Why Darden Restaurants Stock Gained Today


What happened

Shares of Darden Restaurants (NYSE: DRI) gained today, closing up 3% after the company said it had reopened most of its Olive Garden locations in Georgia. Some Olive Garden restaurants in Tennessee have also started to resume dine-in operations.

So what

Darden will reopen approximately 100 Olive Garden locations in Georgia, a meaningful chunk of the 870 company-owned Olive Garden restaurants it had at the end of last quarter. Olive Garden is Darden’s biggest chain, followed by LongHorn Steakhouse with 522 locations.

Olive Garden exterior

Image source: Darden Restaurants.

States around the country are taking steps toward reopening following broad lockdowns in recent weeks related to the COVID-19 pandemic. Georgia has been criticized for potentially easing restrictions too quickly, which some health experts have warned could result in a resurgence in coronavirus cases.

Olive Garden will implement safety precautions and follow social distancing guidelines imposed by the state, such as limiting the number of guests to 10 people per 500 square feet, only serving smaller parties of six or less, requiring all employees to wear masks, and encouraging contactless payment options and takeout orders, among others.

Now what

The novel coronavirus outbreak has wrecked the restaurant industry, and Darden said last week that same-restaurant sales had plunged by 45% quarter to date through April 19. The company’s ongoing weekly cash burn rate has improved to $20 million per week. Looking at the prior two weeks of sales, same-restaurant sales improved modestly for the week ending April 19.

More recently, Darden conducted a secondary offering to raise capital in order to manage liquidity during the crisis, selling 9 million shares at $58.50 per share. The company confirmed that the underwriters exercised their options and Darden raised over $505.4 million in net proceeds.

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Evan Niu, CFA 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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