McDonald’s shares tumble on E coli even as US head vows to improve safety

McDonald’s shares were on track for their worst day since March 2020 on Wednesday, as the fast-food giant scrambled to limit the damage from an E. coli outbreak linked to the chain’s Quarter Pounder burgers in several states in the United States that killed one person and sickened nearly 50 others.

McDonald’s US President Joe Erlinger said on Wednesday that the world’s biggest fast-food chain could rebuild public trust as it works to mitigate the impact of the E. coli outbreak, which led to one death and caused 49 others to fall ill across parts of the US West and Midwest.

Previous E. coli outbreaks at major US fast-food chains have caused consumers to avoid them for months.

During an appearance on NBC’s Today show on Wednesday, Erlinger pointed to the Chicago-based company’s steps to quickly pull the Quarter Pounder from its menu in the areas where the outbreak had occurred.

“Given the recent events of the past 24 hours, our priority is to reinforce the confidence of American consumers,” he said.

The outbreak sickened people in 10 states, with 10 hospitalised due to serious complications, according to the US Centers for Disease Control and Prevention (CDC). A severe kidney disorder known as hemolytic uremic syndrome was reported in one child, the CDC said.

The CDC and McDonald’s said they are scrutinising the supply of slivered onions and Quarter Pounder beef patties as they investigate the cause of the E. coli outbreak.

McDonald’s suppliers frequently test their products, and within the date range provided by the CDC for the outbreak, none of them identified this E. coli strain, according to company spokespeople.

By early afternoon, the company’s stock was down 4.8 percent at $299.51 as spokespeople noted that they had not yet ruled out the possibility of beef being linked to the outbreak. McDonald’s shares earlier hit a low of $290.88.

McDonald’s said on Wednesday that a fifth of its 14,000 US restaurants were no longer selling Quarter Pounders. They were pulled from its menu in the affected areas, spanning Colorado, Kansas, Utah, Wyoming, and parts of Idaho, Iowa, Missouri, Montana, Nebraska, Nevada, New Mexico and Oklahoma.

‘Struggling to drive growth’

“This public health scare is the last thing McDonald’s needs, given that it’s already been struggling to drive growth,” said Susannah Streeter, Hargreaves Lansdown’s head of money and markets.

In the past, two notable E. coli outbreaks at other fast-food chains – at Chipotle Mexican Grill in 2015 and Jack in the Box in 1993 – significantly hurt sales at those chains.

Chipotle took a year-and-a-half to stabilise, while Jack in the Box sales declined for four straight quarters, Raymond James analyst Brian Vaccaro said.

Chipotle shares fell nearly 50 percent during the 2015-to-2018 period when cases of norovirus infections were reported after the E. coli outbreak.

The E. coli strain that led to the McDonald’s outbreak is said to cause serious illness. It is the same as a strain linked to a 1993 incident at Jack in the Box that killed four children.

Analysts said McDonald’s fourth-quarter sales could face some pressure from the outbreak, but it is too early to determine whether it will be more severe than the previous two E. coli cases.

The company’s move to quickly identify the source of the outbreak and replenish supplies should fix the problem, JP Morgan analysts said.

BMO Capital Markets analyst Andrew Strelzik said McDonald’s US comparable sales had just accelerated after the launch of $5 value meals.