McDonald's reported quarterly earnings and sales on Tuesday that beat analysts' expectations as its U.S. restaurants reversed same-store sales declines last quarter.
However, investors are concerned about a further decline in U.S. sales, fueled by a recent E. coli outbreak in 13 states linked to McDonald's Quarter Pounder burgers. As of Friday, 75 health cases have been linked to the outbreak, including one death in an older adult.
Immediately after McDonald's was linked to the outbreak, daily sales and traffic fell, Chief Financial Officer Ian Borden said Tuesday during the company's earnings call. However, the company does not expect the situation to have a material impact on its business.
Health authorities have identified the burger's chopped onions as the likely source and McDonald's has terminated its relationship with the supplier. Quarter Pounder burgers will return to affected restaurants periodically this week, sans chopped onions.
Executives tried to reassure investors by saying the company had resolved the issue and was now working to bring guests back.
“While the situation appears to be contained and has not impacted the third quarter numbers, it is certainly an important development that I know is on the minds of many of you,” CEO Chris Kempczinski told investors on the earnings call of the company, adding that McDonald's was sorry and is committed to “making this right.”
The company's shares were flat in morning trading.
Here's what the company reported for the period ending Sept. 30, compared to Wall Street's expectations based on an analyst survey by LSEG:
- Earnings per share: $3.23 adjusted vs. $3.20 expected
- Revenue: $6.87 billion versus expected $6.82 billion
McDonald's reported third-quarter net income of $2.26 billion, or $3.13 per share, down from $2.32 billion, or $3.17 per share, a year earlier.
Excluding certain items, the fast food giant earned $3.23 per share.
Net sales rose 3% to $6.87 billion.
The chain's global same-store sales fell 1.5%, StreetAccount estimates, a more dramatic drop than the 0.6% Wall Street had expected, and was weighed down by the company's international markets. It's the second quarter in a row that the company's same-store sales have declined.
“Although we anticipated a challenging environment in 2024, our performance this year has fallen short of our expectations,” Kempczinski said.
In the U.S., same-store sales rose 0.3%, reversing last-quarter same-store sales declines but still slightly weaker than the 0.5% increase forecast by StreetAccount. Traffic at its U.S. restaurants was down slightly, but the company credited the increase in sales to its marketing and a $5 meal introduced in late June.
Diners have cut back on restaurant spending, prompting McDonald's and its competitors to resort to discounts and other marketing ploys to lure customers back to their restaurants. For example, McDonald's released limited-time “Collector's Edition” cups in August.
The company's two international divisions reported larger declines in same-store sales compared to the previous quarter. The Internationally Operated Markets segment, which includes France, Germany and Australia, saw same-store sales decline 2.1%. The international development license markets division reported a same-store sales decline of 3.5%, reflecting weak demand in the Middle East and China.
Looking ahead to the fourth quarter, it's unclear how the E. coli outbreak might impact U.S. sales, especially as consumers have become more selective about how and where they spend their money.
McDonald's executives have taken steps to reassure customers that the company's menu items are safe to consume, including removing Quarter Pounder burgers from menus in affected areas until beef patties are identified as the culprit.
Comments are closed.