McDonald’s faces a significant sales decline following an E. coli outbreak linked to Quarter Pounders, leading to a temporary menu suspension and a severed supplier relationship.
At a Glance
- McDonald’s U.S. comparable sales fell 1.4% in Q4, the steepest drop since the COVID-19 pandemic
- E. coli outbreak affected 104 people across 14 states, resulting in one death
- Quarter Pounders were removed from 900 restaurant menus in affected areas
- McDonald’s is investing in value menus and digital promotions to regain consumer trust
- The company expects to recover from food safety issues by the start of the fiscal second quarter
E. Coli Outbreak Impacts McDonald’s Sales
McDonald’s, the fast-food giant, has encountered a significant setback as an E. coli outbreak linked to its Quarter Pounders led to a steep decline in U.S. sales. The company reported a 1.4% drop in comparable sales for U.S. stores during the fourth quarter, marking the most substantial decrease since the COVID-19 pandemic. This decline surpassed analysts’ expectations of a 0.4% drop, highlighting the severity of the situation.
The outbreak, which began on October 22, prompted McDonald’s to temporarily suspend Quarter Pounder sales in 20% of its U.S. restaurants. Federal health officials declared the outbreak “closed” in December, but not before it had affected 104 individuals across 14 states, resulting in 34 hospitalizations and one death.
McDonald's to resume quarter pounder sales after E. coli outbreak https://t.co/q8PSGNmjwd
— Axios (@axios) October 28, 2024
Swift Response and Financial Impact
In response to the outbreak, McDonald’s took immediate action by removing Quarter Pounders from the menus of 900 restaurants in affected areas. The company also ceased purchasing onions from the implicated facility, which was traced to Taylor Farms’ Colorado processing plant and an unnamed Washington state farm.
The financial repercussions of this crisis were significant. McDonald’s reported $6.39 billion in revenue, falling short of Wall Street’s estimate of $6.44 billion. The company’s net income dropped 5% to $2.04 billion on an adjusted basis, below the estimated $2.07 billion. Despite the challenging quarter, global same-store sales managed to increase by 0.4%, contrary to the expected 0.63% decline.
Recovery Strategies and Future Outlook
As McDonald’s works to recover from this setback, the company is implementing several strategies to regain consumer trust and boost sales. The fast-food chain is investing heavily in value menus, affordability, and digital promotions. McDonald’s plans to enhance its value programs in the first quarter to offer industry-leading value, aiming to attract budget-conscious consumers.
“In our view, the challenge McDonald’s faces in the months and quarters ahead will be weaning customers off these deep discounts,” BTIG analyst Peter Saleh said.
While customer traffic increased slightly, the average spend per visit decreased, partly due to the high-margin nature of the Quarter Pounder. To combat this, McDonald’s increased limited-time offers and meal deals in 2024, including extending a $5 meal deal and introducing the Chicken Big Mac.
McDonald’s executives remain optimistic about the company’s recovery, stating that they expect to bounce back from the food safety issues by the start of the fiscal second quarter. The impact of the outbreak is now largely localized to the Rocky Mountain region, allowing the company to focus its efforts on rebuilding consumer confidence in affected areas.
