Shares of casual-dining eatery company Darden Restaurants (DRI 0.96%) rose 17.5% in November, according to data provided by S&P Global Market Intelligence. The stock spiked early in the month in the wake of positive coronavirus vaccine news.
Restaurants stocks popped early in November after promising data from phase 3 coronavirus vaccine trials was announced. Specifically, casual-dining restaurant stocks like Darden surged on this news. That's because while these companies can offset some lost revenue with to-go orders, it pales in comparison to the business provided by bustling dining rooms. But until the general public is getting vaccinated, dining rooms will likely stay closed or operate in a limited capacity.
With the vaccine news, Darden can see light at the end of tunnel. Sadly, that's not true for all restaurants.
In September, Yelp released a report detailing the economic impact of the COVID-19 pandemic on businesses. It stated that the restaurant industry is the hardest-hit sector, with over 32,000 ongoing closures at the time. Even worse, the report said that 61% of ongoing restaurant closures were permanent -- they won't be reopening when we return to normal.
One can only assume that most of these permanently closed restaurants are small, privately owned operations. The reality, no matter how unfortunate, is that large restaurant operations like Darden will have an opportunity to grow sales long-term since there will be less competition. For this reason, some analysts see Darden as one of the best-positioned casual-dining players, and that also likely helped this consumer discretionary stock rise higher.
Before we look too far ahead, Darden has to keep enduring its present challenges. The company is scheduled to report results for the second quarter of its fiscal 2021 on Dec. 18. Management guided for revenue of about $1.7 billion and earnings per share of $0.65 to $0.75.