonald’s Israel, per multiple media reports last November.
Kempczinski on Monday called the backlash against local businesses amid the Israel-Hamas war “disheartening and ill-founded” and noted McDonalds “will always proudly open our doors to everyone.”
McDonald’s is among several companies facing boycotts over the Middle East, with others including Starbucks and Coca Cola over accusations of supporting Israel’s war in Gaza.
Starbucks last week lowered its sales forecast in the wake of weakened spending in China and other markets, The Associated Press reported.
McDonald’s shares dropped by 3.7 percent Monday following the announcement.