Darden Restaurants, Inc. (DRI), Chipotle Mexican Grill, Inc. (CMG): Should You Bet Your Money on This Restaurant Stock?

Interestingly, not all restaurants seem to be suffering from low customer traffic. Chipotle Mexican Grill, Inc. (NYSE:CMG), for example, seems to be doing all the right things. In its last quarter, the Tex-Mex grill chain actually witnessed higher customer traffic at its outlets. The company reported a 13.4% revenue growth, matched with a 24% growth in net income. Known for its unique marketing campaigns, organic food and natural ingredients, Chipotle Mexican Grill, Inc. (NYSE:CMG) has been giving tough competition to its peers. Albeit expensive, the company’s stock is a great performer, with a 14% average growth rate in the last couple of years. In the current quarter, analysts are expecting a 10% increase in earnings. Currently, the stock is up 21% year-to-date. A drop in its price would be a superb opportunity to go long in this one.

Planning ahead

Coming back to Darden, in the next quarter it plans to tweak its product line for different clienteles. At Olive Garden, for instance, it plans to introduce protein-centric dishes for higher-paying customers, affordable dishes for the price-conscious and lighter meals for its health-conscious guests. Also in the pipeline are four-course meals at Red Lobster and seasonal appetizers at Longhorn Steakhouse. This should give a much-needed boost to customer traffic at its restaurants.

As always, achieving this will be easier said than done. The main challenge for Darden is to make a profit in the face of rising costs. Until the company manages to do that its future does not look too promising, at least as compared to a few of its peers (read Chipotle Mexican Grill, Inc. (NYSE:CMG) and Panera Bread Co (NASDAQ:PNRA).) The best bet, I believe, would be to wait until customer spending in the economy picks up. Hopefully, the company would have also come up with a solid cost-cutting plan by then. In the long run, I expect this stock to pick up momentum.

The article Should You Bet Your Money on This Restaurant Stock? originally appeared on Fool.com and is written by Sonam Chamaria.

Sonam Chamaria has no position in any stocks mentioned. The Motley Fool recommends Burger King Worldwide (NYSE:BKW) and Chipotle Mexican Grill. The Motley Fool owns shares of Chipotle Mexican Grill and Darden Restaurants. Sonam is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

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