Darden Restaurants on Thursday reported mixed quarterly results as the Olive Garden owner’s same-store sales shrank for the first time since the Covid pandemic.
Sales slowed down in January due to bad weather, and underperformed expectations in February. CFO Raj Vennam said on the company’s conference call that February’s weak sales exposed “some underlying consumer weakness.”
Shares of the company fell more than 4% in morning trading.
Here’s what the company reported for the quarter ended Feb. 25 compared with what Wall Street was expecting, based on a survey of analysts by LSEG, formerly known as Refinitiv:
- Earnings per share: $2.62 adjusted, meeting expectations
- Revenue: $2.97 billion vs. $3.03 billion expected
Darden reported fiscal third-quarter net income of $312.9 million, or $2.60 per share, up from $286.6 million, or $2.34 per share, a year earlier.
Excluding items, the restaurant company earned $2.62 per share.
Net sales rose 6.8% to $2.97 billion, fueled by Darden’s acquisition of Ruth’s Chris Steak House and 53 other new restaurant locations.
But Darden’s overall same-store sales fell 1% in the quarter as almost all of its restaurant segments reported same-store sales declines. Only LongHorn Steakhouse saw same-store sales growth. A year earlier, Darden reported same-store sales growth of 11.7%.
Lower-income consumers pulled back their restaurant spending, according to executives. In particular, transactions from households making less than $50,000 fell at every one of Darden’s brands.
Sales from households making less than $75,000 also declined. Older customers are also being more careful about how much they spend while dining, Vennam said.
But there were some bright spots. Darden gained more customers from households with incomes of at least $150,000. Executives also said the company’s same-store sales and traffic outpaced that of the broader industry.
Despite the slowdown, Darden isn’t planning on changing its strategy by leaning into discounts like many of its peers. The company instead has been raising its menu prices slightly below the pace of inflation.
Olive Garden, usually the crown jewel of Darden’s portfolio, reported its same-store sales fell 1.8%. Analysts were expecting the chain’s same-store sales to rise 1.3%, according to StreetAccount estimates.
LongHorn Steakhouse’s same-store sales rose 2.3%, but still fell short of StreetAccount estimates of 3.1%.
Darden’s fine dining business, which includes The Capital Grille, saw its same-store sales decline 2.3%. That division now includes Ruth’s Chris, but those same-store results won’t be included in the category total for several more quarters.
Remaining chains, like Cheddar’s Scratch Kitchen, collectively saw same-store sales fall 2.6%.
Darden also updated its outlook for fiscal 2024. The company now expects adjusted earnings per share of $8.80 to $8.90, narrowing its earnings forecast from a prior range of $8.75 to $8.90. Darden also lowered its revenue projection from $11.5 billion to $11.4 billion and changed its same-store sales outlook from a range of 2.5% to 3% growth to a range of 1.5% to 2%.