Darden Restaurants reported weaker-than-expected earnings and revenue for the first quarter, impacted by declining sales at Olive Garden and its fine dining establishments. For the quarter ending August 25, the company posted adjusted earnings per share of $1.75, falling short of Wall Street’s expectation of $1.83. Revenue came in at $2.76 billion, slightly below the anticipated $2.8 billion.
Despite the disappointing results, Darden’s net income rose to $207.2 million, or $1.74 per share, compared to $194.5 million, or $1.59 per share, a year ago. Excluding costs associated with the acquisition of Tex-Mex chain Chuy’s, the adjusted earnings per share matched $1.75. Same-store sales for the company declined by 1.1% for the quarter. Although traffic to Darden’s restaurants experienced a significant drop in July, it showed signs of recovery in the following months, according to CFO Raj Vennam.
Olive Garden, the company’s flagship brand, saw a same-store sales decrease of 2.9%. To attract more customers, Olive Garden is bringing back its popular Never Ending Pasta Bowl promotion earlier than usual and extending it three weeks longer than last year. The chain hopes this move will help recapture customer interest during a challenging period.
In an effort to boost sales, Darden announced its first-ever partnership with a third-party delivery service, teaming up with Uber for a two-year exclusive deal. This marks a strategic shift for the company, which had previously relied on its own employees for meal deliveries, even during pandemic lockdowns. The pilot program will initially launch at select Olive Garden locations. It remains uncertain whether this partnership will significantly impact sales, especially given Olive Garden’s mature customer base and its strong association with in-restaurant dining.
The company’s fine dining segment, which includes Eddie V’s and The Capital Grille, also faced a challenging quarter, with same-store sales dropping by 6%. CEO Rick Cardenas suggested that luxury consumers might have shifted their spending to other areas this summer, and noted a decrease in patronage from households earning up to $200,000 annually.
In contrast, LongHorn Steakhouse continued to perform well, reporting a 3.7% increase in same-store sales. The chain has been a standout in Darden’s portfolio since the pandemic, benefiting from consumers trading down from more expensive dining options.
Darden recently acquired Chuy’s Holdings for approximately $605 million, its second major purchase in two years. The company expects this deal to close in its fiscal second quarter, coinciding with the inclusion of Ruth’s Chris Steak House’s results in its financials. Darden bought Ruth’s Chris a little over a year ago.
Despite the challenges, Darden reaffirmed its full-year outlook, projecting earnings per share between $9.40 and $9.60 and total net sales of $11.8 billion to $11.9 billion for fiscal 2025. CEO Cardenas expressed optimism that the summer slump may be temporary, as same-store sales have shown growth early in the fiscal second quarter.
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