Costco Wholesale Corporation’s COST rotisserie chicken salad has definitely landed the retailer in the soup. According to the Centers for Disease Control and Prevention (“CDC”), the company’s chicken salad has been found responsible for an E. coli infection in seven U.S. states, namely, California, Colorado, Missouri, Montana, Utah, Virginia and Washington. Per sources, at least 19 people across these seven states fell sick after consuming the chicken salad.
A mix of diced celery and onions used to prepare Costco’s chicken salad has been traced as the likely cause of the E. coli outbreak. This vegetable mix is used in a number of Costco’s products apart from the chicken salad. As a result, the company is recalling over 154,000 lots of numerous products from various grocery store chains across 17 states, most of which are in the West.
Per the U.S. Food and Drug Administration, a sample of the abovementioned vegetable mix was examined by the Montana state health authorities and it tested positive for the E. coli O157:H7 strain.
The CDC disclosed that although no deaths were reported, five people had to be admitted to the hospital. Moreover, of these five patients, two developed hemolytic uremic syndrome (a type of kidney failure).
Last week, when the news of the E. coli infection surfaced, Costco informed the CDC that it has taken its rotisserie chicken salad off the shelves, effective Nov 20. In addition, the retailer has stopped further production of the item.
Also, Costco is currently in talks with the U.S. Food and Drug Administration and the U.S. Department of Agriculture regarding the issue, including the possible time when it can restart sale of the product.
This news might come in handy for the company’s competitors. We note that Costco faces stiff competition from BJ’s Wholesale Club and Sam’s Club, a division of Wal-Mart Stores Inc. WMT. These two rivals follow similar business models as they market high volumes of merchandise at low prices in membership-only warehouse clubs.
As of now, we can only wait and watch to see whether, and if yes, how soon Costco is able to untangle itself from this E. coli outbreak issue.
Zacks Rank
Costco currently carries a Zacks Rank #3 (Hold). A couple of better-ranked stocks in the retail sector include Ross Stores Inc. ROST and Burlington Stores, Inc. BURL. Both these stocks carry a Zacks Rank #2 (Buy).
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