Shares of Darden Restaurants (DRI) - Get Report soared Tuesday even after the company announced that its flagship restaurant Olive Garden saw its sales plunge in recent weeks amid the coronavirus pandemic.
Darden also announced a $270 million loan.
Olive Garden's sales fell 34.5% for the fiscal third quarter to date -- from Feb. 24 through April 5. Darden’s LongHorn Steakhouse saw its sales plummet 36.4% during the period.
Overall, the company’s same-store restaurant sales slid 39.1%.
But with many of its restaurant units closed for in-house dining, Olive Garden doubled its off-premise sales, and LongHorn Steakhouse tripled its off-premise sales.
“More than 99% of our restaurants remain open, with the remaining restaurants temporarily closed due to limited demand or other operational constraints,” Darden CEO Gene Lee said in a statement.
“We will continue to evaluate potential closures on an ongoing basis," the CEO said.
The company said it was furloughing some workers at its support center.
Darden also said it entered into a $270 million term loan credit agreement to “maximize financial flexibility and further bolster liquidity as a precautionary measure,” the company said.
“The term loan was fully drawn on April 6, matures on April 5, 2021, and carries a current interest rate of LIBOR plus 300 basis points,” Darden said.
Morningstar analyst R.J. Hottovy issued a positive report on Darden March 23. “We believe the recent pullback has unlocked buying opportunities for stronger operators with strong brand intangible assets and scale advantages,” he wrote.
“We see Darden as one of these investment opportunities.” He put the stock’s fair value at $95.
The stock was trading at $59.82, up 14.16%.