Darden Restaurants (NYSE:DRI) is about to report earnings. Follow this Bear Case Scenario:
Casual dining is highly correlated to employment and labour earnings. As the economy goes so goes Darden one restaurant at a time.
The industry is resorting to vicious price competition. Blood will soon be flowing down the streets of casual dining. The survivors will have small margins and unattractive returns.
Input costs are heavily reliant on food commodities. Restaurants never seem to be able to get the cycle right and customers are price sensitive to start with.
George Gutowski writes from a caveat emptor perspective.