Coronavirus shutters restaurants in China, sending shares of Luckin, Starbucks lower

Key Points
  • Shares of McDonald's, Starbucks, Yum China and Luckin Coffee all fell Monday amid growing fears about the Wuhan coronavirus.
  • McDonald's, Starbucks and Yum China have shuttered locations near the initial outbreak.
  • The virus has claimed 81 lives in China so far and infected nearly 2,900 people in the country.
Wary of the coronavirus, crowds of people wear surgical masks. In light of a deadly virus outbreak in China, Hong Kong citizens wore surgical masks in fear of contracting the flu.
Willie Siau | Getty Images

Restaurant stocks fell Monday amid mounting concern about the Wuhan coronavirus and its impact on the global economy.

The virus has claimed 81 lives in China so far and infected nearly 2,900 people in the country. Wuhan and more than a dozen other cities are on lockdown to stop its spread. Both the Dow Jones Industrial Average and the S&P 500 were trading lower on Monday as the number of coronavirus cases rose. A fifth case in the U.S. was confirmed over the weekend.

With the number of cases rising, there is some concern that restaurants will remain closed for a prolonged period. The Chinese government has already added three days to the Lunar New Year holidays, which will now end Feb. 2.

Starbucks' Chinese rival Luckin Coffee, which has a market value of $9 billion, saw its shares tumble as much as 8%. The chain recently surpassed Starbucks with its number of locations in China.

The company has proactively closed Luckin coffee stores in Wuhan throughout the Lunar New Year holiday and has strict nationwide policies in place to monitor the situation, according to a company spokesperson.

"While holiday travel has likely accelerated the virus's spread, the timing of the Chinese New Year has been a mitigating factor for Luckin Coffee as 70-80% of the company's footprint is typically closed during that period," Keybanc analyst Eric Gonzalez wrote in a note to clients on Monday.

Starbucks' stock, which has a market value of $105 billion, dropped nearly 4%. The coffee chain said it has closed all shops and suspended delivery service in China's Hubei province, where the virus originated, for the Lunar New Year holiday. China is Starbucks' second largest market, behind the United States. During its fiscal fourth quarter, Starbucks' 4,125 Chinese cafes contributed $763 million in revenue.

Shares of McDonald's, which suspended business in five Chinese cities last week, were down more than 1% in morning trading. China represents a small fraction of the global fast-food giant's total business.

"When you think about McDonald's, less than 2% of their operating profits are derived from China," Cowen analyst Andrew Charles said on CNBC's "Squawk on the Street" on Friday.

Shares of Yum China, which Reuters reported had temporarily closed some KFC and Pizza Hut restaurants in Wuhan, fell 5%. China accounts for 27% of KFC's systemwide sales and 17% of Pizza Hut's. Yum Brands, its U.S. franchiser, saw its own stock drop more than 1%.

Starbucks is scheduled to report earnings Tuesday after the bell. McDonald's, which has a market value of $160.8 billion, will announce its fourth-quarter results Wednesday morning.

Here's how the virus outbreak could affect restaurants