Mc Donald's, Middle East tensions and inflation weigh on revenues

Boycotts of US brands in Muslim-majority nations have hurt consumer companies since war broke out in Israel last year, and McDonald's continues to suffer. In a second quarter earnings call, the company said it had lost market share in France, a country with a large Muslim population. According to McDonald's, rivals have also intensified competition in France. The company is pushing value options in that country, including those that may appeal to families that have reduced their business.

McDonald's ended the second quarter with global sales down 1% as consumers wavered in the face of high prices for burgers and fries. McDonald's revenues were virtually unchanged at 6.49 billion in the April-June period while profit fell 12% to 2.02 billion. This is actually a trend that has been going on since the beginning of the war in Gaza, causing the fast food group to miss analysts' estimates. Added to this is the fact that persistent inflation has forced low-income consumers to shift to cheaper food options at home. This has led fast food chains such as McDonald's, Burger King, Wendy's and Taco Bell to focus on lower-priced meals to encourage customers to return to the chains. McDonald's, for instance, pointed out that the $5 meal offer launched at the end of June sold above expectations.

CEO Chris Kempczinski stated that consumers have become "very selective" and think much more about offers. "Consumers' predisposition to purchase in most of our major markets remains low," he noted.

McDonald's results are reflected in last week's comments by Coca-Cola CEO James Quincey, who stated that there has been "some decrease in out-of-home channels" in North America, an indication therefore of fewer people eating out.

The company, however, kept its planned capital expenditure budget to USD 2.7 billion, more than half of which is earmarked for new restaurants in the US and international markets.