An Olive Garden restaurant in Times Square in New York.
Richard Levine | Corbis | fake pictures
Darden Restaurants reported Thursday that sales at the same store nearly halved during the fiscal fourth quarter, as the closings of soup kitchens from the coronavirus pandemic affected their revenue.
But the parent of Olive Garden expects its business to rebound in the next three months. The company’s outlook for the next quarter projects that total sales will be around 70% over the previous year.
“As our industry continues to rebuild, there is a significant opportunity to increase market share,” CEO Gene Lee said in a statement. “Those who execute at the highest level will win, and Darden is well positioned to take advantage of the opportunity.”
The company’s shares rose 7% in morning trading.
This is what the company reported for the quarter ended May 31:
- Loss per share: $ 1.24, adjusted
- Revenue: $ 1.27 billion
The company reported net fourth quarter fiscal losses from continuing operations of $ 479.7 million, or $ 3.85 per share, compared to earnings of $ 208.7 million, or $ 1.67 per share, a year earlier. Darden reported a goodwill impairment charge of $ 160 million and a trademark impairment charge of $ 108.8 million.
Excluding those charges and other items, Darden reported losses of $ 1.24 per share.
Net sales fell 43% to $ 1.27 billion. In all its brands, sales in the same store fell by 47.7%.
Analysts had expected the company to lose $ 1.65 a share on revenue of $ 1.27 billion, according to Refinitiv estimates. However, the impact of the Covid-19 crisis makes these estimates difficult to compare with actual earnings.
Olive Garden, which accounted for more than half of Darden’s revenue, saw its same-store sales decline by 39.2% during the quarter. Its haute cuisine segment, which includes The Capital Grille and Eddie V’s, reported even steeper declines, with same-store sales falling 63.1%.
Lee said the company tried to deliver its own food but found that it was inefficient. He reiterated that Darden did not plan to work with external delivery providers. As a result, Darden is focusing on curb pickup to fulfill take-away orders.
“We believe off-site it will play a bigger role in the future. I’m not so sure we will maintain these same execution rates in the future,” Lee told analysts on the earnings conference call.
In Olive Garden restaurants that have reopened dining rooms with limited capacity, take-out orders accounted for about 40% of sales in the first three weeks of its fiscal first quarter.
The company plans to install temporary barriers in approximately 100 of its dining rooms, including the Olive Garden locations, in the coming days to see if they can improve efficiency without sacrificing safety, particularly since higher capacity limits may make it difficult to maintain 6 feet of distance.
As of Monday, 91% of Darden locations had reopened their dining rooms with limited capacity. Lee said the company has not seen any change in consumer behavior, as confirmed Covid-19 cases in some states skyrocketed in the past week. The United States reached its biggest day of new cases on Wednesday, according to an NBC News count.
Lee also said Darden abandoned his loyalty program test at the end of the fiscal year to streamline his approach during the crisis.
The company is generating positive operating cash flow, from the week ended June 21. During the first three weeks of the company’s fiscal first quarter, sales at the same store fell 33.2%.
For the first fiscal quarter of 2021, the restaurant company expects net earnings per share from continuing operations to turn positive. It also forecasts earnings before interest, taxes, depreciation and amortization of at least $ 75 million.
Darden had more than $ 750 million in cash available Monday and has access to a $ 750 million line of credit.
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