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Why Yum! Brands Stock Fell 23% in March

By Demitri Kalogeropoulos – Apr 6, 2020 at 10:27AM

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COVID-19 containment efforts have taken a toll on the fast-food industry.

What happened

Yum! Brands (YUM -1.35%) stock underperformed a weak market last month as shares fell 23% compared to a 12.5% decline in the S&P 500, according to data provided by S&P Global Market Intelligence.

The drop left the fast-food stock down roughly 37% so far in 2020, compared to a 23% decrease in the broader market.

A plate of fried chicken surrounded by biscuits, mashed potatoes, and mac and cheese.

Image source: Getty Images.

So what

Investors reacted to quickly deteriorating conditions in the fast-food industry as COVID-19 containment measures forced sharp reductions in customer traffic. The social distancing moves have caused spiking demand for delivered pizza from its Pizza Hut brand. However, that boost has been more than offset by plunging traffic at most Pizza Hut, Taco Bell, and KFC locations.

Now what

Yum! Brands is aiming to support franchisees through this temporary period of far weaker sales, and those efforts will likely contribute to significantly weaker earnings results through at least the first half of 2020.

The good news is that the fast-food chain's business will almost certainly rebound as economic activity starts returning to normal. The timing and scale of any recovery, however, remain major questions in investors' minds today.

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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