01—Abstract
Summary
Summary of the 10-K filed July 24, 2020. Cited figures are marked; the original filing is the authoritative source.
Darden Restaurants, Inc. (DRI) reported a challenging fiscal year 2020, significantly impacted by the COVID-19 pandemic.
While the first three quarters showed strong sales growth, the fourth quarter experienced a severe decline of 43.0% due to mandated dine-in restrictions, forcing a shift to To-Go and delivery formats. In response, Darden took aggressive measures including drawing down credit facilities, raising equity, suspending dividends, and reducing costs. These actions, along with a substantial non-cash impairment charge of $390.0 milliona related to goodwill and intangible assets, led to a net loss from continuing operations of $49.2 million for the year, a significant drop from the $718.6 million net earnings in fiscal 2019.
Despite the headwinds, Darden managed to add 19 net new restaurants and maintain operational control, with 89.0% of dining rooms open in some capacity by the end of the fiscal year. The company is focused on adapting its business model, enhancing safety protocols, and managing liquidity to navigate the ongoing pandemic. The outlook for fiscal 2021 includes plans for 35-40 net new restaurant openings and capital expenditures between $250b-$300 million, signaling a commitment to continued growth despite the uncertain operating environment.
02—Key points
Key Highlights
- Fiscal 2020 sales decreased by 8.3% to $7.81 billion, primarily due to the COVID-19 pandemic's impact in the fourth quarter, which saw a 43.0% decline in sales.
- The company incurred a net loss from continuing operations of $49.2 million in fiscal 2020, a stark contrast to the $718.6 million net earnings in fiscal 2019.
- Significant non-cash impairment charges of $390.0 million were recognized in the fourth quarter of fiscal 2020 due to the economic impact of COVID-19, affecting goodwill and intangible assets.
- Darden took proactive measures to bolster liquidity, including drawing $750.0 million on its revolving credit facility (later repaid), securing a $270.0 million term loan, and raising $505.1 million through a follow-on equity offering.
- The company added 19 net new company-owned restaurants during fiscal 2020, expanding its total to 1,804 locations.
- 89.0% of Darden's restaurants had reopened their dining rooms to some extent by the end of fiscal 2020, adapting to local regulations.
- Dividends were suspended and share repurchase activity was halted to preserve liquidity during the pandemic.
03—One dollar
Follow one dollar
For each $1.00 of revenue in FY2020, Darden Restaurants Inc lost $0.01.
- Revenue$7.81B100.0%
- Cost of revenue−$6.64B85.0%
- Gross profit$1.17B15.0%
- Operating costs−$1.12B14.4%
- Operating income$47.9M0.6%
- Interest, other & tax−$100.3M1.3%
- Net income−$52.4M0.7%
Where FY2020 revenue went
$7.81B- Cost of revenue: $6.64B, 85% of revenue
- Operating costs: $1.12B, 14% of revenue
- Operating income: $47.9M, 0.6% of revenue
Kept 0.6% as operating incomeOperating income $47.9M · 0.6%
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2020filed July 24, 2020Financial Statements
FY2020 against FY2019
| Line item | FY2020FY2019 | Change |
|---|---|---|
| Revenue | $7.81B$8.51B | −8.3% |
| Gross Profit | $1.17B$1.59B | −26.6% |
| Operating Expenses | $7.76B$7.68B | +1.1% |
| Operating Income | $47.90M$832.50M | −94.2% |
| Interest Expense | $49.30M$44.30M | +11.3% |
| Net Income | -$52.40M$713.40M | −107.3% |
| EPS (Basic) | $-0.43$5.78 | −107.4% |
| EPS (Diluted) | $-0.43$5.69 | −107.6% |
| Shares Outstanding (Basic) | 122.70M123.50M | −0.6% |
| Shares Outstanding (Diluted) | 122.70M125.40M | −2.2% |
05—Questions
Frequently Asked Questions
How did the COVID-19 pandemic impact Darden's financial performance in fiscal year 2020?
The COVID-19 pandemic significantly impacted Darden's financial performance, particularly in the fourth quarter of fiscal 2020. This quarter saw a 43.0% decline in sales due to mandated dine-in restrictions and a shift to To-Go and delivery models. This led to a net loss from continuing operations for the full fiscal year, a reversal from the strong earnings in the prior year, and substantial non-cash impairment charges on goodwill and intangible assets.
What steps did Darden take to manage its liquidity and financial flexibility during the pandemic?
Darden implemented several measures to secure its liquidity position. These included drawing down its $750.0 million revolving credit facility (which was subsequently repaid), obtaining a $270.0 million term loan, and raising $505.1 million through a follow-on equity offering. Additionally, the company suspended its quarterly cash dividend and share repurchase program.
What is Darden's outlook for new restaurant development in fiscal year 2021?
Despite the challenges of fiscal year 2020, Darden plans to open 35-40 net new restaurants in fiscal year 2021. Capital expenditures for new restaurants, renovations, and technology initiatives are expected to be between $250.0 million and $300.0 million.
How did the company's major brands perform in terms of same-restaurant sales during fiscal year 2020?
All of Darden's major brands experienced negative same-restaurant sales in fiscal year 2020, with decreases ranging from 5.8% for Eddie V's to 18.3% for Bahama Breeze. These declines were primarily driven by the impact of COVID-19, particularly in the fourth quarter. Olive Garden and LongHorn Steakhouse saw same-restaurant sales decrease by 8.6% and 8.8% respectively, with decreases in guest counts being partially offset by a slight increase in average check size.
06—Continue