Darden Restaurants on Thursday reported weaker-than-expected quarterly earnings and revenue as sales weakened at Olive Garden and its fine dining restaurants.
“While we fell short of our expectations for the first quarter, I firmly believe in the strength of our business,” CEO Rick Cardenas said in a statement. “I am confident in the actions all our brand teams are taking to address their guests’ needs, which do not compromise the long-term health of our business for short-term benefits.”
The company shared a number of initiatives that it’s implementing to boost sales, including its first partnership with Uber, ending its resistance to third-party delivery.
Shares of the company closed Thursday up 8%. Excluding Thursday’s gains, the stock has fallen 3% this year as investor concerns about the health of the consumer weigh on the restaurant industry at large.
Here’s what the company reported for the quarter ended Aug. 25 compared with what Wall Street was expecting, based on a survey of analysts by LSEG:
- Earnings per share: $1.75 adjusted vs. $1.83 expected
- Revenue: $2.76 billion vs. $2.8 billion expected
Darden reported fiscal 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 its 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 declined 1.1% in the quarter. Traffic to its restaurants fell sharply in July but then improved, according to CFO Raj Vennam. Executives at other restaurant companies have also said that traffic struggled this summer, chalking it up to increased travel or diners growing 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 the hopes of bringing back customers. Olive Garden is running the promotion about a month earlier than usual and extending it for three weeks longer than last year.
Darden is also looking to Uber to boost its sales. The two-year, exclusive deal will start with a pilot 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 diners.
It’s too early to tell if delivery will lift sales significantly for Darden.
“Our gut reaction is given the brand skews to a more mature customer base & is known more for hospitality than off-premise, we do not expect as material a sales lift vs other concepts launching third-party delivery,” TD Cowen analyst Andrew Charles wrote in a note to clients on Thursday.
Darden’s fine dining segment, which includes Eddie V’s and The Capital Grille, reported same-store sales declines of 6%.
“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 who make as much as $200,000.
LongHorn Steakhouse was the company’s only division to report same-store sales growth. The chain, a top performer in Darden’s portfolio since the pandemic, saw same-store sales growth of 3.7%. Cardenas said that consumers are trading down from fine-dining restaurants into LongHorn’s steaks.
Darden bought Chuy’s Holdings in July for roughly $605 million, its second acquisition in two years. The company expects the Chuy’s deal to close in its fiscal second quarter, which is also when Ruth’s Chris Steak House’s results will appear in its same-store sales numbers. Darden bought Ruth’s Chris a little over a year ago.
Despite the gloomy quarter, Darden reiterated its full-year outlook. For fiscal 2025, the company is forecasting 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 fiscal second-quarter same-store sales are growing, a promising sign that this summer’s slump could just be a blip, Cardenas said.
