Darden Restaurants, the parent company of Olive Garden, recently released its quarterly results, which showed mixed performance. While the overall same-store sales for Darden remained flat, Olive Garden experienced a decline in same-store sales for the second consecutive quarter. This news comes as a disappointment, as analysts had expected the Italian-inspired chain to report flat same-store sales growth.
The decline in Olive Garden’s same-store sales can be attributed to weaker-than-expected sales and a pullback from low-income consumers. Last quarter, the chain saw a decline of 1.8% in same-store sales, and this quarter, the decline deepened to 1.5%. This trend is concerning for Darden, as Olive Garden has traditionally been a strong performer in its portfolio.
On the other hand, LongHorn Steakhouse, which is overtaking Olive Garden as the gem of Darden’s portfolio, reported positive same-store sales growth. The chain saw a 4% increase in same-store sales for the quarter. This growth is a promising sign for Darden, as it indicates that LongHorn Steakhouse is resonating with consumers and driving revenue for the company.
Darden’s fine-dining restaurants, which include The Capital Grille and Eddie V’s, did not fare as well. These restaurants saw a decline of 2.6% in same-store sales for the quarter. However, it’s important to note that this division now includes Ruth’s Chris Steak House, which was acquired by Darden. The inclusion of Ruth’s Chris in the fine-dining category will not be reflected in the same-store sales results until several more quarters.
Looking ahead to fiscal 2025, Darden is forecasting modest growth. The company expects its same-store sales to increase by just 1% to 2%. Additionally, Darden anticipates earnings per share from continuing operations of $9.40 to $9.60, which aligns with Wall Street’s expectations. However, the company’s projected net sales of $11.8 billion to $11.9 billion fall on the lower end of analysts’ expectations.
To mitigate the impact of inflation, Darden is preparing for a total inflation rate of 3% in fiscal 2025. The company also plans to allocate $550 million to $600 million for capital expenditures. These investments will be crucial for Darden to maintain and enhance its restaurant offerings, ensuring continued growth and success in the highly competitive industry.
In conclusion, Darden Restaurants’ quarterly results have highlighted both strengths and weaknesses in its portfolio. While Olive Garden’s same-store sales have declined, LongHorn Steakhouse has emerged as a standout performer. Darden will need to strategize and make necessary adjustments to revitalize Olive Garden’s performance and leverage the success of LongHorn Steakhouse. By doing so, Darden can position itself for sustained growth and profitability in the years to come.
