McDonald’s sales took a significant hit in its latest quarter due to an E. coli outbreak linked to slivered onions that killed one person and sent over two dozen to the hospital.
CEO Chris Kempczinski told analysts during an earnings call on Monday that sales at U.S. stores slipped 1.4% during the fourth quarter, which was largely attributed to the “impact of the E. coli outbreak linked to slivered onions on our Quarter Pounders.”
The company reported revenue of $6.39 billion, missing Wall Street estimates of $6.44 billion.
Federal health officials declared that the outbreak was “closed” in December, after illnesses emerged in late October. There were 104 confirmed cases of the E. coli O157:H7 strain across 14 states, with hospitalizations climbing to 34. Four victims had developed hemolytic uremic syndrome, a serious condition that can cause kidney failure, according to the Centers for Disease Control (CDC). One death was linked to the outbreak early on, the CDC said.
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The raw onions served as a topping on Quarter Pounders were found to be the likely source of the outbreak after beef was ruled out. The agency said it has completed inspections at the Colorado processing plant of Taylor Farms, which supplied recalled onions to McDonald’s, and an unnamed onion farm in Washington state.
Upon discovery of the outbreak, McDonald’s removed Quarter Pounders from the menu at 900 of its restaurants in the impacted areas and stopped purchasing onions processed at Taylor Farms’ Colorado Springs facility.
Executives said that the company had been seeing “strong sales” during the first few weeks of October before the outbreak emerged.
In the fourth quarter, while there was slightly positive traffic at U.S. stores, the company said customers were spending less. Part of the issue was that its Quarter Pounder was “a high margin” item, according to executives.
Kempczinski said the E. coli impact is now “localized to the areas that had the biggest impact.”
“Think about that as sort of the Rocky Mountain region. That was really the epicenter of the issue. And that continues to be down versus where we were heading into that impact,” he said, adding that the impact is contained to that region.
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The company expects to have fully recovered from the food safety issues by the beginning of the fiscal second quarter.
Following the outbreak, executives said the company invested in “value, affordability and obviously in digital offers to get consumers back” and regain trust.
| Ticker | Security | Last | Change | Change % |
|---|---|---|---|---|
| MCD | MCDONALD’S CORP. | 308.44 | +14.11 | +4.79% |
McDonald’s plans to further enhance its value programs in the first quarter “to ensure that we are offering industry leading value and with good value at the foundation.”
Still, CFO Ian Borden told analysts that its approach to 2025 “reflects the current environment of softer, declining restaurant industry traffic in the U.S. and many of our larger markets.”
