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Why Brinker International Stock Jumped 12% in July

By Reuben Gregg Brewer - Aug 6, 2020 at 9:36AM

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The restaurant owner's stock had a decent run in July, but it's still far too soon to give the all clear.

What happened

Shares of restaurant owner Brinker International (EAT 1.43%) rose 12% in July according to data from S&P Global Market Intelligence. Although that was a nice number, the stock was still down by roughly 36% through the first seven months of 2020. There's a lot of backstory here and it's all related to COVID-19.

So what

Brinker International owns and franchises Chili's and Maggiano's Little Italy restaurants. It's normally a pretty boring business, but the coronavirus pandemic changed things in swift fashion. Early in the year governments closed non-essential businesses, particularly those where people gathered in groups, and asked residents to stay at home. In effect, Brinker's business was shut down. The stock was lower by roughly 80% at the worst point in March.

Corn chips scattered around a bowl of guacamole

Image source: Getty Images.

Things have gotten better, with the company noting that by June over 80% of its restaurants were again open for business. Investors' moods have brightened along with the improving outlook. And, in July, though there wasn't much news on the corporate front, it was probably more important that there wasn't any deeply negative news. Investors responded by giving the shares a boost. The broader market was up around 6%, so that's not really shocking. However, it's important to highlight that many of the states that have reopened for business are seeing an uptick in COVID-19 cases. So, the headwinds Brinker faces are far from over.   

Now what

There's no question that the situation surrounding COVID-19 is better today than it was in early 2020. Although the United States hasn't exactly gotten a handle on the coronavirus, people are starting to move around again. That's good news for Brinker's business, but nothing is back to normal yet and it may be quite a while before that happens. Long-term investors should expect earnings to be difficult reading for the rest of the year, with continued share price volatility, likely driven by COVID-19 related news, just par for the course. In other words, July's advance was nice to see, but don't count on a steady upward trajectory. 

Reuben Gregg Brewer 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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Stocks Mentioned

Brinker International, Inc. Stock Quote
Brinker International, Inc.
EAT
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