Darden Restaurants (NYSE:DRI) reported earnings today, and the headwinds the company is facing caused the market to sell off Darden to the tune of about 6%. Is this restaurateur in trouble? On today's Stock of the Day, Motley Fool analyst Jason Moser takes a look at Darden Restaurant's troubles, and why the competition may be eating its lunch.
With the growth of the so-called "fast casual" dining industry, and companies in this space such as Panera and Chipotle seeing a lot of success as the preferred option for consumers who are looking for good food at an affordable price, fewer consumers are choosing the experience of eating at casual restaurants over the value proposition of fast casual. While this has hurt Darden across its restaurant chains, Red Lobster has been the standout underperformer for the company, and Darden has now announced that it will be spinning off Red Lobster from its fold.
So could this sell-off be considered a buying opportunity for value investors looking to pick up Darden on the cheap? Jason isn't looking at it that way. With the continued rapid growth of restaurants in the fast-casual sector compared with Darden's current anemic growth rate, he sees the pinch that Darden is feeling today as a trend that could stretch on into the foreseeable future.
Jason Moser owns shares of Chipotle Mexican Grill. Fool contributor Mark Reeth has no position in any stocks mentioned. The Motley Fool recommends Chipotle Mexican Grill and Panera Bread. The Motley Fool owns shares of Chipotle Mexican Grill, Darden Restaurants, and Panera Bread. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.