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Why Coca-Cola Stock Fell 17% in March

By Demitri Kalogeropoulos – Updated Apr 2, 2020 at 7:39AM

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The soda giant abruptly lost several important revenue lines as COVID-19 containment measures took root around the world.

What happened

Coca-Cola (KO -1.11%) shareholders underperformed a weak market last month as their stock lost 17% compared to a 12.5% drop in the S&P 500, according to data provided by S&P Global Market Intelligence.

The decline put Coke about even with broader indexes so far in 2020, down 24% in the first quarter.

A glass of soda.

Image source: Getty Images.

So what

Blue chip consumer staples investments like Coca-Cola are often safe havens during market slumps. Yet Coke stock was hurt by worries about a significant negative impact from the COVID-19 outbreak on the business.

The company warned in mid-March that plunging consumer traffic at restaurants, plus the cancellation of major sporting events and most forms of public entertainment activities, will likely harm short-term earnings. Coke gets a large portion of its revenue from those on-premises sales.

Now what

Coke tapped debt markets on March 20, adding more than $5 billion to its cash savings. Executives are slashing costs while attacking sales opportunities online and in retailing stores, too. "We are confident about our ability to navigate from a liquidity perspective," they said in a note to investors.

Yet the company is still likely to see a significant short-term impact to its business while social distancing efforts dampen demand for ready-to-drink soda products.

Demitrios Kalogeropoulos has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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