McDonald's shares fall as E. coli outbreak tied to Quarter Pounder kills 1 in US

By Ananya Mariam Rajesh

(Reuters) - Shares of McDonald's (NYSE:MCD ) fell nearly 6% in premarket trading on Wednesday after an E. coli outbreak linked to the restaurant chain's Quarter Pounder hamburgers resulted in the death of one person and sickened 49 people in the U.S.

At least 10 people were sent to the hospital and the outbreak was reported in 10 states, the U.S. Centers for Disease Control said on Tuesday. Cases were reported starting September and has continued in October.

In the past, two notable E. coli outbreaks - at Chipotle Mexican Grill (NYSE:CMG ) in 2015 and Jack in the Box (NASDAQ:JACK ) in 1993 - had significantly hit sales at the companies.

The E. coli O157:H7 strain that led to the McDonald's outbreak is said to cause serious illness and was linked to Jack in the Box's 1993 incident, which killed four children.

The latest outbreak could have been caused by the use of slivered onions used in the Quarter Pounder and was sourced from a single supplier that serves three distribution centers, McDonald's said based on its initial findings.

The fast-food chain has removed slivered onions and beef patties used in the burger and temporarily halted the sale of Quarter Pounder hamburgers at restaurants in the affected areas, the company said.

Analysts said fourth-quarter sales could see some pressure from the outbreak but it is too early to note if it would be worse than the previous two E. Coli cases.

"...while it is early, historical precedent suggests comp (comparable sales) pressures can trough quickly and prove transitory, assuming no recurrence," BMO Capital Markets analyst Andrew Strelzik said.



The timing was unfortunate for McDonald's and its investors, he said, as U.S. comparable sales had just begun to accelerate following the launch of $5 value meals.

The company's move to quickly replenish supplies should fix the problem, J.P. Morgan analysts said in a note, adding that it doesn't expect this to "engulf the U.S. or certainly international".

Source: Investing.com