Are Panera and Chipotle eating Darden's lunch?
The owner of Red Lobster and Olive Garden released earnings Thursday, and could be in trouble. Is the burgeoning fast-casual dining industry to blame?
Is this restaurateur in trouble? On today's Stock of the Day, Motley Fool analyst Jason Moser takes a look at Darden Restaurant's troubles, and why the competition may be eating its lunch.
With the growth of the so-called "fast-casual" dining industry, and companies in this space such as Panera Bread (PNRA) and Chipotle Mexican Grill (CMG) seeing a lot of success as the preferred option for consumers who are looking for good food at an affordable price, fewer consumers are choosing the experience of eating at casual restaurants over the value proposition of fast casual.
While this has hurt Darden across its restaurant chains, Red Lobster has been the stand out underperformer for the company, and Darden has now announced that it will be spinning off Red Lobster from the company.
So could this sell-off be considered a buying opportunity for value investors looking to pick up Darden on the cheap? Jason isn't looking at it that way. With the continued rapid growth of restaurants in the fast casual sector compared with Darden's current anemic growth rate, he sees the pinch that Darden is feeling today as a trend that could stretch on into the foreseeable future.
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