McDonald’s experienced a significant drop in sales during its latest quarter, primarily due to an E. coli outbreak associated with slivered onions. The outbreak, which led to one death and hospitalized over two dozen people, caused a substantial setback for the company.
During an earnings call on Monday, CEO Chris Kempczinski reported that sales at U.S. locations fell by 1.4% in the fourth quarter, with the E. coli outbreak linked to Quarter Pounder sandwiches being a major factor in the decline. The company reported revenue of $6.39 billion, which was below Wall Street’s expectations of $6.44 billion.
The outbreak, which started in late October, was officially declared “closed” by federal health authorities in December. There were 104 confirmed cases of E. coli O157:H7 across 14 states, with 34 people requiring hospitalization. Four of the victims developed hemolytic uremic syndrome, a condition that can lead to kidney failure. The Centers for Disease Control and Prevention (CDC) confirmed one death was connected to the outbreak. The source of the outbreak was traced to raw onions, which had been used as a topping for Quarter Pounders. Beef was ruled out as the cause. After the outbreak, the CDC conducted inspections at the Taylor Farms processing plant in Colorado, which supplied the recalled onions, and at an onion farm in Washington state.
In response to the outbreak, McDonald’s removed Quarter Pounders from the menu at 900 restaurants in affected areas and halted purchases of onions from the Colorado Springs facility.
Executives noted that the company had been experiencing strong sales during the first few weeks of October, prior to the outbreak. However, the fourth quarter saw a slight increase in customer traffic at U.S. stores, but a decrease in spending. A key issue was that the Quarter Pounder, a high-margin item, was significantly impacted by the outbreak.
Kempczinski said the effects of the outbreak have been mostly confined to the Rocky Mountain region, which was the epicenter of the problem. While the region continues to see lower sales compared to pre-outbreak levels, the company expects to fully recover by the start of the fiscal second quarter.
To regain consumer trust and boost sales, McDonald’s has focused on offering value and affordability, alongside digital promotions.
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