McDonald's Corp. experienced a mixed financial quarter, with its revenue falling short of expectations due to the impact of ongoing conflict in the Middle East on its operations in the region. Despite an overall 8% increase in net sales to $6.41 billion, the fast-food giant missed the anticipated $6.45 billion mark set by analysts surveyed by LSEG, formerly known as Refinitiv. The company's global same-store sales saw a modest 3.4% growth, which did not meet the expected 4.7%.
The international developmental licensed markets segment, including the Middle East, reported a mere 0.7% increase in same-store sales, primarily affected by the conflict between Israel and Hamas. This situation has led to boycotts and protests against Western brands perceived as supporting Israel, including McDonald's, particularly after McDonald's Israel, operated by a local franchisee, provided free meals to Israeli soldiers.
Despite these challenges, McDonald's managed a net income rise to $2.04 billion, or $2.80 per share, up from $1.9 billion a year earlier. The company also highlighted an adjusted earnings per share of $2.95, surpassing the $2.82 prediction.
In response to the ongoing conflict and its repercussions on sales, McDonald's emphasized its commitment to monitoring the situation, acknowledging the potential continued negative impact on systemwide sales and revenue. The company's domestic same-store sales in the U.S. showed resilience with a 4.3% increase, attributed to menu price hikes, effective marketing, and digital sales growth.
Looking forward, McDonald's reiterated its 2024 outlook, projecting that new restaurants would contribute nearly 2% to systemwide sales growth, excluding currency changes. The company plans to inaugurate over 2,100 new locations this year, emphasizing its strategy to accelerate expansion and reach more customers. Additionally, McDonald's anticipates spending between $2.5 billion and $2.7 billion on capital expenditures, with a significant portion allocated to opening new restaurants in the U.S. and international operated markets.
This financial performance reflects the complex challenges McDonald's faces, from geopolitical tensions in the Middle East affecting sales in certain segments to adapting to changing consumer behaviors and regulatory environments, such as the new law in California raising fast-food workers' minimum wage. The company's strategic focus on expansion, digital innovation, and marketing efforts aims to navigate these challenges and sustain growth.
