Darden Restaurants On Thursday it reported lower-than-expected quarterly profit and revenue as sales fell at Olive Garden and fine-dining restaurants.
“While we did not meet our expectations for the first quarter, I strongly believe in the strength of our business,” CEO Rick Cardenas said in a statement. “I am confident in the actions all of our brand teams are taking to address the needs of their guests, which do not compromise the long-term health of our business for short-term gain.”
The company shared a number of initiatives it is implementing to boost sales, including its first partnership with Uber, ending its resistance to third-party delivery.
The company’s shares closed Thursday up 8%. Excluding Thursday’s earnings, the stock is down 3% this year as investor concerns about consumer health weigh on the broader restaurant industry.
Here’s what the company reported for the quarter ended Aug. 25 compared with what Wall Street expected, based on a survey of analysts by LSEG:
- Earnings per share: $1.75 adjusted vs. $1.83 expected
- Annuity: $2.76 billion vs. $2.8 billion expected
Darden reported first-quarter net income of $207.2 million, or $1.74 per share, up from $194.5 million, or $1.59 per share, a year earlier.
Excluding costs related to the purchase of Tex-Mex chain Chuy’s, the restaurant company earned $1.75 per share.
Net sales rose 1% to $2.76 billion, but the company’s same-store sales fell 1.1% in the quarter. Traffic to its restaurants fell sharply in July but has since improved, according to CFO Raj Vennam. Executives at other restaurant companies also said traffic has struggled this summer, leading to increased travel or restaurants becoming even more cautious.
Olive Garden’s same-store sales shrank 2.9% in the quarter. The chain is reviving its Never Ending Pasta Bowl later this month in hopes of bringing back customers. Olive Garden is running the sale about a month earlier than usual and extending it three weeks longer than last year.
Darden is also looking to Uber to boost its sales. The two-year, exclusive agreement will begin with a pilot program at select Olive Garden restaurants. Unlike many chains, Darden rejected third-party delivery companies even during pandemic lockdowns and instead chose to use its own employees to deliver meals to restaurants.
It’s too early to say whether the delivery will significantly increase sales for Darden.
“Our gut reaction is because the brand is skewing to a more mature customer base and is known more for hosting than off-premises, we don’t expect material sales growth versus other perceptions that are starting third-party delivery,” the analyst by TD Cowen, Andrew Charles. wrote in a note to clients on Thursday.
Darden’s fine dining division, which includes Eddie V’s and The Capital Grille, reported a 6 percent decline in same-store sales.
“It seems like there were other places where the luxury consumer was spending dollars, especially this summer,” Cardenas said, adding that the company is seeing a pullback from consumers making up to $200,000.
LongHorn Steakhouse was the only company division to report same-store sales growth. The chain, a top performer in Darden’s portfolio since the pandemic, posted same-store sales growth of 3.7%. Cardenas said consumers are switching from fine dining to LongHorn’s steaks.
Darden bought Chuy’s Holdings in July for about $605 million, its second acquisition in two years. The company expects the Chuy’s deal to close in the second quarter of its fiscal year, when Ruth’s Chris Steak House results will also show in its same-store sales numbers. Darden bought Ruth’s Chris a little more than a year ago.
Despite the dismal quarter, Darden reiterated its outlook for the full year. For fiscal 2025, the company forecasts earnings per share from continuing operations of $9.40 to $9.60 and net sales of $11.8 billion to $11.9 billion.
To date, Darden’s same-store sales for the second quarter of the fiscal year are up, a promising sign that this summer’s downturn could be just a blip, Cardenas said.
