Why These Restaurant Stocks Popped by Double Digits Monday
Shares of Texas Roadhouse (NASDAQ: TXRH), BJ's Restaurants (NASDAQ: BJRI), The Cheesecake Factory (NASDAQ: CAKE), and Darden Restaurants (NYSE: DRI) were all jumping more than 10% Monday morning as the S&P 500 and Dow surged higher and investors heard some positive COVID-19 news from overseas.
Italy reported its slowest rise in deaths in two weeks, and France and Spain also noted a deceleration in deaths, giving some glimmer of hope that the world is taking the right steps to get the COVID-19 pandemic under control. Despite positive news overseas, it's certainly a gloomy time for U.S. restaurant companies and their investors. As UBS analysts recently noted, "For casual dining, a continued down [approximately] 70-to-80% sales environment would provide insufficient cash flow to be viable for more than one-to-two months."
The harsh truth is that many restaurant companies aren't prepared for such an immediate revenue plunge, and it has companies doing anything they can to weather the storm. Cheesecake Factory has temporarily closed stores, furloughed thousands of employees, drawn an additional $90 million from its revolving credit facility, and notified its landlords it would withhold April rent. The company also said March comparable-restaurant sales declined 46%, due to COVID-19.
Source Fool.com