3 Food and Beverage Stocks in the US: SBUX, MCD & MNST

With the US lifting restrictions on people movement gradually, the consumers are returning to fast food chains and beverage restaurants to get meals and drinks after long days sitting at homes. Meanwhile, Restaurant chain operators are plying trade under renewed challenges and procedures.

Some health-conscious consumers may not step out of home and will likely order from home. Companies engaged in fast food and beverage industry are increasingly embracing the shift to digital with more investments to deliver quality consumer experience. With restaurants opening, some of the labour force is likely to get back on payroll as well.

Let’s discuss these three businesses:

Starbucks Corporation (NASDAQ:SBUX)

Founded in 1985, Starbuck Corporation operates in most part of the world. Its stores sell coffee, beverages, tea, and handcrafted coffee. It also offers products and services through other channels, including licensing, trademarks, alliances. Stock of the corporation is listed on the NASDAQ Global Select Market.

In May, the coffee shop brand opened around 85% of the US stores and expects to resume trading in 90% of the stores by early June. It is operating under modified hours and processes. The Company has experience from China where almost all of its stores are trading under the new regime.

Likewise, the business adopted similar processes in the US and is committed to adhere to the guideline formulated by the Centers for Disease Control and Prevention, including sanitisation protocols.

SBUX has introduced new modes of delivery to honour social distancing principles in the wake of COVID-19, including contactless pickup, mobile ordering, grab and go etc. It was noted around 20 million of its customers are using Starbucks mobile application, and the Company would continue to enhance the customer experience on the mobile application.

Some of the features on the application include voice ordering through Siri and enhanced drive thru process. The business is moving towards cashless payments and notes that mobile payment will likely be dominant form of payment.

It continues to invest in Artificial Intelligence capabilities on its Deep Brew suite. The suite will drive data-based decision making at a field leadership level, underpin operations, and resuming of trading at stores.

SBUX noted that prior to COVID-19 crisis, over 80% of its customer sales in the US were through physical distancing processes, including drive-thru, pick-up after mobile order.

In late April, the Company reported Q2 fiscal 2020 results for the period ended 29 March 2020. Its global comparable sales were down 10%. In the Americas and the US, comparable sales were down by 3%.

International comparable sales plunged 31%, while China comparable sales were down 50%. Its consolidated net revenues stood at $6 billion for the period, down by 5% due to COVID-19.

At the end of the period, it was trading with around 32k stores with 255 new stores in Q2. GAAP-based EPS for the period was $0.28, down by 47% compared to the same period last fiscal.

On 18 May 2020, SBUX last traded at $76.23, up by 2.79% from the previous close.

McDonald’s Corporation (NYSE:MCD)

Based in Chicago, Illinois, USA, McDonald’s Corporation is a world-renowned fast food chain operating globally. It operates restaurants that serve locally driven food and beverages. The corporation is present in most of the countries through its affiliates, developmental licensing or conventional franchises. MCD is a primary franchisor and considers this model is the best way to provide great-tasting food.

At the backdrop of COVID-19, the Company has undertaken proactive measures to support its franchisees across the world. These measures were directed for franchisees to continue supporting workforce and community.

As a part of these measures, MCD announced around $1 billion of short-term liquidity support in late April. Last week, the Company also announced additional measures to support and accelerate recovery of franchisees. These new measures would enable its partners to return to growth and maintain competitive advantages, which have been crucial for the success of the brand over the course of history.

MCD is investing in marketing in the US and international market segments to underpin the recovery in sales. It would be providing targeted financial support the organisations that have faced severe contraction. And, the Company would support to the organisations that are operating under a new regime such as delivery only restaurants in certain markets.

In late April, the Company released Q1 2020 results for the period ended 31 March 2020. During the first two months, it recorded strong comparable sales growth and results. However, in the second half of March, MCD experienced stores closures and changes in consumer behaviour, impacting the first quarter results.

Source: McDonald’s Website

Subsequently, the franchisor withdrew its long term and 2020 outlook as a result of uncertain trading condition across markets.

In Q12020, the Company recorded a decline of 3.4% in global comparable sales. Revenue for the period was $4.71 billion, down by 6% compared to 1Q2019. MCD’s operating income fell by 19% against the same period last fiscal to around $1.7 billion from $2 billion.

Likewise, it delivered a net income of $1.1 billion, down by 17% from $1.32 billion in same period last fiscal. Diluted earnings per share for the period was $1.47 against $1.72 in 1Q2019, down by 15%.

On 18 May 2020, MCD last traded at $179.83, up by 3.46 % from the previous close.

Monster Beverage Corporation (NASDAQ:MNST)

Based in Corona, California, USA, Monster Beverage Corporation is the producer of energy drinks and concentrates of energy drinks. It has a range of products in the alternative beverage category, and its energy drinks are world renowned. Monster Beverage traces its roots back to 1930s when Hubert Hansen started selling juices. In the 2010s, the company transitioned to Monster Beverage Corporation from Hansen Natural Corporation, disposing its non-energy products and acquiring various energy brands.

In response to COVID-19 crisis, the Company has implemented various measures to ensure business continuity, including work from home and safety precautions for employees who were unable to operate from home.

During the first quarter, the impact of pandemic was not material to the gross and net sales of the business. However, sales in April were materially impacted by the implication of COVID-19 crisis. Consumers have been moving towards consume-at home from immediate consumption.

As of 7 May 2020, Q2 sales of the businesses were materially impacted as foot traffic contracted at convenience and gas channels, which is the largest channel of the sales. Meanwhile, sales in other channels were largely stable barring food service on-premise. Its supply chains have continued to exhibit resilience with no material impacts.

At the end of March 2020, MNST had $701.8 million in cash and cash equivalents. Also, it was carrying $233.5 million in short term investments and $13.9 million in long term investments.

For the first quarter ended 31 March 2020, net sales for period were $1.06 billion, up by 12.3% compared to same period last year. FX changes on currencies impacted net sales by $10.4 million on a net basis. Net sales to customers outside USA improved by 25.6% on the same period last year to $356.8 million, constituting to 33.6% of the net sales in 1Q2020 against 30% in 1Q2019.

Similarly, net income for the period was $278.8 million, up by 6.6% compared to 1Q2019. Diluted earning per share for the period was $0.52 against $0.48 in the same period last fiscal.

On 18 May 2020, MNST last traded at $66.62, up by 0.92% from the previous close.

(All currencies in USD unless or otherwise stated)

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