Darden Restaurants on Thursday reported weaker-than-expected sales as Olive Garden and LongHorn Steakhouse underperformed analysts’ projections.
The restaurant company blamed weather for the sales slowdown and maintained its full-year forecast, lifting investors’ confidence that the rough quarter was a blip.
Darden shares rose 5% Thursday.
Here’s what the company reported compared with what Wall Street was expecting, based on a survey of analysts by LSEG:
- Earnings per share: $2.80 adjusted vs. $2.79 expected
- Revenue: $3.16 billion vs. $3.21 billion expected
Darden reported fiscal third-quarter net income of $323.4 million, or $2.74 per share, up from $312.9 million, or $2.60 per share, a year earlier.
Excluding costs related to its acquisition of Chuy’s, Darden earned $2.80 per share.
Net sales rose 6.2% to $3.16 billion, fueled largely by the addition of Chuy’s restaurants to its portfolio.
Darden’s same-store sales rose 0.7%, less than the 1.7% increase expected by analysts, according to StreetAccount estimates.
Executives blamed this winter’s low temperatures and snowstorms for the disappointing quarter ended Feb. 23. When excluding weather, same-store sales across all four of Darden’s segments grew during the quarter, and only consumers making less than $50,000 were spending less at its casual-dining restaurants.
“Even if [consumers] say they’re feeling feeling less optimistic, we haven’t seen a huge correlation between that and dining out,” CEO Rick Cardenas told analysts on the company’s conference call. “So I think as long as incomes are going up and outpacing inflation, I think they’re likely to keep spending.”
Both Olive Garden and LongHorn Steakhouse, which are typically the two standouts of Darden’s portfolio, reported underwhelming same-store sales growth. Olive Garden’s same-store sales rose 0.6%. Analysts were anticipating same-store sales growth of 1.5%. And LongHorn’s same-store sales increased 2.6%, missing analysts’ expectations of 5% growth.
In February, Olive Garden finished rolling out delivery with Uber Direct. The chain’s delivery customers typically spend 20% more than the average curbside pickup order, and Olive Garden saw delivery order volume increase every week.
“Now at the end of the third quarter, our pilot restaurants were running around 2.5% of sales in delivery, and the other restaurants were following that same pattern,” Cardenas said.
In the first three weeks of March, both Olive Garden and LongHorn saw strong momentum, executives said.
Darden’s fine dining segment, which includes The Capital Grille and Ruth’s Chris Steak House, reported same-store sales declines of 0.8%. The segment saw stronger demand during the holiday season, but consumers pulled back again in the new year.
“We are seeing more persistent check management post-holidays, so I guess we’re not ready to claim victory yet on fine dining. It’s still soft,” CFO Raj Vennam said.
The last segment of Darden’s business, which includes Cheddar’s Scratch Kitchen and Yard House, saw same-store sales shrink 0.4% in the quarter.
For the full year, Darden reiterated its forecast for revenue of $12.1 billion. It narrowed its outlook for adjusted earnings from continuing operations to a range of $9.45 to $9.52 per share. Its prior forecast was $9.40 to $9.60 per share.
Darden’s fiscal 2025 outlook includes Chuy’s results, but the Tex-Mex chain won’t be included in its same-store sales metrics until the fiscal fourth quarter in 2026.
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