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Darden Restaurants Resumes Its Dividend After Sales Improve

By Demitri Kalogeropoulos – Sep 24, 2020 at 9:48AM

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Cash flow trends are improving, but customer traffic is still weak.

Darden Restaurants (DRI -0.91%) is still reeling from a pandemic-related customer traffic plunge, but at least the business is on the mend.

The owner of the Olive Garden and LongHorn Steakhouse restaurant franchises on Thursday revealed that sales dove 28% across its chains through late August. That metric marked a sharp improvement from the prior quarter's 43% decline that was powered by widespread COVID-19 closures.

A waiter serves a table.

Image source: Getty Images.

Darden has resumed limited operations at most locations, with a focus on outdoor dining. But traffic is far from fully rebounded. This reduced capacity pushed operating profit down to $57 million compared to $202 million a year ago.

Yet management says it is encouraged by steadily improving sales and cash flow trends. These factors pushed operating results above expectations for the period. "I'm incredibly proud of how our restaurant teams have adapted to our new operating environment," CEO Gene Lee said in a press release.

The improving financial picture convinced executives to reinstate the quarterly dividend payment that Darden suspended as the pandemic struck in early March. Yet it may still be several more quarters before the chain can reasonably expect to return to sustainable sales growth.

Demitri 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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