Darden Restaurants Reports Mixed Sales Performance in Latest Quarter
Darden Restaurants, a prominent player in the casual dining sector, announced disappointing sales figures for the recent quarter, primarily driven by underperformance at its popular chains, Olive Garden and LongHorn Steakhouse. The company’s announcement on Thursday revealed that sales did not meet analyst expectations.
Quarterly Earnings Overview
For the fiscal third quarter, Darden reported a net income of $323.4 million, translating to $2.74 per share, which represents an increase from the $312.9 million or $2.60 per share recorded during the same period last year. Adjusted earnings, excluding acquisition-related costs of Chuy’s, stood slightly higher at $2.80 per share, surpassing the anticipated $2.79.
In terms of revenue, Darden generated $3.16 billion, reflecting a 6.2% growth compared to the previous year; however, it fell short of the expected $3.21 billion.
Same-Store Sales Performance
The company reported that same-store sales grew by just 0.7%, less than the 1.7% forecasted by analysts. Darden’s leadership attributed the weaker performance to adverse weather conditions, including low temperatures and snowstorms, which impacted customer turnout.
CEO Rick Cardenas, addressing the concerns, stated, “Even if [consumers] say they’re feeling less optimistic, we haven’t seen a huge correlation between that and dining out. So I think as long as incomes are going up and outpacing inflation, I think they’re likely to keep spending.”
Performance of Individual Brands
Olive Garden faced challenges with same-store sales rising only 0.6%, misaligned with the 1.5% growth that analysts predicted. LongHorn Steakhouse also underwhelmed with a 2.6% increase, falling short of the expected 5% growth. However, executives noted that both brands experienced positive momentum in early March.
Delivery Services and Future Outlook
In an effort to boost performance, Olive Garden recently completed a rollout of its delivery service with Uber Direct. The chain observed that delivery orders typically exceed curbside pickup orders by 20%, and they maintain robust weekly order volume.
“Now at the end of the third quarter, our pilot restaurants were running around 2.5% of sales in delivery, and the other restaurants were following that same pattern,” Cardenas mentioned.
Fine Dining Segment Insights
Darden’s fine dining sector, which incorporates brands like The Capital Grille and Ruth’s Chris Steak House, noted a decline in same-store sales by 0.8%. CFO Raj Vennam remarked on post-holiday spending trends, indicating that while the segment showed strength during the holiday season, consumer spending has softened since then.
Outlook and Forecast
Looking ahead, Darden reaffirmed its revenue forecast for the year, expecting approximately $12.1 billion, while narrowing its adjusted earnings per share outlook to a range between $9.45 and $9.52. Notably, results from Chuy’s, which are included in fiscal 2025 forecasts, will not affect same-store sales metrics until the fourth quarter of fiscal 2026.
As Darden adapts to current market conditions, the company remains poised to navigate the challenges within the dining sector, with hopes for improved performance in the upcoming quarters.
