Restaurant chains all across the country are in trouble. Darden Restaurants is holding their own but the issues are mounting.
Darden Restaurants reported mixed quarterly results for the period ending May 26, with Olive Garden’s same-store sales declining for the second consecutive quarter. The company has been going through a challenging consumer environment, characterized by increased discounting and marketing pressure from competitors, according to CEO Rick Cardenas.
For fiscal 2025, Darden projects a modest same-store sales growth of 1% to 2%. Despite the challenging conditions, the company’s shares rose slightly in morning trading.
Darden’s earnings per share for the quarter were $2.65, adjusted, slightly above the expected $2.61. However, revenue fell short of expectations, coming in at $2.96 billion compared to the anticipated $2.97 billion. Overall, same-store sales were flat, weighed down by weaker sales at Olive Garden and its fine-dining restaurants, though executives highlighted that their chains are still outperforming the broader casual-dining segment.
Darden Restaurants reports mixed quarterly results as Olive Garden’s same-store sales fell for the second consecutive quarter. https://t.co/DtGXhKZ723
— NBC News (@NBCNews) June 20, 2024
Cardenas emphasized a focus on profitable sales growth rather than matching competitors’ discounting efforts. He noted that while consumers are worried about inflation and job market stability, patrons at Olive Garden and LongHorn Steakhouse have shown a willingness to spend on higher-priced entrees and alcoholic beverages in recent quarters.
Olive Garden’s same-store sales dropped by 1.5%, despite a 1% menu price increase from the previous year. Analysts had expected flat same-store sales growth for the Italian-inspired chain. In the previous quarter, Olive Garden’s sales fell by 1.8%, largely due to reduced spending by low-income customers.
Darden’s fine-dining segment, which includes The Capital Grille and Eddie V’s, experienced a 2.6% decrease in same-store sales. This division now includes Ruth’s Chris, but its same-store sales will be accounted for starting in the second quarter of fiscal 2025.
LongHorn Steakhouse was the only segment to report same-store sales growth, with a 4% increase, positioning it as a strong performer in Darden’s portfolio.
Darden reported a fiscal fourth-quarter net income of $308.1 million, or $2.57 per share, slightly down from $315.1 million, or $2.58 per share, the previous year. Excluding costs related to the acquisition of Ruth’s Chris Steak House and other items, the adjusted earnings were $2.65 per share. Net sales increased by 6.8% to $2.96 billion, driven by the acquisition of Ruth’s Chris and 37 other net new locations.
Darden Restaurants Surpasses EPS Estimates, Boosts Dividend by 6.9% https://t.co/yC3R8D1wrU pic.twitter.com/1dGWlCwKzH
— TheFinancialAnalyst (@AoFAFinance) June 20, 2024
For fiscal 2025, Darden anticipates earnings per share from continuing operations to be between $9.40 and $9.60, aligning with Wall Street expectations of $9.55 per share. The company also expects net sales of $11.8 billion to $11.9 billion, slightly below analysts’ projections of $11.94 billion. Darden projects total inflation at 3% and same-store sales growth of 1% to 2%, with an expected price increase of 2% to 3% to match overall inflation.
CFO Raj Vennam stated that the company anticipates traffic improvements throughout the year and plans to maintain low prices. Darden intends to allocate $550 million to $600 million for capital expenditures.
Key Points:
i. Darden Restaurants reported mixed quarterly results with Olive Garden’s same-store sales falling for the second consecutive quarter.
ii. The company faced a weaker consumer environment and increased competition from rivals, affecting sales growth.
iii. For fiscal 2025, Darden forecasts same-store sales growth of only 1% to 2%, with an emphasis on profitable sales rather than aggressive discounting.
iv. Olive Garden’s same-store sales decreased by 1.5%, despite a menu price increase, while LongHorn Steakhouse reported a 4% increase in same-store sales.
v. Darden’s net income for the fiscal fourth quarter was $308.1 million, slightly down from the previous year, with projected earnings per share for fiscal 2025 between $9.40 and $9.60.
Kirk Volo – Reprinted with permission of Whatfinger News
