Nationwide
On Wednesday following an E. coli epidemic connected to the Quarter Pounder hamburgers of McDonald’s restaurant chain resulted in the death of one person and sickened 49 people in the United States, shares of McDonald’s dropped about 6%.
The U.S. Centres for Disease Control stated on Tuesday that the outbreak was recorded in ten states and at least ten individuals had been hospitalised. Cases began to be recorded in late September and carried on into October.
“This public health scare is the last thing McDonald’s needs given that it’s already struggling to drive growth,” said head of money and markets Susannah Streeter, Hargreaves Lansdown.
Said to be the same strain connected to a 1993 incident at Jack in the Box, which killed four children, the E. coli O157:H7 strain responsible for the McDonald’s outbreak causes major sickness.
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Based on preliminary data, McDonald’s claimed the epidemic may have resulted from slivered onions used in the Quarter Pounder and came from one supplier serving three distribution sites.
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Two well-known E. coli outbreaks in the past—at Jack in the Box in 1993 and Chipotle Mexican Grill in 2015—have seriously affected sales at both firms.
While Jack in the Box sales fell for four straight quarters, Raymond James analyst Brian Vaccaro said, Chipotle took a year-and-a-half to stabilise.
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McDonald’s announced an unexpected worldwide sales loss in July, its first quarterly drop in more than three years, as bargain-hunting shoppers turned away its more expensive menu items.
Although the epidemic may cause some effect on McDonald’s fourth-quarter sales, analysts said it is too early to determine whether it would be worse than the two prior E. Coli incidents.
J.P. Morgan analysts noted in a note that the company’s fast identification of the outbreak and supply replenishment should solve the issue; they also cautioned against expecting this to “engulf the U.S. or certainly international.”
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McDonald’s claimed to have temporarily stopped selling slivered onions and beef patties used in the Quarter Pounder at outlets in the impacted areas.
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.While it is early, historical precedent shows comp (similar sales) pressures can bottom fast and prove ephemeral, assuming no recurrence, BMO Capital Markets analyst Andrew Strelowicz said.
McDonald’s and its investors suffered from bad timing, he claimed, since U.S. comparable sales had only started to pick up speed after $5 value meals were introduced.
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