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Archive for Wednesday, May 21, 2003

Shares of hamburger chains tumble on report

May 21, 2003

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Shares of big U.S. hamburger chains and meat processor Tyson Foods Inc. fell sharply Tuesday following the disclosure of the first case of mad cow disease in Canada in a decade, as investors feared that people would shy away from eating beef.

In a bid to ensure that the brain-wasting disease doesn't appear in the United States, U.S. health officials promptly banned imports of cattle, beef, beef-based products and animal feed from Canada.

But analysts said the appearance of the disease in a cow in Alberta, as announced by Canadian agricultural officials, raised concern because it had been thought unlikely to appear in either Canada or the United States due to safe feeding practices.

Shares in McDonald's, the world's largest restaurant company, fell $1.21, or 6.6 percent, to close at $17.14 on the New York Stock Exchange.

Also sinking were fast-food rival Wendy's International, closing down $2.01, or 6.5 percent, to $28.55; Tyson, the world's largest meat company, down 46 cents, or 4.8 percent, to $9.01; and Jack in the Box, off 51 cents, or 2.4 percent, at $20.17. Outback Steakhouse Inc. declined $1.16, or 3.17 percent, to $35.46.

McDonald's, with restaurants in more than 100 countries, has seen its business hurt from other mad cow disease scares even though its beef has never been implicated in the disease. Sales were affected in Europe in 2000-01, and more recently in Japan, where monthly sales plunged by as much as 18 percent at some outlets from the previous year.

"McDonald's worldwide has the highest beef safety standards and will continue to strictly enforce them," the Oak Brook, Ill., company said in a statement. "McDonald's Canada only purchases beef from facilities federally inspected and approved by the Canadian Food Inspection Agency."

The company emphasized that McDonald's USA does not import any raw beef or hamburger patties from Canada for McDonald's use in the United States.

"The discovery of one cow is concerning, even though it did not enter the food chain, as the discovery of other cases is possible," said John Ivankoe, restaurant analyst for J.P. Morgan, in a note to investors. "We will wait for new news regarding this story, but if confidence regarding the beef supply in only Canada is shaken, it is a relatively minor issue."

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