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Darden Restaurants Says Sales Continued Slumping Into Mid-June

By Demitri Kalogeropoulos – Jun 25, 2020 at 10:35AM

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The chain said it is on track to return to profitablity this quarter even as customer traffic trends remain depressed.

On Thursday, Darden Restaurants (DRI -1.80%) reported financial results for its fiscal fourth quarter, which includes the challenging sales months of March, April, and May. The period was heavily impacted by COVID-19 store closures that sent sales down by nearly 50%. But the owner of the Olive Garden and LongHorn Steakhouse franchises has only seen a modest recovery in the first three weeks of June.

Comparable-store sales fell 39% at Olive Garden and dove 45% at LongHorn Steakhouse in Q4, as nearly all its dining rooms were closed. The company reported a net loss of $3.85 per share compared to earnings per share of $1.67 a year ago.

Operating profits fell at a faster rate than sales, reflecting the high fixed costs built into the full-service dining niche. Olive Garden posted a 71% drop in operating earnings, and LongHorn's comparable figure plunged 88%.

A waiter placing a plate of food down in front of a woman dining with a man, with several other people occupying nearby restaurant tables

Image source: Getty Images.

CEO Gene Lee said that the disruption in the industry may create space for high-performing brands to win market share as restaurants open back up for business. Darden is also predicting a return to positive earnings and cash flow in the current quarter.

However, its latest weekly demand trends suggest that the recovery could be slow. Companywide, comps were down 39% in the first week of June and fell about 30% in each of the following two weeks. Darden said over 90% of its restaurant dining rooms are now open with at least limited capacity.

Demitrios Kalogeropoulos 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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