Social Media Users Claim Boycotts Are Hurting McDonald’s Bottom Line

McDonald’s has faced limited boycotts worldwide over its alleged support for Israel after Hamas attacked the country in October 2023. 

Pro-Palestinian posters on social media are now crediting the boycotts with hurting the company’s bottom line. One Instagram post—made by humanitarian clothing brand Wear the Peace—features a screenshot of a recent article in the Guardian, a left-leaning British newspaper. “McDonald’s records first sales miss in nearly four years amid boycotts,” reads its headline. “Company is among several western brands that have seen protests and boycott campaigns over perceived pro-Israeli stance.”

The post is correct. McDonald’s did underperform earnings estimates in the fourth quarter of 2023, caused mostly by lagging sales growth in the Middle Eastern market.

Following the attacks on October 7, McDonald’s restaurants in Israel donated thousands of meals to Israeli military personnel, sparking backlash from Arab McDonald’s chains and Muslim customers worldwide. Some supporters of the Palestinian cause have chosen to boycott the restaurant in response, with McDonald’s Malaysia even suing the boycott movement in response. 

Publicly traded companies in the U.S. are required by the Securities and Exchange Commission to file earnings reports every quarter (except following the fourth quarter, when annual earnings reports are required). Financial institutions often use various forecasting methods to predict these earnings in advance of their public release. These estimates—which are made by security analysts at banks like Wells Fargo and UBS—are then averaged together to determine a consensus estimate (also known as the “street expectation”) of what a company’s earnings might be for any given reporting period. Companies generally see a boost in their stock price when they outperform street expectations, but their equity value takes a hit when they underperform.

McDonald’s earnings report for the fourth quarter and full year ending December 31, 2023, was filed during the first week of February. In the report, the company announced that it had seen global same-store sales growth of only 3.4 percent in the quarter, underperforming the street estimate of 4.7 percent. “Segment performance reflected positive comparable sales in all geographic regions, with the exception of the Middle East, which was impacted by the war in the region,” the report read. “International Developmental Licensed Markets [IDL] segment increased 0.7%, reflecting the impact of the war in the Middle East.”

On an earnings call the same day, McDonald’s CFO Ian Borden explained that “the war has meaningfully impacted our IDL segment performance, resulting in fourth quarter comp sales of less than 1 percent.”

McDonald’s CEO Chris Kempczinski, in response to a question from a securities analyst at the investment bank Evercore, explained that the company had seen not only a negative effect on sales at restaurants in the Middle East, but also in other Muslim-majority countries like Malaysia and Indonesia, as well as in Muslim neighborhoods in Western countries like France. McDonald’s executives declined to speculate on the degree to which boycott activity affected restaurant performance, but did admit that it was material. “We’re not going to get into specific numbers on the Middle East, but suffice to say, as you see in our IDL results, you can infer that the impact is meaningful,” Kempczinski explained later in the call.

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