McDonald’s Earnings Dragged Down By Inflation And Israel-Hamas War Boycotts

Inflation and war in the Middle East took some of the shine off the Golden Arches in the first quarter of the year.

On Tuesday, McDonald’s said first-quarter adjusted earnings came in at $2.70 per share for the first three months of the year,  missing the consensus forecast of $2.72.

McDonald’s rarely misses earnings forecast. Shares of the fast-food company slid in early morning trading following the results but were nearly flat by midday even while the broader market slumped.

The company raised prices by 10 percent last year. Over the past decade, prices have nearly doubled, according to some analysts.

Inflation weighs particularly heavily on lower-income families. The company has noted that lower-income customers are visiting its burger joints less frequently and spending less per visit.

“Consumers continue to be even more discriminating with every dollar that they spend as they faced elevated prices in their day-to-day spending, which is putting pressure on the industry,” CEO Chris Kempczinski said on the company’s conference call.

Same-store sales in the U.S. rose 2.5 percent, just missing forecasted growth of 2.6 percent.

Kempczinski said the company was “laser-focused” on affordability to attract diners.

McDonald’s has faced rising labor costs from a combination of a tight labor market and minimum wage hikes. Several states raised their minimum wage last year, including California, which hiked its minimum wage for fast food workers to $20 an hour.

McDonald’s also said its restaurants in the Middle East have taken a hit from boycotts linked to the Israel-Hamas war. Supporters of Hamas and critics of Israel have called for boycotts of the fast food chain. Sales in the Middle East fell 0.2 percent, the first regional sales decline for the company since the pandemic.

The “continued impact of the war in the Middle East more than offset positive comparable sales in Japan, Latin America and Europe,” McDonald’s said. “The Company is monitoring the evolving situation, which it expects to continue to have a negative impact on Systemwide sales and revenue as long as the war continues.”