McDonald's is grappling with a significant food safety issue after the CDC reported that 49 people across 10 states fell ill – including one death – linked to slivered onions in the Quarter Pounder with Cheese. Hedgeye’s veteran Consumables analyst, Howard Penney, says in this clip from The Call @ Hedgeye that the fallout from the outbreak could lead to 25% downside in MCD stock.
Comparisons to Chipotle's 2015-16 crisis have emerged, but “the comparison to CMG stops there,” Penney explains. Chipotle faced multiple pathogens during the issues it faced, while McDonald's, which Penney calls “a better-run company,” is expected to “manage the situation more effectively.”
That said, the financial impact could still be significant. “CMG went from $750 to $250,” Penney said, recapping that company’s sales crisis from nearly a decade ago. While McDonald's may not see a 20% sales drop like Chipotle did, it faces hefty costs to compensate franchisees and enhance safety protocols.
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