Large Restaurant Chains Weather Pandemic Storms
Large Restaurant Chains Take Supply Disruptions in Stride
Supply disruptions, rising food prices, and labor shortages have put pressure on restaurant operators across the country, but arger chains including Darden Restaurants (DRI), Cracker Barrel (CBRL), and Cheesecake Factory (CAKE) have been faring better than their smaller counterparts.
In fact, last week Darden upped its sales forecast for the current fiscal year to $9.5 billion from $9.35 billion. For the quarter ending in August, revenue increased 8% year-over-year. Even with inflation of 4%, Darden is still expected to post record profits in 2021. Darden is the parent company of Olive Garden, Red Lobster, and other nationwide restaurant chains. Meanwhile, Cracker Barrel’s fiscal fourth-quarter revenue matched pre-pandemic levels.
The Impact of Labor Shortages
Once labor shortages improve, large restaurant chains could see even more growth. The lack of workers has hurt restaurants’ ability to serve customers, with some restaurants reducing hours or keeping tables empty.
At Darden’s LongHorn Steakhouse, which is almost fully staffed, profits jumped 45% compared to the summer of 2019. However, Olive Garden closed dining rooms this summer due to staff shortages. As a result, its profits were flat during the same period. Once labor shortages ease, these restaurant chains are likely to see sales rise even more.
Even inflation should not hurt the restaurant operators’ bottom lines too much. In August prices at restaurants increased 4.7% year-over-year, which is a mild uptick.
Investors Aren’t So Sure
Restaurant chains are poised to grow as labor shortages abate, but you wouldn’t know it from their stocks’ performance. Aside from Darden, which is trading near an all-time high, restaurant stocks are in the doldrums. Cracker Barrel is down 20% from its high this year and Cheesecake Factory is down 24%. Shares of Brinker International (EAT), which owns Chili’s, are 34% lower.
The pandemic has created a slew of challenges for the restaurant industry. But as some of these issues improve, restaurants are likely to benefit. It will be interesting to see how long labor shortages will last and how restaurant chains will continue to overcome them.
Please understand that this information provided is general in nature and shouldn’t be construed as a recommendation or solicitation of any products offered by SoFi’s affiliates and subsidiaries. In addition, this information is by no means meant to provide investment or financial advice, nor is it intended to serve as the basis for any investment decision or recommendation to buy or sell any asset. Keep in mind that investing involves risk, and past performance of an asset never guarantees future results or returns. It’s important for investors to consider their specific financial needs, goals, and risk profile before making an investment decision.
The information and analysis provided through hyperlinks to third party websites, while believed to be accurate, cannot be guaranteed by SoFi. These links are provided for informational purposes and should not be viewed as an endorsement. No brands or products mentioned are affiliated with SoFi, nor do they endorse or sponsor this content.
Communication of SoFi Wealth LLC an SEC Registered Investment Adviser
SoFi isn’t recommending and is not affiliated with the brands or companies displayed. Brands displayed neither endorse or sponsor this article. Third party trademarks and service marks referenced are property of their respective owners.
SOSS21093001
All your finances.
All in one app.
App Store rating
