The burger chain experienced a surprise decline in worldwide sales in July, its first quarterly decline in three years. file | Photo courtesy: Reuters
Shares of McDonald’s fell nearly 6% in premarket trading on Wednesday (Oct. 23, 2024) due to an E. coli outbreak linked to the restaurant chain’s Quarter Pounder hamburgers that has resulted in one death and 49 injuries in the US. got ill.
The US Centers for Disease Control said on Tuesday (October 22, 2024) that outbreaks have been reported in 10 states and at least 10 people have been sent to the hospital. Cases began to be reported in late September and continued through October.
“This public health concern is the last thing McDonald’s needs as it already struggles to drive growth,” said Susanna Streeter, head of wealth and markets at Hargreaves Lansdowne.
The burger chain reported a surprise decline in worldwide sales in July, its first quarterly decline in more than three years, as deal-seeking consumers held back on its higher-priced menu items.
McDonald’s said based on its preliminary findings that the outbreak may have been caused by the use of chopped onions used in the Quarter Pounder and that it was obtained from the same supplier that serves the three distribution centers.
In the past, two notable E. coli outbreaks – at Chipotle Mexican Grill in 2015 and Jack in the Box in 1993 – had a significant impact on the companies’ sales.
Raymond James analyst Brian Vaccaro said, “Chipotle took a year and a half to stabilize, while Jack in the Box saw four consecutive quarters of sales decline.”
The E. coli O157:H7 strain that caused the McDonald’s outbreak is said to cause serious illness and was linked to a 1993 incident at Jack in the Box that killed four children.
Analysts said McDonald’s fourth-quarter sales could see some pressure from the outbreak, but it was too early to say whether it would be worse than the previous two E. coli cases.
McDonald’s said it has removed the chopped onions and beef patties used in the Quarter Pounder and temporarily halted its sale in restaurants in affected areas.
BMO Capital Markets analyst Andrew Strelzik said, “…although it is early, historical precedent suggests that comp (comparable sales) pressure may subside rapidly and prove fleeting, with no recurrence. ”
The timing was unfortunate for McDonald’s and its investors, he said, as U.S. comparable sales began to accelerate following the launch of the $5 price meal.
The company’s move to quickly identify the source of the outbreak and replenish supplies should resolve the problem, JPMorgan analysts said in a note, adding that they did not expect it to spread “in the U.S. or certainly internationally.” level will spread”.
published – October 23, 2024 04:59 PM IST