COVID-19 wreaks havoc on Red Lobster, foodservice distributors

Published on
August 12, 2020

Red Lobster continues to struggle due to months of dine-in restrictions across its North American restaurants, and it isn’t alone – Sysco and US Foods also faced hardship in their most recent quarters, realizing significant sales losses.

Red Lobster is exploring strategic options after facing “unprecedented challenges resulting from the COVID-19 pandemic,” FSR magazine reported.

The Orlando, Florida-based chain of around 740 restaurants tapped strategic adviser Guggenheim to determine its next steps.

As SeafoodSource previously reported, landlords of Red Lobster restaurants say that Red Lobster owes them several months’ worth of rent.

The Chung family filed a lawsuit alleging that Red Lobster owes them USD 125,000 (EUR 110,000) in back rent, while another landlord said she is owed USD 80,000 (EUR 70,000), KETK reported.

Red Lobster has a USD 380 million (EUR 322 million) term loan coming due in July 2021, and had about USD 216 million (EUR 183 million) in unrestricted cash in February, FSR magazine reported.

Foodservice distributors Sysco and US Foods are also suffering significant sales losses due to COVID-19.

In Sysco’s fiscal fourth quarter, sales plummeted 42.7 percent to USD 8.9 billion (EUR 7.5 billion), while gross profit dropped 47.4 percent to USD 1.6 billion (EUR 1.4 billion).

For its fiscal year 2020, sales decreased 12 percent to USD 52.9 billion (EUR 45 billion), while gross profit declined by 13.2 percent to USD 9.9 billion (EUR 8.4 billion).

However, Sysco President and Chief Executive Officer Kevin Hourican said in a press release that its fourth quarter results were “notably better than we anticipated.”

“While our fourth quarter and fiscal 2020 results were significantly impacted by the COVID-19 pandemic, we quickly responded by strengthening our balance sheet, adding new and different types of customers, and strategically committing resources to plan for the eventual return of demand,” Hourican said.

Similarly, US Foods Holding Corp. said net sales dropped 20.2 percent to USD 4.6 billion (EUR 3.9 billion) in its second quarter, while gross profit decreased 41.2 percent.

"While COVID-19 continues to impact the foodservice industry and our business, we remain confident in the long-term outlook for both the industry and our company,” US Foods Chairman and Chief Executive Officer Pietro Satriano said in a press release.

“As the quarter progressed, we saw trends in volumes, margins and bottom line profitability improve, and we believe our scale, our differentiated platform, and our strong balance sheet leave us well positioned to gain market share as the industry continues to recover,” Satriano added.

Photo courtesy of George Sheldon/Shutterstock

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