Dining restrictions have caused a sizable drop in Darden Restaurants’ profits.
Darden Restaurants is the parent company to multiple prolific dining chains, including Longhorn Steakhouse, The Capital Grille, and the most profitable chain, Olive Garden. Typically, Q3 is the company’s best fiscal quarter, with Olive Garden in particular often bringing in the largest portion of profits. However, based on new projections, it seems this year’s Q3 will fall well short of its predecessors.
Darden Restaurants CFO Rick Cardenas announced today that sales from its brands are projected to drop by 30 to 35% in Q3, and that they likely will not recover until Q4 2021. As a result of this news, shares in Darden dropped in value by 1.6%.
In-store sales across all of Darden’s brands have been down in recent months, with the obvious culprit being the ongoing COVID-19 pandemic. With cases on the rise again and new restrictions being put in place indefinitely, it is unknown when they will be able to regain their losses.
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 altered their sales tactics in order to appeal more to pandemic-era crowd, focusing more on safe take-out options and less on limited time menu selections. Nevertheless, sales at Olive Garden this past quarter have been down by 19.9%, with Longhorn Steakhouse and The Capital Grille suffering drops of 11.1% and 31%, respectively. The Capital Grille saw especially heavy losses as it is a fine dining chain that isn’t typically intended to serve take-out options.
The Darden board is planning to invest approximately $250 million to $300 million in 35 to 40 new restaurant locations in Q3. Economic difficulties have caused more real estate to become available, though rent prices haven’t dropped a significant amount.