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Why Restaurant Stocks Plunged Today

By Joe Tenebruso - Updated Mar 16, 2020 at 3:50PM

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Drastic measures to halt the spread of the COVID-19 coronavirus are leading to restrictions and closings.

What happened

Shares of McDonald's (MCD -0.54%), Chipotle Mexican Grill (CMG -0.62%), Texas Roadhouse (TXRH -2.62%), BJ's Restaurants (BJRI -3.69%), and Darden Restaurants (DRI -1.90%) all plummeted by more than 10% on Monday, as investors grew increasingly concerned about the consequences of the COVID-19 coronavirus outbreak on the industry. 

So what

As the number of confirmed cases of COVID-19, the disease caused by the novel coronavirus, continues to grow, government officials around the world are taking drastic measures to slow the spread. This includes ordering restaurants to reduce operating hours, banning in-store dining, and even forcibly closing stores. 

A person posting a sign with the word closed on it.

Many restaurants are closing due to the COVID-19 coronavirus pandemic. Image source: Getty Images.

These actions will no doubt have a negative impact on restaurants' sales and profits in the coming weeks. Many investors, unwilling to hold through this painful period, sold their shares on Monday, leading most of the major restaurant stocks to suffer large losses.

Now what

It's unclear how long the restaurant industry will need to operate under these recent coronavirus-related restrictions. If the situation persists for months, restaurants (and their investors) could continue to endure losses. Worse still, if concerns over disease transmission lead to a long-term reduction in restaurant traffic, the industry could face a more difficult road ahead.

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Stocks Mentioned

McDonald's Corporation Stock Quote
McDonald's Corporation
MCD
$246.41 (-0.54%) $-1.32
Chipotle Mexican Grill, Inc. Stock Quote
Chipotle Mexican Grill, Inc.
CMG
$1,280.16 (-0.62%) $-8.04
BJ's Restaurants, Inc. Stock Quote
BJ's Restaurants, Inc.
BJRI
$21.55 (-3.69%) $0.82
Darden Restaurants, Inc. Stock Quote
Darden Restaurants, Inc.
DRI
$111.71 (-1.90%) $-2.16
Texas Roadhouse, Inc. Stock Quote
Texas Roadhouse, Inc.
TXRH
$72.26 (-2.62%) $-1.94

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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