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3 Food Service Stocks Taking A Hit From Coronavirus Closures On College Campuses

Dave Royse

If you are in the business of feeding assembled masses of people, what do you do if no masses assemble?

In places where people gather in large groups, they often eat. And when big gatherings don't occur in an effort to slow the spread of a pandemic virus, whether at a stadium, a convention center or a university dining hall, it could result in a hit to the bottom lines of the big food service vendors.

Aramark (NYSE: ARMK), which provides food services for about 1,500 colleges and universities, as well as school systems, stadiums and other clients, saw its stock plummet 13.56% Wednesday as the response to the COVID-19 virus ramped up dramatically in the United States.

Another food service vendor, SYSCO Corporation (NYSE: SYY) was down 11.65%.

Several college campuses across the country announced Wednesday that they're shutting down in-person classes and a few told students to leave on-campus housing in an effort to slow the spread of the virus, which the World Health Organization now considers a pandemic.

At some universities, officials were shutting down dining services, with students expected to leave campus. It's not clear yet how many college dining halls will stop serving, and whether any of them are run by Aramark or Sysco. It's also not clear what the impact on the bottom line from such closures would actually be.

The companies have different types of contracts, including some with fixed costs for the universities, and others where the university payments depend on revenue from meals sold.

Neither company responded to a request for comment on the issue or on their plans for responding to the virus.

Concession To Pandemic: Fewer Concession Stands

Food service vendors also are starting to have to think about the reality of a world in which big sports events aren't so big. The companies run concession operations that can serve tens of thousands of spectators, but in some locations in the coming weeks, they may not be serving anybody.

At least two major college basketball leagues, the Mid-America Conference and the Big West, have decided to hold their post-season conference tournaments in nearly empty arenas, banning most spectators. The Ivy League canceled its tournament entirely.

Holding the MAC tournament in front of just a handful of school officials, family members and media at Rocket Mortgage Arena in Cleveland will affect Aramark, which holds the concession contract at the facility, which is also home to the NBA's Cleveland Cavaliers.

March Sadness

Ohio Gov. Mike DeWine indicated that NCAA tournament games in Cleveland and Dayton will also likely be played without fans in attendance.

Major sporting events have already been canceled in other countries, and some professional soccer games in Europe are being played in empty stadiums. It's something U.S. teams are going to have to contemplate as well.

The NBA's Golden State Warriors will play at least one home game without fans in attendance, with the San Francisco Health Office having banned events with more than 1,000 people. Levy Restaurants and Bon Appétit Management Co., two vendors that are part of the British food service company Compass Grp PLC/S ADR (OTC: CMPGY), serve the Warriors' home arena, the Chase Center.

Compass Group, which has institutional clients around the world, saw its stock drop nearly 9% on Wednesday.

Also on Wednesday, Washington state Gov. Jay Inslee said his state will prohibit gatherings of more than 250 people in the Seattle area; the state has had 284 confirmed coronavirus cases.

That could mean University of Washington sports, Seattle Sounders soccer games and the upcoming Seatlle Mariners baseball season could be in jeopardy of being played with restricted audiences.

Related Links:

WHO Declares The Coronavirus Outbreak A Pandemic

Golden State Warriors Will Play An Empty Arena Game

Michigan State University photo via Wikimedia. 

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