McDonald's says E. coli outbreak hit sales
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An E. coli crisis involving Quarter Pounders quickly turned away McDonald's customers, executives said today.
Why it matters: The outbreak, tied to slivered onions and which now appears contained, is putting pressure on the fast-food chain to restore much-needed momentum from its new value meals.
Zoom in: Sales and guest counts turned negative following the outbreak, CFO Ian Borden revealed today on an earnings call.
- While McDonald's didn't provide specific numbers, customer visits in the first three days after the announcement dropped between 6.4%-9.5% across the country, according to foot-traffic data supplier Placer.ai.
- "We certainly believe the most significant events are behind us, and the work to do right now is focused on restoring consumer confidence, getting our U.S. business back to that strong momentum," Borden said. "And I think we're really confident in our ability to do that."
The big picture: McDonald's is trying to avoid the same fate as Chipotle, which suffered a sharp and prolonged downturn in sales in 2015 during an outbreak of foodborne illnesses from its restaurants.
- McDonald's CEO Chris Kempczinski said Tuesday that the "last serious public health issue in the U.S. associated with McDonald's occurred more than 40 years ago."
State of play: McDonald's quickly pulled onions from Taylor Farms' Colorado facility, which have also been recalled.
- It is possible E. coli cases can still grow, which health agencies have warned about. As of the latest count there are 75 reported illnesses from 13 states with one death.
- Other restaurants including Taco Bell and Burger King have removed onions from select restaurants.
The Golden Arches had been enjoying a jolt to sales from the success of its $5 Meal Deal. It was beginning to see momentum from the offering last quarter when fewer customers visited the company's U.S. restaurants than a year ago.
- The company is extending the deal — which it said is profitable for its franchisees — into December.
- "We saw increased traction, particularly with low-income consumers, successfully growing traffic share with this group for the first time in over a year," Borden said.
What they're saying: "We feel management has a good handle on the E. coli issue from a marketing and operational point of view," CFRA analyst Arun Sundaram writes.
Yes, but: The company's foreign market sales are looking weak.
- Comparable sales at international operated markets fell 2.1%.
What's next: McDonald's is preparing to bring back Quarter Pounders to restaurants where sales had been suspended. At 900 restaurants that had onions supplied from Taylor Farms' Colorado Springs facility, they will be served without slivered onions.
- The company said in a statement last week that it has "made the decision to stop sourcing onions from Taylor Farms' Colorado Springs facility indefinitely."
- Taylor Farms has not responded to requests for comment.
Editor's note: This story was updated with additional context on the Quarter Pounders' return to restaurants where sales were temporarily suspended.
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