People sit in outdoor seating at McDonald's after going out on a Saturday night on Rothschild Street on June 11, 2022 in Tel Aviv, Israel.
Alexi Rosenfeld | fake images
McDonald's and starbucksTwo of the largest restaurant companies in the United States said the war between Israel and Hamas affected their sales late last year.
McDonald's shares fell nearly 4% on Monday after it reported that a slowdown in sales in the Middle East contributed to its fourth-quarter revenue loss. Starbucks shares have fallen about 2% since Tuesday, when the company reported that the war also affected its U.S. sales in the final three months of the year.
The two restaurant giants became some of the largest U.S. companies to say the conflict in the Middle East hurt their sales and will likely hurt demand in future quarters as well. It's unclear whether other restaurant companies will see a similar decline.
Starbucks became a target of boycotts when Starbucks Workers United, which represents hundreds of the chain's unionized coffee shops, published posts supporting the Palestinians, sparking a backlash from conservatives. Starbucks attempted to distance itself from the tweet, which the union removed, and sued Workers United for trademark infringement.
Starbucks CEO Laxman Narasimhan said Tuesday that the company's sales in the Middle East struggled, but that the boycotts also hurt its coffees in the United States. The chain's comparable sales in the United States rose 5% in its fiscal first quarter ended Dec. 31, but foot traffic fell.
The delay in foot traffic in the United States was largely due to customers who only visited occasionally, according to Narasimhan. Starbucks seeks to revive demand by offering more specific promotions and introducing new drinks.
For its part, McDonald's saw a drop in fourth-quarter sales in the Middle East after its Israeli licensee offered discounts to soldiers, prompting some boycotts from customers opposed to 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, according to TD Cowen analyst Andrew Charles.
McDonald's CEO Chris Kempczinski said Monday that as a result, the company experienced weaker sales in the Middle East and Muslim-majority countries such as Malaysia and Indonesia. France, which has Europe's largest Muslim population, also saw weaker sales, although executives said the price reaction also contributed to weaker demand.
McDonald's doesn't expect its sales in the Middle East to recover until the war is over.
“The current impact of the war on these franchisees' local businesses is discouraging and unfounded,” Kempczinski told analysts on the company's conference call.
Unlike Starbucks, McDonald's saw no effect on its sales in the United States.
In addition to McDonald's and Starbucks, some activists have also called for a boycott Dominos Pizza, Papa Johns, Restaurant International Brands Burger King and Yum Brands Pizza Hut.
Yum Brands is scheduled to report its quarterly results on Wednesday, while Restaurant Brands will share its earnings on February 13. Domino's and Papa John's are not expected to release their fourth-quarter earnings until the end of the month.
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