Olive Garden Italian restaurant sign showing company logo, Spokane Valley, Washington, owned by Florida-based Darden Restaurants Incorporated.
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Darden Restaurants On Thursday it reported mixed quarterly results as Olive Garden’s same-store sales fell for the second quarter in a row.
The company has faced a “continually weaker consumer environment” as well as increased discounting and marketing pressure from its rivals, CEO Rick Cardenas said at the company’s conference call.
For fiscal 2025, Darden is projecting that its same-store sales will grow just 1% to 2%.
The company’s shares were up less than 1% in morning trading.
Here’s what the company reported compared to what Wall Street expected for the quarter ended May 26, based on a survey of analysts by LSEG:
- Earnings per share: $2.65 adjusted vs. $2.61 expected
- Revenue: $2.96 billion vs. $2.97 billion expected
Darden’s overall same-store sales were flat for the quarter, dragged down by weaker-than-expected sales at Olive Garden and its gourmet restaurants. However, executives noted that their chains are outperforming the broader dining segment.
“We’re not going to do things to buy sales, even with the increased discounting that our competitors are doing. … Our focus is on profitable sales growth,” Cardenas said.
He added that consumers are concerned about inflation – and are becoming more concerned about the job market. Still, customers at Olive Garden and LongHorn Steakhouse are more willing to spend on expensive meals and alcoholic beverages than they have been in recent quarters, executives said.
Olive Garden’s same-store sales fell 1.5%, despite a 1% increase in its menu prices compared to the year-ago period. Analysts had expected the Italian-inspired chain to report flat same-store sales growth, according to StreetAccount estimates. Last quarter, Olive Garden’s same-store sales fell 1.8%, driven by a pullback from lower-income consumers.
Darden’s fine dining restaurants, which include The Capital Grille and Eddie V’s, saw their same-store sales shrink 2.6% in the quarter. This division now includes Ruth’s Chris, but these same-store results will not be included in the category total until the second quarter of fiscal year 2025.
LongHorn Steakhouse, which is overtaking Olive Garden as the crown jewel of Darden’s portfolio, was the only segment to report same-store sales growth. The chain’s same-store sales rose 4% in the quarter.
Darden reported fiscal fourth-quarter net income of $308.1 million, or $2.57 per share, up from $315.1 million, or $2.58 per share, a year earlier.
Excluding costs related to the company’s acquisition of Ruth’s Chris Steak House and other items, the company earned $2.65 per share.
Net sales increased 6.8% to $2.96 billion, driven by the acquisition of Ruth’s Chris and 37 other net new locations.
Looking ahead to fiscal 2025, Darden is forecasting earnings per share from continuing operations of $9.40 to $9.60, in line with Wall Street expectations of $9.55 per share. The company is also forecasting net sales of $11.8 billion to $11.9 billion, on the low end of analysts’ expectations of $11.94 billion.
Darden is projecting headline inflation of 3% and same-store sales growth of 1% to 2% in fiscal 2025. CFO Raj Vennam said the company expects traffic to improve as the year progresses. Darden expects to raise prices about 2% to 3%, reflecting general inflation, according to Vennam.
“We feel like we’ve done a lot of work to keep prices down and we’ll continue to do so,” he said.
The company plans to spend $550 million to $600 million on capital expenditures.