Darden Restaurants, the parent company of popular chain Olive Garden, reported its first same-store sales decline since the Covid-19 pandemic began. However, the company was able to offset this decline with its acquisition of Ruth’s Hospitality Group, the parent company of Ruth’s Chris Steak House. Darden’s mixed quarterly results caused the company’s shares to fall more than 5% in premarket trading.
In terms of earnings per share, Darden met expectations with $2.62 adjusted. However, the company fell short of Wall Street’s revenue expectations, reporting $2.97 billion compared to the expected $3.03 billion. Despite these mixed results, Darden’s net income for the fiscal third quarter increased to $312.9 million, or $2.60 per share, up from $286.6 million, or $2.34 per share, the previous year. Excluding items, the restaurant company earned $2.62 per share.
Darden’s overall same-store sales declined by 1% in the quarter, with almost all of its restaurant segments reporting decreases in same-store sales. Only LongHorn Steakhouse saw an increase in same-store sales, rising by 2.3%. The usually successful Olive Garden reported a 1.8% decline in same-store sales, while analysts had expected a 1.3% increase. The fine dining division, which includes The Capital Grille and Ruth’s Chris, saw a decline of 2.3% in same-store sales. However, it is important to note that Ruth’s Chris results will not be included in the same-store sales total for several more quarters.
Other chains within Darden’s portfolio also experienced declines in same-store sales. Cheddar’s Scratch Kitchen saw a collective decline of 2.6%, indicating a challenging period for the company as a whole.
Looking ahead to fiscal 2024, Darden updated its outlook. The company now expects adjusted earnings per share of $8.80 to $8.90, narrowing its previous range. It also lowered its revenue projection from $11.5 billion to $11.4 billion and adjusted its same-store sales outlook from a range of 2.5% to 3% growth to a range of 1.5% to 2%.
Overall, Darden Restaurants’ mixed quarterly results and decline in same-store sales highlight the ongoing challenges faced by the restaurant industry during the pandemic. Despite these setbacks, the company’s acquisition of Ruth’s Chris Steak House provides some compensation and potential for growth in the future. As the industry continues to navigate the uncertainties brought about by the pandemic, it will be interesting to see how Darden Restaurants adapts and evolves to meet changing consumer demands.