McDonald's Sales Hit As It Tackles E. Coli Outbreak Crisis

McDonald's Corp. sales fell short of Wall Street's expectations in the third quarter following weakness in international markets such as France, China, the UK and the Middle East. Sales at restaurants open at least 13 months fell 1.5%, worse than analysts had projected. The US was a bright spot with growth of 0.3%, according to a company statement Tuesday. 

McDonald's has been working to reverse traffic declines in all its geographic segments, driven by consumers' reticence to spend, high levels of inflation and boycotts against American brands in the Middle East. Efforts have included a value push around the world and a limited-time release of vintage McDonald's cups.

The stock slipped 0.4% at 2:22 p.m. on Tuesday in New York. The shares are little changed for the year, while the S&P 500 index has gained 22%.

McDonald's said in a call with analysts that its $5 meal deal in the US improved brand perceptions around affordability, resonated with low-income consumers and drove a positive shift in guest counts. The company said it will introduce a new value platform in early 2025.

"For the first time in over a year, we gained share with lower-income consumers," Chief Financial Officer Ian Borden said.

The results gave "encouraging insights" into how McDonald's, despite its size, can quickly shift its sales trajectory by leaning into value and marketing, Citigroup research analyst Jon Tower said in a note to clients.

Earnings, excluding some items, were $3.23 a share in the quarter. Total sales across franchised and company-owned restaurants were flat.

US Setback

Analysts and investors are already looking ahead at the fourth quarter, trying to assess the impact of an E. coli outbreak linked to the company's Quarter Pounders that became public last week. In response, the chain pulled the burgers from 20% of its more than 13,000 US stores. 

On Tuesday, McDonald's said it's not expecting a material impact from the issue. Still, the outbreak throws a wrench into the chain's near-term recovery, Citigroup's Tower said.

The company said on Oct. 27 it will start selling Quarter Pounders again after ruling out beef patties as the origin of the pathogen, instead pointing to pre-slivered onions are the likely culprit. The 900 restaurants that got their product from a supplier facility linked to the outbreak will serve the burgers without onions.

McDonald's sales fell across the US after the outbreak became public, according to Bloomberg Second Measure data, which tracks debit and credit card transactions. They fell as much as 33% in Colorado, the state where the most people have fallen ill, according to cellphone mobility data from Placer.ai.

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