The Israel-Hamas war has had a significant impact on the sales of major U.S. restaurant companies, McDonald’s and Starbucks. McDonald’s reported a fourth-quarter revenue miss due to a sales slowdown in the Middle East, causing its stock to fall by 4% in morning trading. The conflict prompted McDonald’s Israeli licensee to offer discounts to soldiers, which led to boycotts from customers who opposed the country’s offensive in Gaza. This resulted in weaker sales not only in the Middle East but also in majority Muslim countries such as Malaysia and Indonesia. Even France, which has the largest Muslim population in Europe, experienced weaker sales. Pricing backlash was also identified as a contributing factor to the decline in demand.
Similarly, Starbucks encountered challenges in sales during the Israel-Hamas war. The company’s U.S. sales were affected in the final three months of the year, causing a 2% drop in its stock. Starbucks endured backlash from conservatives when Starbucks Workers United, a union representing the chain’s cafes, posted in support of Palestinians. Although the tweet was deleted, the damage had already been done. Starbucks CEO Laxman Narasimhan acknowledged that the boycotts impacted the company’s U.S. cafes. While Starbucks experienced a 5% rise in same-store sales in the fiscal first quarter, foot traffic declined. The drop in foot traffic primarily came from occasional customers. In response, Starbucks plans to revitalize demand by offering targeted promotions and introducing new beverages.
Both McDonald’s and Starbucks anticipate the war’s impact on sales to extend into future quarters. McDonald’s CEO Chris Kempczinski expressed concern about the ongoing effect on franchisees’ local businesses, emphasizing that recovery is unlikely until the war ends. Starbucks, on the other hand, aims to recover by implementing strategies to attract customers through promotions and innovation. However, it remains uncertain whether other restaurant companies will experience a similar downturn due to the Middle East conflict.
Potential Boycotts and Other Affected Brands
Apart from McDonald’s and Starbucks, several activists have called for boycotts of other major restaurant chains, including Domino’s Pizza, Papa John’s, Burger King (owned by Restaurant Brands International), and Pizza Hut (owned by Yum Brands). The impact on these brands is yet to be determined, but the controversy surrounding the war raises concerns about potential negative effects on their sales as well. Investors and stakeholders will closely watch the upcoming quarterly reports of Yum Brands and Restaurant Brands International for insights into the extent of the impact on these companies.
The Israel-Hamas war has had significant repercussions on the sales of McDonald’s and Starbucks. Both companies experienced a decline in revenues due to boycotts, sales slowdowns in the Middle East, and pricing backlash. McDonald’s witnessed weaker sales in the Middle East and majority Muslim countries, while Starbucks struggled with sales in the U.S. Both companies are actively working to address these challenges and revive demand. The aftermath of the war and potential boycotts of other restaurant chains will be closely monitored to assess the broader impact on the industry.
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