Darden Restaurants on Thursday reported mixed quarterly results because the Olive Garden owner’s same-store sales fell for the primary time because the Covid pandemic.
Sales dropped in January because of bad weather, and in February they performed worse than expected. Chief Financial Officer Raj Vennam said on the corporate’s conference call that weak sales in February exposed “some underlying consumer weakness.”
The company’s shares fell by greater than 4% in morning trading.
Here’s what the corporate said for the quarter ended February 25 in comparison with Wall Street expectations, based on a survey of analysts by LSEG, formerly often known as Refinitiv:
- Earnings per share: Adjusted $2.62, consistent with 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, compared with $286.6 million, or $2.34 per share, a yr earlier.
After excluding items, the restaurant company earned $2.62 per share.
Net sales rose 6.8% to $2.97 billion, driven by Darden’s acquisition of Ruth’s Chris Steak House and 53 other latest restaurants.
However, Darden’s overall same-store sales declined 1% within the quarter as nearly all restaurant segments experienced declines in same-store sales. Only LongHorn Steakhouse saw same-store sales growth. A yr earlier, Darden reported same-store sales growth of 11.7%.
Lower-income consumers have in the reduction of on restaurant spending, executives said. In particular, the variety of transactions by households earning lower than $50,000 for every Darden brand declined.
Sales also fell for households earning lower than $75,000. Vennam said older customers are also more mindful of how much they spend when dining out.
But there have been some shiny spots. Darden gained more customers from households earning a minimum of $150,000. Executives also said the corporate’s same-store sales and traffic outperformed those within the broader industry.
Despite the slowdown, Darden has no plans to alter its strategy, resorting to discounts like many other competitors. Instead, the corporate raises menu prices barely below the speed of inflation.
Olive Garden, often the crown jewel of the Darden portfolio, saw same-store sales decline 1.8%. According to StreetAccount estimates, analysts expected sales within the chain’s stores to extend by 1.3%.
LongHorn Steakhouse’s same-store sales rose 2.3%, but still fell wanting StreetAccount’s estimate of three.1%.
In Darden’s fine-dining segment, which incorporates The Capital Grille, same-store sales fell 2.3%. This division now includes Chris Ruth, but same-store results won’t be included within the category totals for the subsequent few quarters.
Other chains, equivalent to Cheddar’s Scratch Kitchen, saw same-store sales decline a complete of two.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 the previous range of $8.75 to $8.90. Darden also lowered its revenue forecast from $11.5 billion to $11.4 billion and revised its same-store sales forecast from a 2.5% to three% growth range to a 1.5% to 2% growth range.