Fast food giant McDonald’s (MCD:NYSE) shares fell 4% in US trading after fourth quarter same store sales growth missed Street estimates due to conflict in the Middle East.

The company said Middle Eastern sales were impacted by boycotts after its Israeli licensee offered discounts for soldiers.

Chief executive Chris Kempczinski noted other markets were also seeing an impact from boycotts including Indonesia, Malaysia, and France.

The company 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.’

HIGHER PRICING BOOSTS PROFITS

Global same store sales increased 3.4% falling short of estimates calling for a 4.9% rise while domestic sales also came in shy of forecasts.

However, an increase in menu prices and lower raw material costs saw adjusted EPS (earnings per share) increase 14% to $2.95 beating analysts’ estimates of $2.82 per share.

Full year EPS increased 18% to $11.94 as revenues grew 10% to $25.49 billion, just shy of Street estimates.

Looking ahead the company reiterated prior guidance which see it opening more than 2,000 restaurants and growing systemwide sales by around 2% as part of its expansion strategy.

WHAT ARE THE EXPERTS SAYING? 

Danni Hewson, head of financial analysis at AJ Bell commented:

‘McDonald’s smart menu adjustments and promotional offers kept customers coming back for more and as cost pressures decreased the company has been rewarded with stonking profit numbers.

‘The company’s CEO Chris Kempczinski had warned sales in the Middle East were likely to have taken a hit and that was confirmed today when the fast-food giant served up its first earnings miss in four years.

‘The big question for investors is whether the US brand will regain its shine in places like the Middle East, China and India, or if geopolitical events will continue to take their toll on this most Western of brands.

‘And what happens when the cost-of-living crisis that has pushed so many consumers to trade down is no longer such a defining force?’

Disclaimer: Financial services company AJ Bell referenced in the article owns Shares magazine. The author of the article (Martin Gamble) and the editor of the article (Steven Frazer) own shares in AJ Bell.

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