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Olive Garden Parent Reveals Weekly Sales Losses up to 75%, Stock Rallies Anyway

By Rhian Hunt – Apr 7, 2020 at 12:57PM

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Darden Restaurant's fine dining subsidiaries were the hardest hit.

With its news release this morning, Darden Restaurants (DRI -2.32%) gave one of the earliest in-depth looks at the COVID-19 pandemic's effects on a major restaurant company. The company, which is the parent of well-known subsidiaries such as Olive Garden and LongHorn Steakhouse, provided data on the first six weeks of its fourth-quarter 2020 operations. Its fiscal 2020 fourth quarter began with the week ending March 1, and provides a snapshot of coronavirus-related changes.

Same-restaurant sales remained positive at the start of March, growing a modest 3%. The dip caused by the pandemic appeared the following week, however, with weekly sales dropping 0.2%. Sales plummeted by mid-March, plunging 75.1% for the week ending March 22, falling 74.9% the following week, and most recently losing 71.2% during the week ending on April 5. Sales fell 39.1% overall during the six weeks.

The exterior of a LongHorn Steakhouse.

Image source: Darden Restaurants.

While Olive Garden and LongHorn Steakhouse took a heavy hit as a result, Darden's fine dining restaurants, Eddie V's Prime Seafood and The Capital Grille, sustained even heavier sales losses. Its fine dining locations registered same-restaurant sales declines of more than 89% one week, while its "other business" sector suffered a 94% plunge. The difference is explained in part by the availability of to-go sales at the two casual dining chains, which both saw increased off-premise purchases.

Darden Restaurants recently suspended its dividend and withdrew its guidance because of the coronavirus. It also says it obtained and fully drew down a $270 million term loan on April 6 to help it stay liquid through the pandemic. Its stocks are up more than 10% so far today amid a general rally over news of a potential end to the coronavirus lockdown in four to eight weeks.

Rhian Hunt has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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