McDonald's Corp. results fell short of expectations in the first quarter, hampered by slowing growth in the US and the reverberations of the Israel-Hamas war.
Growth in comparable sales, a metric tracking restaurants open for over a year, was 1.9 per cent - slower than analysts polled by Bloomberg anticipated. Each of McDonald's geographic segments fell short of expectations on sales by that metric, including a slight miss in the key US market. The business unit that includes the Middle East recorded a decline.
McDonald's shares fell about 1.94 per cent at 7:01 am in premarket trading in New York. The shares had declined 7.7 per cent this year through Monday's close.
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Some analysts had trimmed their outlook for comparable sales before McDonald's released results, in part on data pointing to moderating traffic. After outpacing the rest of the industry in recent years, the burger chain is facing challenges on a variety of fronts as the company embarks on an ambitious expansion strategy.
Company executives have warned of slowing growth amid boycotts related to the war in the Middle East. On Tuesday, McDonald's warned of revenue weakness 'as long as the war continues.'
Low-income consumers in the US, which are an important part of the company's customer base, have also pulled back, executives have previously said. This contrasts with trends at chains such as Domino's Pizza Inc., which said frequency increased among that demographic in the first quarter. Executives are expected to provide more details in an earnings call on Tuesday.
While comparable-sales growth is slowing, the company pointed to a 3 per cent expansion in systemwide sales in the quarter. That gauge also includes new restaurants, which are key to the company's targets.
McDonald's is hoping items such as the limited-time Bacon Cajun Ranch McCrispy will bring in diners. It's also looking to attract customers into its loyalty program and with bundles for under $4 at many US locations.
Still, traffic might not improve in a sustained way in the first half of the year, BTIG LLC analyst Peter Saleh said in a note before the earnings release. He sees discounts, which can erode profitability, likely remaining prevalent.
Earnings, excluding some items, were $2.70 per share in the first quarter. Analysts polled by Bloomberg were expecting $2.72.
