McDonald’s sales fall as it deals with E. coli outbreak crisis

McDonald’s Corporation’s sales fell short of Wall Street expectations in the third quarter, due to weakness in international markets such as France, China, the U.K. and the Middle East. Sales at restaurants open at least 13 months fell 1.5%, also less than analysts expected. The U.S. remained a bright spot, rising 0.3%, according to a company statement Tuesday.

McDonald’s is working to reverse a decline in traffic in all of its geographies, which is due to consumers’ reluctance to spend, high inflation and a boycott against U.S. brands in the Middle East. Efforts include price increases worldwide and the limited-time release of vintage McDonald’s cups.

The stock fell 0.4% as of 2:22 p.m. Tuesday in New York. Shares are little changed this year, while the S&P 500 index has gained 22%.

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McDonald’s said in a call with analysts that its $5 meal deal in the U.S. improved the brand’s perception of affordability, attracted lower-income consumers and led to a positive change in guest volume. The company said it will introduce a new value platform in early 2025.

“For the first time in more than a year, we have gained share with lower-income consumers,” Chief Financial Officer Ian Borden said.

Citigroup research analyst John Tower said in a note to clients that the results provided “encouraging insight” into how McDonald’s, despite its size, can quickly change its sales trajectory by focusing on value and marketing.

Excluding some items, earnings were $3.23 per share in the quarter. Overall sales at franchised and company-owned restaurants were flat.

Setback in the U.S.

Analysts and investors are already looking to the fourth quarter, trying to assess the impact of an E. coli outbreak linked to the company’s Quarter Pounders that went public last week. In response, the chain removed the burgers from 20% of its more than 13,000 U.S. stores.

On Tuesday, McDonald’s said it does not expect a material impact from the issue. Still, Citigroup’s Tower said the outbreak hinders the chain’s near-term recovery.

The company said Oct. 27 that it would resume selling Quarter Pounders after ruling out beef patties as the origin of the pathogen, instead pointing to pre-cut onions as the likely culprit. The 900 restaurants that get their product from the supplier facility linked to the outbreak will serve the burgers without onions.

McDonald’s sales fell across the U.S. after the outbreak went public, according to Bloomberg Second Major Data, which tracks debit and credit card transactions. In Colorado, the rate dropped to 33%, according to cellphone mobility data from Placer.ai, which is the state with the most people getting sick.

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