Darden (DRI) Rides on Robust Online Sales Amid Dismal Traffic

Darden Restaurants, Inc. DRI continues to focus on strengthening online ordering facility and various sales boosting initiatives to drive growth. Consequently, the company’s shares have gained 68% in the past six months, compared with the industry’s rally of 31%. However, dismal same-restaurant sales and traffic woes stray. Let’s delve deeper.


During fourth-quarter 2020, the company rolled out online ordering facility for Cheddar's and other brands that did not have this facility earlier. This also included online sales of alcohol for all brands. Further, the company initiated streamlining of order pickup process and payment methods to reduce friction and enhance consumer convenience in the digital platform. Backed by these initiatives, online ordering has increased sharply. In first-quarter fiscal 2021, online sales contributed almost 60% to total off-premise sales. Online sales have tripled form the last year.

In order to boost the performance of the Olive Garden brand, the company implemented a set of initiatives under its Brand Renaissance Plan. These included simplifying kitchen systems, improving sales planning and scheduling, operational excellence to improve guest experience, developing new core menu items, allowing customization and making smarter promotional investments. The revamped restaurants are already generating high same-restaurant sales and returns. Meanwhile, the company is also focusing on technology-driven initiatives like the system-wide rollout of tablets in order to capitalize on the digitization, which has rapidly penetrated the U.S. fast-casual restaurant sector. This initiative has been providing a boost to the company’s sales for the past few quarters.

Darden stated that it has enough liquidity to survive the coronavirus pandemic for some time. As of Aug 31, 2020, the company’s cash balance totaled nearly $655 million.


Hurdles to Cross

In first-quarter fiscal 2021, same-restaurant sales declined sharply at all segments due to the pandemic. Same-restaurant sales at Olive Garden, Fine Dining, LongHorn Steakhouse and Other Business declined 28.2%, 39.1%, 18.1% and 39%, respectively. Moreover, total sales also declined 28.4% from the prior-year quarter’s levels due to negative blended same-restaurant sales of 29%.

The coronavirus pandemic is likely to hurt the company’s results in the coming quarters. Due to the social distancing protocol, traffic in second-quarter fiscal 2020 is likely to remain dismal. This, in turn, will negatively impact the company’s earnings and revenues.

Darden currently carries a Zacks Rank #3 (Hold).

Key Picks

Some better-ranked stocks in the same space include Brinker International, Inc. EAT, Del Taco Restaurants, Inc. TACO and BJ's Restaurants, Inc. BJRI. Brinker and Del Taco sport a Zacks Rank #1 (Strong Buy), while BJ's Restaurants carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank  stocks here.

Brinker has a trailing four-quarter earnings surprise of 52.7%, on average.

Del Taco’s 2021 earnings are expected to surge 55%.

BJ's Restaurants has a three-five year earnings per share growth rate of 15%.

Have You Seen Zacks’ 2020 Election Stock Report?

The upcoming election could be a massive buying opportunity for savvy investors. Trillions of dollars will shift into new market sectors after the election. The question is, which sectors will soar for each candidate? Zacks has put together a new special report to help readers like you target big profits.

The 2020 Election Stock Report reveals specific stocks you’ll want to own immediately after the results are announced – 6 if Trump wins, 6 if Biden wins. Past election reports have led investors to gains of +71%, +83%, even +185% in the following months. This year’s picks could be even more lucrative.

Check out Zacks’ 2020 Election Stock Report >>

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
BJs Restaurants, Inc. (BJRI): Free Stock Analysis Report
Darden Restaurants, Inc. (DRI): Free Stock Analysis Report
Brinker International, Inc. (EAT): Free Stock Analysis Report
Del Taco Restaurants, Inc. (TACO): Free Stock Analysis Report
To read this article on click here.
Zacks Investment Research

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

Other Topics


Latest Markets Videos


Zacks is the leading investment research firm focusing on stock research, analysis and recommendations. In 1978, our founder discovered the power of earnings estimate revisions to enable profitable investment decisions. Today, that discovery is still the heart of the Zacks Rank. A wealth of resources for individual investors is available at

Learn More