In a recent presentation of its financial health, Darden Restaurants, the parent company of popular dining chains including Olive Garden and LongHorn Steakhouse, reported a mixed bag of results for the fiscal third quarter. While the company managed to achieve earnings per share slightly above analysts’ expectations, revenue fell short, highlighting ongoing challenges in the casual dining sector.
For the quarter that ended on February 23, Darden posted a net income of $323.4 million, or $2.74 per share, up from $312.9 million—or $2.60 per share—during the same period last year. When adjusting for acquisition-related expenses, particularly from the integration of Chuy’s, earnings reached $2.80 per share, edging past the consensus estimate of $2.79. However, revenue for the quarter settled at $3.16 billion, a 6.2% increase year-over-year, yet falling short of the expected $3.21 billion.
One of the primary factors contributing to the disappointing sales figures was the weather, with executives citing unusually low temperatures and snowstorms as significant deterrents for diners during this quarter. CEO Rick Cardenas emphasized that, despite consumer sentiment suggesting a decline in optimism, there remains no substantial evidence linking this sentiment directly to reduced dining out. In fact, he noted, “As long as incomes are going up and outpacing inflation, I think they’re likely to keep spending.” This sentiment is supported by a broader economic context where, according to recent data from the Bureau of Labor Statistics, average hourly earnings have risen, giving consumers more disposable income to spend on dining experiences.
However, when examining same-store sales—an important metric for assessing the performance of established restaurants—both Olive Garden and LongHorn Steakhouse fell short of expectations. Olive Garden’s same-store sales rose a modest 0.6%, compared to analyst predictions of 1.5%, while LongHorn reported a 2.6% increase, missing the anticipated 5%. These figures suggest that even stalwarts of Darden’s portfolio are experiencing headwinds in attracting foot traffic.
In an effort to adapt to changing consumer behaviors, Olive Garden recently partnered with Uber Direct to enhance its delivery services. Early reports indicate that customers using this delivery option are spending around 20% more than those who opt for curbside pickup. Cardenas noted that delivery sales have been steadily growing, with pilot restaurants accounting for approximately 2.5% of overall sales, a trend that appears promising as the company looks to leverage convenience in an increasingly competitive market.
Despite the challenges faced in the casual dining segment, Darden’s fine dining offerings, which include The Capital Grille and Ruth’s Chris Steak House, also saw a decline in same-store sales, dropping 0.8%. This decline comes after a stronger performance during the holiday season, suggesting that consumers are tightening their wallets post-holiday. “We are seeing more persistent check management post-holidays,” Cardenas remarked, indicating that while there had been a brief surge in fine dining demand, the enthusiasm has waned.
The broader picture for Darden is one of cautious optimism. The company reiterated its full-year guidance, forecasting revenue of $12.1 billion and adjusting its earnings per share outlook to a range of $9.45 to $9.52, slightly narrowing from prior estimates. Notably, even though results from Chuy’s are contributing to overall revenue, they won’t impact same-store sales metrics until the fourth quarter of fiscal 2026.
Looking forward, it remains crucial for Darden to continue adapting its strategies in response to consumer trends and economic pressures. With food service spending still robust among higher-income consumers, the company must focus on enhancing customer experience and convenience to maintain its competitive edge. As the landscape of dining continues to evolve, Darden’s ability to navigate these shifts will be pivotal in securing its place as a leader in the casual dining space.
