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Darden Slips as Olive Garden Growth Cools LongHorn Leads

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Darden posted a slight earnings miss for the quarter ended Aug. 30 as Olive Garden's sales rose just 1.1% and LongHorn Steakhouse led with 6.2% growth.

Darden Restaurants fell short of Wall Street forecasts for both profit and sales in its latest quarter, the company said Thursday, as its flagship Olive Garden chain posted only modest sales gains. The stock dropped as much as 5% before the opening bell, then trimmed the decline to roughly 2% by mid-morning after executives sought to calm investors during the earnings call.

For the fiscal first quarter, which ended Aug. 30, the company earned $233.4 million, or $2.04 a share. That was down from $257.8 million, or $2.19 a share, in the same period a year earlier. Net sales climbed 5.1% to $3.20 billion. Comparable-restaurant sales across the group rose 3.1%, with every division posting growth.

Chief Executive Rick Cardenas pointed to a pair of temporary drags on demand. Diner unease over cyclospora, a foodborne illness linked to fresh produce this summer, and a soccer World Cup that kept some customers at home both bit into sales during the period. Cardenas said trends have picked up in September, and he told analysts that prices for important commodities such as beef should ease in the back half of the fiscal year.

Chief Financial Officer Raj Vennam said the tournament alone cut the company's comparable sales by 80 basis points, or 0.8%, early in the quarter.

LongHorn overtakes Olive Garden

LongHorn Steakhouse was again the standout, with same-store sales up 6.2%. The steak chain has now surpassed Olive Garden as the group's fastest grower, though it still brings in a smaller portion of total revenue.

Olive Garden itself managed a 1.1% rise. It remains the largest brand in the portfolio by both location count and sales, but its momentum has faded as customers grow more selective about where they spend. The chain also felt the summer's produce scare. Cardenas said the brand had been ready to promote one of its best-known draws - its bottomless soup, salad and breadsticks - but shelved that marketing push after public worry about lettuce spread. That campaign has been pushed into the current quarter instead.

To lift traffic, Olive Garden plans to focus on weekday lunch, a slower part of the day. Cardenas said the team is developing "several opportunities" built around value to draw more midday diners.

Fine dining and Yard House

Darden's upscale segment, home to The Capital Grille and Ruth's Chris, recorded same-store sales growth of 1.6%. Executives said guest counts at those restaurants remain under pre-pandemic marks, though the direction is improving, and the fine-dining brands have raised prices less aggressively than the rest of the company.

"We are seeing that business spending is still low," Cardenas said, adding that private dining is beginning to expand.

The remaining brands, bundled into an "other business" unit, grew comparable sales 3.8%. Within that group, Yard House jumped 10%, the single Darden chain to gain from the World Cup rather than lose from it. Cardenas called the beer-focused concept a "high potential growth brand" and said it became the company's third billion-dollar brand as of last week. Yard House is set to open 13 new locations in the fiscal year.

Darden Restaurants, Olive Garden, LongHorn Steakhouse, Yard House, Rick Cardenas, restaurant earnings, same-store sales, cyclospora outbreak

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