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Darden Restaurants Inc DRI

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Morningstar’s Analysis

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Economic Moat

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Darden’s Second-Quarter Sales Take a Hit, but We Are Encouraged by Its Long-Term Margin Potential

Erin Lash, CFA Sector Director

Analyst Note

| Erin Lash, CFA |

As expected, no-moat Darden’s top line took a hit (down 19.4%) in the second quarter of fiscal 2021 from COVID-19-related closures and capacity restrictions as a result of rising case counts. By the end of the quarter, the percentage of restaurants open with at least limited dining capacity had dropped to 80% from its peak of 97% in the middle of the quarter. We do not expect off-premises sales will be enough to offset the impact of temporary restaurant closures and expect sales will remain depressed until a vaccine is widely distributed and indoor dining restrictions are lifted.

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Company Profile

Business Description

Darden is one of the largest players in the $185 billion U.S. casual dining industry. Olive Garden (874 units), LongHorn (527), and Cheddar's Scratch Kitchen (168 company-owned units) are its core brands, while the smaller, faster-growing specialty restaurant group is made up of Yard House (81), The Capital Grille (60), Seasons 52 (43), Bahama Breeze (41), and Eddie V's (24). In November 2015, the company spun off selected real estate and restaurant assets into Four Corners Property Trust.

Contact
1000 Darden Center Drive
Orlando, FL, 32837
T +1 407 245-4000
Sector Consumer Cyclical
Industry Restaurants
Most Recent Earnings Nov 30, 2020
Fiscal Year End May 31, 2021
Stock Type Cyclical
Employees 177,000

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