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Why Restaurant Stocks -- and Beyond Meat -- Imploded Yesterday

By Rich Smith - Updated Mar 17, 2020 at 8:00AM

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These measures may be necessary, but don't expect restaurant investors to like them.

What happened

You knew this was coming, but now it's actually come -- and now we see the effect.

Over the weekend, state governments began demanding that restaurants and bars close their doors in response to federal government exhortations toward "self-quarantining" and "social distancing" to slow the spread of coronavirus.

At last report, 14 states -- roughly one out of every four in the Union -- have announced restaurant and/or bar closures. As of 3 p.m. EDT Monday, shares of Brinker International (EAT -2.42%), Wendy's (WEN -0.52%), and Shake Shack (SHAK -2.82%) are down 37.5%, 20.2%, and 11.9% respectively.

And not only restaurant stocks have been hit. Beyond Meat (BYND -0.94%) is down 12.3% as well -- illustrating how the company's wide-ranging efforts to get its products onto restaurant menus are turning into a double-edged sword.

'Sorry, we are closed' sign hung on restaurant door

Image source: Getty Images.

So what

Things could still get worse. In fact, things almost certainly will.

So far, Connecticut, the District of Columbia, Illinois, Indiana, Kentucky, Maryland, Massachusetts, Michigan, New Jersey, New York, Ohio, Pennsylvania, Rhode Island, and Washington state have all ordered bars and restaurants within their borders to close to the public, and prepare food only for takeout and delivery. California, however, is closing only bars, nightclubs, breweries, and wineries. For the time being, restaurants are only being asked to reduce their occupancy by 50%.  

Now what

That right there is a second shoe just waiting to drop. And after it does, there are still 36 more states that haven't announced any closures yet, but probably will. While there's certainly a possibility that the government will figure this out, and step in with yet another announcement of targeted relief measures -- a restaurant industry bailout -- there's no guarantee that this will happen or, if it does, how long it will take.

In the meantime, restaurant stocks are falling. You knew this was coming -- and now it has come.

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Stocks Mentioned

Brinker International, Inc. Stock Quote
Brinker International, Inc.
$23.39 (-2.42%) $0.58
The Wendy's Company Stock Quote
The Wendy's Company
$19.03 (-0.52%) $0.10
Shake Shack Inc. Stock Quote
Shake Shack Inc.
$41.01 (-2.82%) $-1.19
Beyond Meat Stock Quote
Beyond Meat
$25.18 (-0.94%) $0.24

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

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