Darden Restaurants (NYSE:DRI) is preparing for a historically stressful short-term operating environment. The owner of the Olive Garden and Longhorn Steakhouse chains said on Thursday that it is taking a few extraordinary financial precautions as customer traffic levels dive in an era of maximum social distancing.
Sales at existing locations turned modestly negative in early March and then collapsed the following week as COVID-19 containment measures ramped up across the country. Revenue dove 21% during that week, executives said in a press release. The chain responded by withdrawing its short-term operating outlook that had called for modest sales growth this year.
The pause in customer traffic should be temporary, but Darden nevertheless took two moves aimed at shoring up its cash balances. The restaurant chain paused its dividend payout and tapped its entire $750 million credit line to deal with the uncertainty driven by new seating restrictions and demand slumps related to the coronavirus outbreak. The loan was taken only out of an "abundance of caution," executives said, and it brings Darden's cash balances to just over $1 billion.
With that cash in hand, the company says it believes it is positioned to navigate through the current industry slump while still supporting its more than 185,000 employees.