Mcdonalds Boycott Gains Momentum: What It Could Mean for the Fast-Food Giant’s Stock Performance”

More Details About Mcdonalds Boycott:

A consumer advocacy group has called for a weeklong boycott of McDonald’s, citing the fast food giant’s alleged tax dodging, opposition to wage increases, and rollback of diversity initiatives as reasons.

A seven-day strike won’t jolt the 84-year-old fast food behemoth that is McDonald’s, but it will add another worry to its list and may hurt its second-quarter profits in July. 

The greater danger is that, if customers are on board, the boycotts will continue beyond a week and cause a long-term crisis for the company’s brand, as has happened to other major companies.

The People’s Union USA is a grassroots advocacy group that is pushing for economic resistance, corporate accountability, and working class justice.

Instead of paying their fair share, they take advantage of tax breaks. They keep wages low and engage in price gouging. They repress union activities and workers’ rights. They back politicians who pose a danger to democracy. 

There has been no significant improvement in their performative DEI. “They put money before people, before community, and before the truth,” the group’s founder, John Schwarz, wrote in a recent Instagram post.

When asked for comment, McDonald’s took some time to respond.

Following its announcement in February of this year regarding the dismantling of its diversity, equity, and inclusion initiatives, Target has been the subject of comparable boycotts since then. Retail foot traffic tracking data company Placer.ai reports that weekly store traffic has been declining since then.

Revenue for the retailer’s first quarter was down 2.8% year over year and nearly half a billion dollars short of analyst expectations, as reported last month.  From the previous year, comparable sales dropped 3.8%.

Even McDonald’s might be in danger. There is already a lot for investors to consider.  Revenue for the first quarter came in at $5.96 billion, down 3.5% year over year, and adjusted earnings fell 1% to $2.67 per share, according to the fast food chain’s report last month. 

Reportedly, the company’s worldwide comparable sales dropped 1% year over year, with a negative guest count in the US market being the primary factor.

McDonald’s stock hit a new high of $326 in March, but investors have been selling off their shares in recent weeks due to disappointing earnings.  Shares are down nearly 10% in the past month, trading at $289 on Monday.

The losses could increase if the headwinds persist.  A premium to competitors like Wendy’s and Yum Brands, McDonald’s stock continues to trade at 23 times forward earnings, even after the pullback.

More problems are piling up, and the impending boycott is just one more. Californians saw a 25% increase to $20 per hour in the minimum wage for fast food employees, while cattle herd sizes hit record lows due to drought, sending beef prices soaring. 

Menu prices have been aggressively increased by the company in recent years.  Fast food restaurants are seeing a decline in business as a result of consumers’ resistance.

In an effort to entice customers who were strapped for cash to return to McDonald’s restaurants, the fast food giant introduced a $5 meal deal and other value offers last year. After two consecutive quarters of decline, same-store sales increased year over year in the final quarter of 2024.

The momentum may have already waned, according to the first quarter’s numbers, and the company could feel the effects of a well-coordinated walkout, even if it’s only for a week. June 30 is the end of McDonald’s second quarter. 

The boycott is timed perfectly to coincide with the July earnings report.  If traffic drops 10% for just one week out of thirteen, it could cut into US sales by almost 1%. Potentially mitigating this effect is McDonald’s franchise model and massive global exposure.

However, given the current state of investor sentiment, any negative news, such as another quarter of negative sales growth or simply failing to meet Wall Street’s expectations, could lead to a further collapse in valuation. The next earnings report from McDonald’s is scheduled for late July.