We are adding Darden Restaurants (DRI) back to the short side of Investing Ideas today.
Below is an excerpt from an institutional research note written by Restaurants analyst Howard Penney on why he remains bearish on the company:
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"Our inherent skepticism concerning multi-branded restaurant companies inclines us to see DRI's recent outperformance as unwarranted, especially given DRI’s acquisition of Cheddar’s Scratch Kitchen back in March. The acquisition brought DRI’s portfolio to eight brands, and even though the Company continues to integrate Cheddar’s into the Darden platform, history tells us that such efforts by multi-branded companies tend to stretch a company thin and create unnecessary distractions. Additionally, and as we have touched on before, Cheddar’s is a brand that directly competes with Olive Garden, so it is unlikely that such an acquisition will add value in the way management is hoping." |
