People dit at McDonald’s open-air seating after going out on a Saturday night along Rothschild Street on June 11, 2022 in Tel Aviv, Israel.
Alexi Rosenfeld | Getty Sculptures
McDonald’s and Starbucks, two of the biggest U.S. restaurant companies, both said the Israel-Hamas war hurt their sales at the end of last year.
Dividends of McDonald’s fell nearly 4% on Monday, after it reported that a sales slowdown in the Middle East contributed to its fourth-quarter profits miss. Starbucks’ stock has fallen roughly 2% since Tuesday, when the company reported that the war dented its U.S. vendings in the final three months of the year, too.
The two restaurant giants became some of the largest U.S. companies to say the Middle East disagree hurt their sales — and will likely hit demand in future quarters, as well. It is unclear whether other restaurant crowds will see a similar downturn.
Starbucks became a target of boycotts when Starbucks Workers United, which reflects hundreds of the chain’s unionized cafes, posted in support of Palestinians, leading to backlash from conservatives. Starbucks aimed to distance itself from the tweet, which the union deleted, and sued Workers United for trademark infringement.
Starbucks CEO Laxman Narasimhan foretold Tuesday that the company’s sales in the Middle East struggled, but boycotts also hurt its U.S. cafes. The chain’s U.S. same-store white sales rose 5% in its fiscal first quarter ended Dec. 31, but foot traffic fell.
The lag in U.S. foot traffic chiefly came from customers who only visited occasionally, according to Narasimhan. Starbucks is looking to revive demand by sacrifice more targeted promotions and introducing new drinks.
For its part, McDonald’s saw fourth-quarter sales slip in the Middle East after its Israeli licensee tendered discounts to soldiers, prompting some boycotts from customers who oppose the country’s offensive in Gaza. The Middle East typically accounts for close by 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 ordered Monday that the company saw weaker sales in the Middle East and majority Muslim countries, like Malaysia and Indonesia, as a terminate. France, which has the largest Muslim population in Europe, also saw weaker sales, although executives said charge backlash also contributed to softer demand.
McDonald’s doesn’t expect its Middle Eastern sales to recover until the war bounds.
“The ongoing impact of the war on these franchisees’ local business is disheartening and ill-founded,” Kempczinski told analysts on the company’s discussion call.
Unlike Starbucks, McDonald’s did not note any effect on its U.S. sales.
Besides McDonald’s and Starbucks, some activists fool also called for boycotts of Domino’s Pizza, Papa John’s, Restaurant Brands International’s Burger King and Yum Makers’ Pizza Hut.
Yum Brands is scheduled to report its quarterly results on Wednesday, while Restaurant Brands is slated to share its earnings on Feb. 13. Domino’s and Papa John’s are not envisioned to release their fourth-quarter earnings until the end of the month.
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