McDonald's Falls on Concern That Storms Will Hurt Sales

Updated on
  • Investors are opting to ‘sell first, ask questions later’
  • Chain has more than 2,000 locations combined in Florida, Texas

A damaged McDonald's sing lies on the ground after Hurricane Harvey in Galveston, Texas, on Aug. 26, 2017.

Photographer: Brendan Smialowski/AFP/Getty Images

McDonald’s Corp. suffered its worst stock decline in more than a year on mounting fears that storms in Florida and Texas will weigh on results this quarter.

The concerns escalated Tuesday after data tracker M Science said its sales projections for the fast-food chain are below Wall Street’s estimates. The analysis firm has previously swayed stocks like Chipotle Mexican Grill Inc. and Weight Watchers International Inc. with its reports.

Two major storms have battered the U.S. in recent weeks, with the impact centered on two of the nation’s three most populous states. Hurricane Harvey struck Texas late last month, with Irma hitting Florida in the past weekend. Though McDonald’s is less exposed to the markets than some restaurant chains -- thanks to its global footprint -- the company has more than 2,000 locations combined in the two states.

M Science Chief Executive Officer Michael Marrale said his firm has evaluated purchasing, traffic and regional performance trends for McDonald’s. The analysis indicates that the company will miss consensus estimates for domestic revenue and same-store sales, he said.

The shares fell as much as 3.6 percent to $155.77 on Tuesday, marking the biggest intraday drop since July 2016. The stock had been up 33 percent this year through Monday, bolstered by McDonald’s outperforming much of the restaurant industry.

Starbucks Corp., which is also dealing with the aftermath of the storms, indicated that the sales disruption is expected to be a drag on results. The company said on Monday that it had closed more than 700 stores in the southeastern U.S. and Puerto Rico as a result of Hurricane Irma and that “nearly all of those stores remain closed.” That followed the closure of more than 400 Texas locations because of Hurricane Harvey, Starbucks said.

The effect of the storms, including the resulting higher gas prices, is spurring concern that restaurant chains will post weaker results, said Peter Saleh, an analyst at BTIG LLC.

“Everybody is on edge right now in the restaurant space,” he said. “It’s sell first, ask questions later.”

— With assistance by Arie Shapira

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