Darden Same-Restaurant Sales Fall Sharply Due to Coronavirus

Darden Restaurants, Inc. DRI same-restaurant sales continue to be impacted by the coronavirus pandemic. The company provided same-store sales update for the fourth quarter to date through May 17.

Sales Update

The company’s same-restaurant sales declined 47.9% in the period. Moreover, for the weeks ended Apr 26, May 3, May 10 and May 17, same-restaurant sales were down 60.1%, 57.7%, 50.8% and 49%, respectively. For the first eight weeks of the fourth quarter, same-restaurant sales were up 3.0% and down 0.2%, 20.6%, 75.2%, 74.9%, 71.2%, 65.2% and 60%, respectively.

For the fourth quarter to date through May 17, same-restaurant sales were down 39.4%, 45.8%, 63.1% and 65.5% at Olive Garden, LongHorn Steakhouse, Fine Dining and Other Business, respectively.

The company announced beginning Apr 27, 2020, it started reopening dining rooms with sitting capacity in the range of 25% to 50% depending on local or state regulations. The company opened 49% of its dining rooms with limited capacity as of May 17. It anticipates opening more than 65% of its dining rooms with limited capacity by the end of May.

Notably, shares of the Zacks Rank #3 (Hold) company have lost 37.4% in the past three months, compared with the industry’s decline of 15.8%. The decline can be primarily attributed to the impact of the coronavirus outbreak.

Liquidity Update

The company stated that its weekly cash burn rate has improved to nearly less than $10 million including capital expenditures. The company fully repaid its $750 million credit facility on May 5, 2020 as it is confident about cash flow projections and stabilization in the credit markets.

As of May 17, the company had nearly $700 million in cash on hand. Moreover, including cash available through the credit facility and cash on hand, the company’s total liquidity is more than $1.4 billion.

Key Picks

Some better-ranked stocks worth considering in the same space include Domino's Pizza, Inc. DPZ, Wingstop Inc. WING and Yum China Holdings, Inc. YUMC. All these stocks carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Domino's Pizza, Wingstop and Yum China have an impressive long-term earnings growth rate of 12.5%, 11% and 9.5%, respectively.

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