Darden Restaurants (DRI) - Get Report pulled its full-year earnings forecast Thursday, and said it will tap a $750 million credit line, as coronavirus lockdowns in major cities around the country cripple traffic in the dining sector.
Darden said it earned $1.88 per share over the three months ending on February 23, the group's fiscal third quarter, on sales of $2.35 billion. Both figures were modestly higher than Street forecasts, but investors are likely to focus on the Olive Garden and LongHorn Steakhouse's decision to scrap near-term growth projections amid the coronavirus outbreak after seeing same-store sales fell 20.6% over the week ending March 15.
Darden also said it was cancelling its regular quarterly dividend and said that, "out of an abundance of caution." it would fully draw down on a $750 million credit facility.
"The health and safety of our team members, their families and our guests remains our top priority," said CEO Gene Lee. "We are committed to supporting our team members during this unprecedented time and are pleased to have an emergency pay program to supplement our permanent paid sick leave policy for all of our hourly team members."
Darden shares were marked 2.5% higher in pre-market trading immediately following the earnings release to indicate an opening bell price of $35.00 each, a move that would still leave the stock with a staggering one-month decline of more than 70%.
The National Restaurant Association said Wednesday that lockdowns and "shelter-in-place" orders would likely cost the industry 225 billion in sales over the next three month and put between 5 million and 7 million jobs at risk.
“We are revising our business model to provide meals in different ways, takeout, delivery, safety-enhanced dine-in, but the majority of our restaurants do not have this capability today. As the restrictions continue, we are facing economic headwinds that will lead many restaurants to shut down operations, lay off workers, and end service in our communities,” said the NRI's public affairs VP Sean Kennedy. “Taken together, these proposals will ensure that restaurants have increased liquidity and access to necessary financing to help the industry and its employees recover.”