Starbucks, McDonald’s among Re-Openings in China
April 9, 2020

A slow recovery in China offers glimpse of what return to business might look like in the US

Starbucks (SBUX) was among the first US corporations to feel the impacts from the COVID-19 Global pandemic. In a letter on March 5, the company noted that comparable sales in China were down a whopping 78% in February, with little impact yet felt here at home in the US.

Now, over 95% of stores in China are back up and running – albeit many with reduced hours and/or services. The slow grind to recovery resulted in an improved, though still largely negative, 64% decline in comparable sales for March.

After shifting to a “to-go” model in the US (similar to other restaurants we’ve covered), just 76% of stores with drive-thru capability remain in operation. In fact, the last couple weeks of the quarter were such a drag on results that a comparable sales drop in the ~60-70% range resulted in total US comparable sales for the quarter to be down 3%, essentially wiping out the strong 10-week start.

Starbucks believes this decline to be temporary, and is hoping to leverage lessons learned from China’s recovery in the US.

Reduced level of demand

McDonald’s (MCD) reported that global comparable sales were down 22% in March and a little over 3% for the quarter. This is with substantially more of their properties able to stay open – the peak closure in China was “just” 25% of locations and the US still has ~99% in operation. However, with 98% of stores now back open in China, the Company notes that “the market continues to experience a reduced level of demand as consumers have not fully returned to their pre-COVID routine.”

Now, the question is, will we see a quick return to pre-crisis behavior once the shelter-in-place orders ease? Chances are any recovery will be a slow and steady one. As Bill Gates recently said, we can’t simply “wave a wand” and have everything go back to normal.

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