Shares of McDonald’s are falling in the wake of the fatal E. coli outbreak. What you need to know – National

Shares of McDonald’s fell nearly 6% in premarket trading on Wednesday after an E. coli outbreak linked to the restaurant chain’s Quarter Pounder burgers resulted in the death of one person and sickened 49 people in the US.

The outbreak has been reported in 10 states and at least 10 people have been sent to hospital, the US Centers for Disease Control said on Tuesday. Cases began being reported in late September and continued into October.

“These public health fears are the last thing McDonald’s needs as it is already struggling to drive growth,” said Susannah Streeter, head of money and markets at Hargreaves Lansdown.

The E. coli O157:H7 strain that led to the McDonald’s outbreak is believed to cause serious illness and is the same as a strain linked to a 1993 incident at Jack in the Box that killed four children.

The outbreak may have been caused by the use of chopped onions used in the Quarter Pounder and came from a single supplier serving three distribution centers, McDonald’s said based on initial findings.

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In the past, two notable E. coli outbreaks — at Chipotle Mexican Grill in 2015 and Jack in the Box in 1993 — significantly hurt sales at the companies.

It took a year and a half for Chipotle to stabilize, while Jack in the Box sales fell for four quarters in a row, said Raymond James analyst Brian Vaccaro.

McDonald’s posted a surprise global sales decline in July, its first quarterly decline in more than three years, as consumers looking for a deal shied away from its pricier menu items.

Analysts said McDonald’s fourth-quarter sales could see some pressure from the outbreak, but it was too early to say whether it would be worse than the previous two cases of E. Coli.

The company’s move to quickly identify the source of the outbreak and replenish supplies should resolve the problem, JP Morgan analysts said in a note, adding that it doesn’t expect this to “impact the U.S. or certainly internationally overflow.”

McDonald’s said it has removed the sliced ​​onions and beef patties used in the Quarter Pounder and temporarily halted sales at restaurants in the affected areas.

“…while it is still early, historical precedent suggests that comp (comparable sales) pressures could dissipate quickly and be transitory, assuming there is no recurrence,” said BMO Capital analyst Andrew Strelzik Markets.

The timing was unfortunate for McDonald’s and its investors, he said, as comparable sales in the U.S. were just starting to rise after the launch of $5 meals.

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