Shred your credit card like shredded cheese at Darden Restaurants

Another company makes the news for corporate security of your personal information that is extremely careless and borderline negligent. Darden Restaurants ($DRI) released an announcement that 567,000 payment card numbers were exposed / stolen. If you think that the average account balance was $500 in cash or $500 in available credit, that means that Darden carelessly let $283.5 million of customer money be exposed.

The company reported that the affected cards came from legacy (read: old and outdated, most likely unsecured or not updated) Point of Sale systems. Here’s the kicker on this announcement. Darden was notified by Federal authorities that the POS system was breached. Darden themselves were absolutely clueless about what was going on. They seem to have been too focused on the next flashy Olive Garden campaign promoting soup and breadsticks. Wait. It’s Crabfest at Red Lobster. They must have let everyone go get unlimited seafood and just stop watching the business.

Darden security costs will add up

DRI is the one to pay for this, and security breaches are expensive to fix. With estimates hovering around the $7 million mark per breach, it’s a tab that I don’t think DRI wants to tip on.

  • Remediation to fix cyber attacks averages $21,155 per day, at an average length of 46 days
  • Loss of customers from bad press, stolen numbers, negative goodwill, etc.
  • Business disruption as the company fixes or updates point of sale systems (the focus of the attack in the Cheddar Kitchen case)
  • Regulatory fines from the likes of FCC, FTC, and PCI (Payment Card Industry)
  • Legal costs, because lawyers aren’t cheap
  • Brand damage from bad PR, turning away potential customers, not just the mentioned existing customers
  • Breached client records, with costs associated with notification averaging $217 each, so Darden would be on the hook for ~$123 million, just in notification costs

Bad news for Darden even before the breach

Looking at a 5 YR Discounted Cash Flow Growth model, there was already a 13% downside to this stock ($99.24 price target per share). Save your money, buy some flour and yeast, make your own breadsticks, and don’t worry about your pet stealing your credit card.

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