$5 value meal helps McDonald's US recover sales

CHICAGO, Illinois: Value meals helped McDonald's U.S. sales recover in the third quarter, but an E. coli outbreak tied to the company's Quarter Pounder hamburgers could dent that recovery in the final months of the year.

McDonald's reported this week that U.S. same-store sales-sales at locations open for at least a year-increased by 0.3 percent from July to September. In response to a disappointing second quarter, the company launched a US$5 value meal in late June, which successfully drew back lower-income customers and improved consumers' perceptions of value.

The $5 deal was so popular that McDonald's recently extended it through December at most U.S. locations.

However, a crisis emerged last week when McDonald's removed Quarter Pounders from the menu at approximately 3,000 stores. The U.S. Food and Drug Administration identified the burger's slivered raw onions as the probable cause of an E. coli outbreak that has led to one death and sickened at least 75 people across 13 states.

McDonald's Chairman, President, and CEO Chris Kempczinski apologized to investors during an October 28 conference call, noting this was the first major E. coli incident tied to McDonald's in over 40 years.

McDonald's announced it has ceased sourcing onions from the affected supplier and expects to have the Quarter Pounder back on U.S. menus nationwide within the week. However, it will be served without onions at about 900 locations.

Despite the quick response, McDonald's acknowledged that the outbreak impacted its sales momentum. Without disclosing specific sales figures, Placer.ai, a firm tracking retail traffic through cell phone data, reported a nine percent year-over-year decrease in U.S. visits to McDonald's by the end of last week.

CEO Chris Kempczinski expressed hope that swift containment efforts, cooperation with authorities, and promotions like the $5 value meal and limited-time Chicken Big Mac will help restore customer confidence. He also noted that additional actions would be taken if necessary.

Globally, McDonald's faced challenges in the third quarter. Demand in China dropped as the economy slowed, prompting customers to opt for lower-cost alternatives. Additionally, the company has been impacted by the Middle East conflict. In France, McDonald's introduced a 4-euro ($4.32) Happy Meal in August to revive sales, while in Canada, $1 coffee deals aim to draw in more customers.

Kempczinski said a focus on value will remain in the U.S. in the first quarter of next year, but the company and its franchisees are still deciding what that will look like. With a mixture of low-priced entry-level items, meal deals, and digital offers, the company might also introduce a McSmart menu of meal deals, as it did in Germany and Australia.

McDonald's revenue rose three percent to $6.87 billion for the quarter. That was slightly higher than the $6.82 billion analysts were predicting.

McDonald's net income fell three percent to $2.25 billion. Adjusted for one-time items, including the costs associated with acquiring McDonald's business in Israel, the company earned $3.23 per share, which was higher than the $3.21 per share Wall Street was expecting.

Shares of McDonald's Corp. fell less than one percent in trading on October 29.