McDonald’s shares plummeted sharply today after an E. coli outbreak linked to its burgers resulted in one fatality and left dozens more ill.
The company’s stock dropped nearly six percent during premarket trading on Wednesday as it launched an investigation into the outbreak, which has spread across at least ten U.S. states.
The outbreak has sent 10 individuals to the hospital out of 49 reported cases, all traced back to McDonald’s Quarter Pounders.
The first cases were reported in late September, with infections continuing into October.
The Centers for Disease Control and Prevention confirmed that one person, an elderly resident of Colorado, has died. A child remains hospitalized due to severe kidney complications associated with the infection.
“This public health scare is the last thing McDonald’s needs given that it’s already been struggling to drive growth,” remarked Susannah Streeter, head of money and markets at Hargreaves Lansdown.
McDonald’s has reacted swiftly by suspending the distribution of slivered onions, which early findings suggest may be the culprit behind the outbreak.
These onions were supplied by a single source to three key distribution centers. As a precaution, the company has also temporarily removed the Quarter Pounder from menus in states most affected, including Idaho, Nevada, New Mexico, and Oklahoma.
The CDC reported that infections from the E. coli O157:H7 strain, which is known for causing severe illness, were recorded between September 27 and October 11.
States impacted include Colorado, Iowa, Kansas, Missouri, Montana, Nebraska, Oregon, Utah, Wisconsin, and Wyoming. Colorado alone accounts for 26 cases, followed by Nebraska with nine.
Every individual interviewed in connection with the outbreak confirmed having eaten at McDonald’s prior to falling ill, and most of them reported consuming Quarter Pounders.
While the U.S. Agriculture Department, the Food and Drug Administration, and state health authorities continue their investigations, McDonald’s has assured the public that it is taking the matter seriously.
The company’s quick response—halting sales of the affected product and identifying the potential cause—aims to mitigate further damage.
Outbreaks such as this can leave a lasting impact on companies, as seen in the past.
In 2015, Chipotle Mexican Grill faced a similar E. coli crisis that took a year and a half to recover from. In 1993, Jack in the Box dealt with an even more devastating outbreak of the same strain, which resulted in the deaths of four children and hurt the company’s sales for four consecutive quarters.
Raymond James analyst Brian Vaccaro warned that McDonald’s might face sales pressure in the fourth quarter due to the outbreak.
However, it is too soon to tell whether it will be as damaging as the E. coli outbreaks that plagued Chipotle and Jack in the Box.
“The timing was unfortunate for McDonald’s and its investors,” Vaccaro noted. The chain had seen U.S. comparable sales begin to rise, thanks in part to the success of its $5 value meals, following a surprise worldwide sales dip in July—the first quarterly decline in over three years.
J.P. Morgan analysts remain cautiously optimistic, suggesting that McDonald’s ability to act quickly could prevent the situation from escalating
In their view, the outbreak is unlikely to spread beyond the U.S. or affect global operations. They wrote in a note that the company’s swift response to pinpoint the source and replenish supplies “should fix the problem.”
For McDonald’s, the coming weeks will be crucial as it works to contain the fallout, reassure customers, and mitigate further damage to its financial performance amidst an already challenging period.
