Cleveland Research has reported that the impact of the E. coli outbreak linked to McDonald's (MCD, Financial) is more severe than initially expected. The company's comparable sales for late October and November have fallen significantly below original projections. As a result, Cleveland Research has revised its forecast for McDonald's fourth-quarter comparable sales growth to -1.5%, down from the pre-outbreak expectation of 2%.
In response to the outbreak, McDonald's is investing in its most affected franchisees and increasing marketing, promotions, and discounts across its system to regain customer traffic. However, the effectiveness of these efforts remains uncertain.
Last month, the U.S. Centers for Disease Control and Prevention (CDC) issued a warning about E. coli-related illnesses linked to McDonald's Quarter Pounder hamburgers across several states. According to a CDC report, 49 people have fallen ill after consuming these hamburgers, with 10 individuals, including one child, hospitalized, and one death reported. An investigation is ongoing.
McDonald's reacted swiftly to the incident, stating that it is taking "quick and decisive action." Preliminary investigations suggest that the illnesses may be connected to sliced onions from a single supplier.
Despite reassurances from McDonald's CFO Ian Borden during an earnings call in late October that the public health incident would not materially affect fourth-quarter results, he acknowledged a decline in daily sales and customer traffic following the outbreak. Consequently, the company has invested $100 million to support the franchisees most impacted by the outbreak.
