Revenue Decline for Darden Restaurants Due to Dining Restrictions
Darden Restaurants, the parent company of various popular restaurant chains including Longhorn Steakhouse, The Capital Grille, and the highly profitable Olive Garden, is facing a substantial decrease in profits. Normally, the third quarter (Q3) is the company’s strongest fiscal period, with Olive Garden typically contributing a significant portion of the earnings. However, recent projections suggest that this year’s Q3 results will be significantly lower than in previous years.
The Chief Financial Officer (CFO) of Darden Restaurants, Rick Cardenas, has announced that sales across the company’s brands are anticipated to decrease by 30 to 35% in Q3, with recovery not likely until Q4 of 2021. Following this announcement, the company’s stock value dropped by 1.6%.
In-store sales for all of Darden’s brands have been on the decline in recent months, primarily due to the ongoing COVID-19 pandemic. With cases rising once again and new restrictions being imposed indefinitely, the timeline for recovering these losses remains uncertain.
Olive Garden parent’s revenue falls 19% as new dining restrictions hit same-store sales https://t.co/rIAZQTqiLq
— CNBC (@CNBC) December 18, 2020
Darden’s brands have adjusted their sales strategies to cater more to the current pandemic environment, focusing on safe take-out options and reducing limited-time menu offerings. Despite these efforts, Olive Garden experienced a nearly 20% drop in sales this past quarter, while Longhorn Steakhouse and The Capital Grille saw declines of 11.1% and 31%, respectively. The Capital Grille, being a fine dining establishment not typically geared towards take-out service, faced particularly significant losses.
Looking ahead, the Darden board is planning to allocate around $250 million to $300 million for the opening of 35 to 40 new restaurant locations in Q3. Economic challenges have led to more available real estate, though rental prices have not decreased significantly.
