McDonald’s stock (MCD) somewhat recovered from steeper losses on Wednesday, with shares falling over 4% in early trading after the Centers for Disease Control and Prevention said the company’s Quarter Pounder burgers had been linked to an E. coli outbreak in some states, with most illnesses in Colorado and Nebraska.
“This is a fast-moving outbreak investigation,” the CDC wrote on its website. “Most sick people are reporting eating Quarter Pounder hamburgers from McDonald’s and investigators are working quickly to confirm which food ingredient is contaminated.”
The company’s stock sank as much as 10% in extended trading in the immediate aftermath of the news on Tuesday.
The CDC said McDonald’s has stopped using fresh slivered onions and quarter-pound beef patties in certain states while a source of the illness is confirmed.
One person has died from the outbreak, the agency said, and 10 hospitalizations have been reported across 10 states.
In an internal memo that McDonald’s shared on its website Tuesday evening, McDonald’s chief supply chain officer of North America Cesar Piña said the company is taking “swift and decisive action” and noted that the initial findings from the investigation “indicate that a subset of illnesses may be linked to slivered onions used in the Quarter Pounder and sourced by a single supplier that serves three distribution centers.”
“As a result, and in line with our safety protocols, all local restaurants have been instructed to remove this product from their supply and we have paused the distribution of all slivered onions in the impacted area,” the company said.
McDonald’s will temporarily remove the menu item from restaurants in the impacted areas, including Colorado, Kansas, Utah, and Wyoming, as well as portions of Idaho, Iowa, Missouri, Montana, Nebraska, Nevada, New Mexico, and Oklahoma. All other menu items are available.
“While the incident appears to be more contained than others we have seen in the industry, an expansion of the investigation or sustained publicity is what has the potential to weigh on consumer traffic,” BTIG analyst Peter Saleh wrote in a note to clients on Wednesday.
He added the incident could dampen the ongoing Chicken Big Mac and McRib limited-time offerings set to round out the year.
“We believe McDonald’s could reduce the advertising supporting these [limited-time offerings] receive in the near future, as the message may fall on deaf ears amid broader news coverage,” he explained. “The company may also want to shift its messaging to quality, and away from value, to reassure consumers about its food safety.”
