Categories Analysis, Consumer

Companies that suffered when the pandemic hit the foodservice industry

For the third quarter of 2021, Darden expects total sales to range from $1.53-1.65 billion and EPS to range from $0.50-0.75

The COVID-19 pandemic might have benefited food retailers by driving up demand for processed food products but companies in the foodservice industry took a real hit from the crisis as they had to shut down most of their restaurants or operate under restricted hours. During the lockdown period, takeaway and delivery services saw a large uptick and those with strong delivery channels managed to use it to their advantage.

Darden Restaurants

Darden Restaurants (NYSE: DRI) saw sales decrease 19% year-over-year in the second quarter of 2021 with sales declines across all its segments. Same-restaurant sales fell 20.6%. Although the company had around 97% of its dining rooms open in the middle of the quarter, this fell to 80% by quarter-end, impacting same-restaurant sales by 200 basis points. This downtick in sales impacted operating income by around $15 million. For the third quarter of 2021, Darden expects total sales to range from $1.53-1.65 billion and EPS to range from $0.50-0.75.

Starbucks

Starbucks Corporation (NASDAQ: SBUX) reported an 8% decline in net revenues for the fourth quarter of 2020 mainly due to lost sales caused by the pandemic. Net revenues declined over 11% for fiscal year 2020. Lost sales amounted to around $1.2 billion for the fourth quarter and around $5.1 billion for the full year. For FY2021, Starbucks expects adjusted EPS of $2.70-2.90.

Chipotle Mexican Grill

After seeing its net sales drop 5% in Q2 along with a decline of 9.8% in comparable restaurant sales, Chipotle Mexican Grill (NYSE: CMG) managed to drive an uptick in sales by the third quarter of 2020, delivering a 14% growth in revenue along with an 8.3% increase in comps. Since the decline seen in late March, the company was able to retain 80-85% of its digital sales gains while recovering 50-55% of its in-store sales. Chipotle’s digital channel played a key role in helping it regain growth and the company has been investing significantly to improve its delivery services.

Yum Brands

Yum Brands Inc. (NYSE: YUM) too suffered from pandemic-related store closures and saw revenue fall 9% in the second quarter of 2020 along with declines across all its segments. However the company managed to improve its performance in Q3 with a net sales increase of 8% and sales growth in the Pizza Hut and Taco Bell divisions. KFC posted a sales decline of 4% in Q3 after seeing a 30% drop in Q2.

Yum has a strong digital channel which delivered a sales increase of more than $1 billion in Q3. The company’s delivery services played a significant role in the growth pickup during the most recent quarter.

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