Darden Restaurants recently released its quarterly results, which caused mixed reactions in the market. Despite an increase in net sales, the same-store sales of its flagship brand, Olive Garden, declined for the second consecutive quarter. Additionally, Darden provided a modest forecast for the coming fiscal year, predicting a mere 1% to 2% growth in same-store sales.
The company reported earnings per share of $2.65, slightly surpassing Wall Street’s expectations of $2.61. However, revenue fell short of estimates, coming in at $2.96 billion compared to the expected $2.97 billion. Net income for the fiscal fourth quarter dropped to $308.1 million from $315.1 million the previous year, with earnings per share of $2.57, down from $2.58 in the previous year. Darden attributed this decline to costs related to the Ruth’s Chris acquisition and other factors. Despite these setbacks, net sales increased by 6.8% to $2.96 billion, mainly due to the addition of Ruth’s Chris Steak House and 37 new locations.
The overall same-store sales for Darden were flat, mainly due to underperformance at Olive Garden and the company’s fine-dining establishments. Olive Garden experienced a 1.5% decline in same-store sales, following a 1.8% decrease in the previous quarter, primarily driven by reduced spending from low-income consumers. On the other hand, Darden’s fine-dining restaurants, including Ruth’s Chris, saw a 2.6% decrease in same-store sales.
Despite the challenges faced by Olive Garden and the fine-dining segment, LongHorn Steakhouse emerged as a beacon of hope, reporting a 4% increase in same-store sales. This growth is significant, considering Olive Garden’s historical dominance within Darden’s portfolio. LongHorn Steakhouse’s success indicates a shift in consumer preferences and highlights the need for Darden to adapt its strategy accordingly.
Looking ahead to fiscal 2025, Darden anticipates earnings per share from continuing operations to range between $9.40 and $9.60, aligning with Wall Street’s expectations. The company also projects net sales of $11.8 billion to $11.9 billion, slightly below analysts’ estimates of $11.94 billion. Darden expects total inflation of 3% and a modest same-store sales growth of 1% to 2% for the upcoming fiscal year. Ruth’s Chris results will be incorporated into Darden’s same-store sales in the second quarter of fiscal 2025. The company plans to allocate $550 million to $600 million for capital expenditures to support its growth initiatives.
Darden Restaurants faces challenges in navigating the shifting consumer landscape and revitalizing its struggling brands. The company’s ability to leverage the success of LongHorn Steakhouse while addressing the weaknesses of Olive Garden and its fine-dining establishments will be crucial in determining its future performance.