DRI Darden Restaurants Inc

By Heather Haddon 

Restaurant chains are showing signs of fresh stress this week as the latest coronavirus surge fuels new sales losses.

Darden Restaurants Inc., Olive Garden's parent company, on Friday reported a same-store sales drop of 20.6% for the sit-down chain's second-quarter compared with last year's period, missing analysts' expectations.

Darden became the latest restaurant company in the past week to say that same-store sales that had been improving from earlier in the pandemic cooled following new restrictions imposed by states since November to curb the virus.

Restaurants chains have generally fared better than independent operators during the pandemic as they have had more access to capital to change operations and absorb costs. Independent restaurants have closed and are still reporting double-digit sales declines from last year, while business at fast-food restaurants in the U.S. was up in November compared with 2019, according to industry data-firm NPD Group Inc.

Reports from some restaurant chains this week, however, highlighted that companies still face a challenging winter.

The latest coronavirus surge is slowing consumer spending at the holiday period, a blow to businesses spanning department stores to auto dealers that had been experiencing better demand in recent months. Restaurants saw some of the steepest declines, with seasonally adjusted sales down 4% in November from the prior month, the Commerce Department said Wednesday.

More than a quarter of Darden's restaurants were closed for indoor dining as of this month, up from 8% in early November, the company said Friday. Weekly same-store sales across the chain's restaurants were down 36.9% for the week ending Dec. 13 compared with last year, a slide from a year-over-year 23.4% decrease in the week ending Nov. 8.

Darden's shares were down Friday afternoon more than 2% to $116.

Starbucks Corp. said earlier this week that its U.S. same-store sales fell 4% in November compared with last year, a dip from October.

"We are seeing further softening here in the month of December. So, our business is being impacted by the current surge," Starbucks CFO Pat Grismer said at an investor conference.

Brinker International Inc., the parent company of Chili's, said earlier this week that the new dining room restrictions had hurt its sales, particularly at its Maggiano's sit-down restaurants. Sit-down chain J. Alexander's Holdings, Inc. on Monday said that more than a fifth of its restaurants were now closed for indoor dining.

Family-dining chain Denny's Corp. on Thursday amended its credit agreement again with its lenders to give it more of a cash cushion to get through the winter.

The arrival of vaccines this month has given restaurants hope that diners will return soon to their tables. But Darden doesn't expect vaccinations to significantly improve customers' willingness ready to come out and dine in its restaurants for months to come. It hopes sales will improve in the spring. Company's executives told investors Friday that they weren't sure if diners would come back quickly or if it will take them time to get comfortable eating indoors again.

Darden has trimmed costs during the crisis, including reducing the number of items on its menus. The Orlando-based chain reported a profit of $96 million for the second quarter ended Nov. 29, or 73 cents a share, better than expectations.

The chain said Friday that it would again provide emergency pay for staff furloughed when its dining rooms have to close. The three weeks in pay will help workers who are losing shifts during the holidays, typically one of the busiest times for the chain, Darden CEO Gene Less.

"We know many team members will not get the hours they needed during this holiday season," he said.

Write to Heather Haddon at heather.haddon@wsj.com

(END) Dow Jones Newswires

December 18, 2020 12:49 ET (17:49 GMT)

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