What happened

Shares of The Chefs' Warehouse, Inc. (CHEF 1.32%), a specialty food distributor to high-end chefs in major metropolitan areas, dropped as much as 20% Wednesday after the company announced its third-quarter financial results.

So what

Starting from the top, net sales declined 36% to $254.0 million during the third quarter, down compared to the prior year's $396.9 million. The result failed to reach analysts' estimates of $266.7 million. Adjusted earnings checked in with a loss of $0.38 per share, much worse than the prior year's adjusted earnings of $0.23 and below analysts' estimates calling for a loss of only $0.31 per share.

Chef cutting a pepper with additional vegetables on the cutting board.

Image source: Getty Images.

The rough results are to be expected in a quarter damaged by COVID-19 and its negative economic impact, but management did have some positive notes for investors. "Business trends improved sequentially during the third quarter as COVID related restrictions eased in certain markets," said Chairman and CEO Chris Pappas in a press release. "Pent-up demand for dining out was evident as more customers opened for both indoor and outdoor dining."

Now what

It was obviously going to be a disappointing quarter for The Chefs' Warehouse and much of the restaurant industry, but investors will have to take today's 20% decline with a grain of salt as the broader markets also declined sharply this week; COVID-19 cases in Europe are rising; and there continues to be uncertainty surrounding stimulus negotiations. The Chefs' Warehouse stock has already declined 65% year to date. While management continues to focus on adding customers across restaurants, retail, and hospitality industries -- and it did log a 26.7% sequential increase in sales from the second quarter of 2020 -- the truth is there might be more restaurant industry pain to be felt while the COVID-19 pandemic lasts.