Kennedy: Some restaurants rebound nicely from shutdown

PHOTOGRAPHER:

An interactive graphic from the investor website The Motley Fool tells the tale: In chain after chain of publicly traded restaurants, a deep crevice appears in the line charting stock price and performance in the period between February and May 2020, when the coronavirus pandemic hit and business ground to a halt.

Restaurants of all sizes and shapes fell off a cliff when emergency rules shuttered dining rooms to stem the spread of COVID-19, then allowed them to reopen in herky-jerky fashion over the ensuing year.

For some chains, though, the climb back up has been swift.

Take Chipotle Mexican Grill, the fast-casual chain touting fresh and organic ingredients.

CEO Brian Niccol told analysts in a fiscal second-quarter conference call last week that all of the company’s 2,800 restaurants are now open and most are back to normal operations.

He credited the chain’s ability to adapt for its “recovering about 70 percent of in-restaurant sales thus far, while retaining about 80 percent of digital sales.”

Like other restaurants, Chipotle stepped up takeout when dining rooms closed, cementing the chain’s evolution into “two sizable businesses” – in-restaurant and “a real-food focused digital lifestyle brand,” Niccol said.

Digital sales grew 10.5 percent year over year to represent nearly 49 percent of overall sales in the quarter, he said. The company’s “Chipotlanes” – takeout service initiated online or through a smartphone app – continue to be rolled out, with 45 of the 56 new restaurants in the quarter having that feature.

A steeper crevice appears in Motley Fool’s chart for Darden Restaurants, and the post-shutdown ascent seems a bit more gradual.

But the parent of more than a half-dozen chains, including Olive Garden and LongHorn Steakhouse, told analysts last month that “being brilliant with the basics” led to a fiscal fourth quarter that exceeded expectations, with both Olive Garden and LongHorn reaching “the highest quarterly segment profit in their history.”

Chief Operating Officer Rick Cardenas noted that off-premises sales remained strong in the quarter even as capacity restrictions in dining rooms continued to ease.

Takeout demand has been “stickier” than anticipated, he said, so the company introduced several improvements throughout the fiscal year. As a result, 64 percent of to-go orders for Olive Garden were placed online during the quarter, and 14 percent of Darden’s total sales for the quarter were digital transactions, according to Cardenas.

Both chains, though, recognize that the pandemic isn’t yet in the rear-view mirror.

Answering an analyst’s question, Darden CEO Gene Lee called another COVID outbreak requiring a return to tough restrictions “the greatest risk” as the company looks forward to an otherwise strong 2022 fiscal year.

Chipotle executives referenced COVID’s now-spreading Delta variant several times during their conference call, with chief financial officer John Hartung citing its “uncertainty” as one reason the company was being “even more conservative than normal with our balance sheet.”

Marlene Kennedy is a freelance columnist. Opinions expressed in her column are her own and not necessarily the newspaper’s. Reach her at [email protected]

Categories: Business

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