- McDonald’s and Starbucks will weigh in with earnings and sales numbers this week.
McDonald’s (NYSE:MCD) will report on Tuesday before the bell. Analysts are looking for a profit of 74 cents per share on sales of $3.7B. U.S. comparable sales are forecast to be down 8%, with global sales down a whopping 20%.
Starbucks (NASDAQ:SBUX) is also scheduled for Tuesday, reporting postmarket. The consensus is for a quarterly loss of 57 cents a share, with sales of $4.14B. The company has guided U.S. and Americas comp sales to drop 40-45%.
The reported period covers the worst months for pandemic shutdowns, so any sign that business is turning a corner to follow the overall rebound in economic indicators will be welcome for investors.
But the Golden Arches is going into earnings season on the back foot. Along with the announcement that it is joining a host of companies requiring customers to wear masks, the company said it will be pausing reopening dining rooms for another 30 days.
“To further our efforts to slow the surge in COVID-19 cases and protect restaurant teams and customers, we will extend our pause on re-opening dining rooms for another 30 days. This means we will not approve the re-opening of any additional dining rooms,” it said.
McDonald’s and Starbucks have underperformed the broader market through the crisis. In the past 6 months, McDonald’s is down 6.9% and Starbucks is off 17.7%, The S&P is down 3.3% in the same period. In the past month, though, both stocks have outperformed, with McDonald’s up 6.5% and Starbucks up 2.9%, compared with the broader market seeing a 2.7% gain.
From a sector perspective, McDonald’s and Starbucks did even worse over 6 months. The Vanguard Consumer Discretionary ETF (NYSEARCA:VCR) is up 11.8%.
Also concerning for investors, shares of rivals like Domino’s (NYSE:DPZ), up 35.7% in 6 month, and Chipotle (NYSE:CMG), up 30%, are storming ahead.
Domino’s has a natural advantage with its delivery-focused model. But its big investment in technology and digital sales also paid off during the lockdown months.
Chipotle last week reported a narrower-than-expected decline in comparable sales for the quarter, with digital sales soaring more than 200%.
"The sales recovery seen in the last two months has been impressive, outpacing our forecast by a couple months with comps up 6.4% so far in July despite lingering headwinds, and we expect the company to retain most of the digital sales achieved during the pandemic," BTIG said in support of its choice for CMG as a top pick.
For the sector to really break out, though, the big players have to get more traction. But a lot of that is out of the hands of management. McDonald’s and Starbucks are very reliant on a breakfast business that has all but disappeared. Even if their stores open fully, the morning traffic will require offices to open up as well and commuting to become the norm again.
Based on Seeking Alpha’s Quant Ratings, McDonald’s ranks second for restaurants, while Starbucks ranks 15. Both struggle on their value measurements but get top marks for profitability.
See a screen of all restaurant stocks and compare by Quant Rating or the ranks of Wall Street analysts and Seeking Alpha authors.
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