What happened

Shares of Bloomin' Brands (NASDAQ:BLMN), Cheesecake Factory (NASDAQ:CAKE), and Darden Restaurants (NYSE:DRI) all underperformed the broad market on Thursday.

Although there was no company-specific news to cause the stocks to fall, macroeconomic news, such as unemployment claims and consumer spending, seemed to weigh on the issues. At market close, Bloomin' Brands was down 10.9%, Cheesecake Factory was down 8.5%, and Darden was off 5.7%.

A chef and his assistant preparing food.

Image source: Getty Images.

So what

Restaurant stocks were pummeled as a result of the COVID-19 pandemic as preventative measures such as lockdowns forced the industry to close its doors or fall back on takeout and delivery.

However, restaurant stocks rallied in April with the S&P Food & Beverage index rising 12% through yesterday's close, but today brought news that unemployment grew by 3.8 million, ahead of projections of 3.2 million, and consumer spending fell 7.5% in March, the worst decline seen in 60 years.

Even so, the broad market enjoyed its best one-month performance in decades, and many restaurants followed suit.

BLMN Chart

Data by YCharts.

Now what

The three casual dining chains ought to be able to weather the storm, as all were among those that still had substantial takeout or delivery operations in effect prior to the pandemic. While the sit-down business is essential to their operations long term, they were able to offset the worst of it with those alternatives.

As Bloomin' Brands noted in its mid-April business update, it has not fired or furloughed any of its hourly employees and continues to support its staff with relief pay and free meals, while the CEO suspended his pay and the board of directors suspended their cash retainers. At the same time, the restaurant's off-premise sales have tripled during the crisis.

Cheesecake Factory is also able to come through to the other side, particularly since it recently scored a $200 million investment from private equity firm Roark Capital, which did earn it a seat on the board of directors. But the restaurant noted its "long-standing business in the off-premise channel" enabled it to quickly pivot to takeout, and the sales acceleration witnessed would, if annualized, equate to over $3 million per unit on average. Of the nearly 300 restaurants it operates, only 30 are currently closed, and those that remain open are "operating sustainably."

The situation isn't all that different for Darden Restaurants, owner of the Olive Garden and LongHorn Steakhouse chains. The company is already reopening its restaurants where allowed, mindful of social-distancing directives and health and safety measures for employees. As another restaurant with a substantial off-premise business, it said to-go orders have tripled during the pandemic.

The restaurant industry has been hard hit, but the strongest brands have done more than just tread water. As such, today's retreat, following the huge rally all three companies enjoyed this past month, is not an unexpected development.