McDonald’s Corp. beat Wall Street’s revenue and earnings expectations for the third quarter on Tuesday, even though profits were down year-over-year. Chris Kempczinski, the CEO of the burger company, also talked about the effects of the recent E. coli outbreak that made the chain famous.
There was a net income of $2.26 billion, or $3.13 a share, in the third quarter of this year, down from $2.32 billion, or $3.17 a share, in the same quarter last year. This caused McDonald’s stock to rise 0.1%. If you take out the one-time things, the adjusted earnings per share were $3.23, which was more than the $3.21 per share that FactSet predicted.
Sales went up 3% to $6.87 billion, which was more than the $6.82 billion that FactSet predicted. The company said that sales to loyalty users across about 50 loyalty markets were over $28 billion over the last 12 months and almost $8 billion over the last three months.
Weaker demand and the E. coli outbreak are hurting McDonald’s earnings, but sales are at their best level in years.
Kempczinski talked about the recent E. coli cases in a few U.S. states that were linked to slivered onions during a conference call to talk about the results. “The situation seems to be under control, and it didn’t have any effect on Q3 numbers, but I know this is an important development that’s on many of your minds,” he said.
“McDonald’s was linked to the last major public health problem in the U.S. more than 40 years ago.” The current rise in E. coli cases is very scary, and hearing about how this has affected our customers has been very upsetting for us, he said. “We’re sorry for what our customers have gone through on behalf of the whole system.” Our heartfelt condolences go out to you, and we promise to make things right.
Kempczinski says that as soon as the CDC told McDonald’s about the study, the company quickly connected the cases to sliced onions from one facility at its Taylor Farms supplier. The CEO said, “They were quickly taken out of our supply chain.” “We’ve been told by health officials that the poison probably came from sliced onions from Taylor Farms’ facility in Colorado Springs.” McDonald’s won’t be getting onions from this plant anymore.
Taylor Farms hasn’t replied to a request for feedback yet.
Kempczinski told CNN on Sunday that the Colorado Department of Agriculture confirmed that E. coli was not found in the beef cakes from the company’s restaurants and that they have no plans to test them again. He also said, “This backs up our investigation that ruled out quarter-pounder patties as the source.” “With this information, we’re sure we can bring back quarter-pounders to the menus.” We told everyone on Sunday that our beef suppliers are making a new stock of fresh beef patties for the affected areas. We expect all U.S. restaurants to start selling quarter-pounders again next week.
During the conference call, Ian Borden, McDonald’s Chief Financial Officer, said that the company now thinks its interest costs will rise by about 11% for the whole year. But McDonald’s confirmed other parts of its financial outlook for 2024, based on the idea that the E. coli public health issue won’t have a big effect on its business.
Before McDonald’s third-quarter numbers, a lot of attention has also been paid to what customers want. During the conference call, the CEO said that the QSR (Quick Service Restaurant) sector had “meaningfully slowed” in many of the company’s areas last quarter. This was because more people, especially low-income people, chose to eat at home. “This trend continued in the third quarter—QSR traffic has remained high, which is a sign of problems across the whole industry,” he said. “We thought the environment would be tough in 2024, but our work so far this year has not lived up to our hopes.”
Kempczinski said that McDonald’s is pleased by signs of progress in the third quarter. He said that the company is seeing more consistent market share gains, especially in the U.S.; new menu items; and more interest in higher-margin core items.
Comparable sales fell 1.5%, which was less than the 0.6% drop that FactSet thought would happen. Comparable sales in the U.S., on the other hand, went up 0.3%.
