Darden Restaurants recently reported its quarterly results, which showed a mixed performance for the company. Despite an increase in net sales by 6.8%, the same-store sales of Olive Garden, one of their prominent chains, fell for the second consecutive quarter. This is concerning as same-store sales are an important indicator of a company’s health in the restaurant industry.
The company reported earnings per share of $2.65 adjusted, slightly beating Wall Street expectations of $2.61. However, revenue came in slightly lower than anticipated, at $2.96 billion compared to the expected $2.97 billion. This discrepancy could be a result of the decline in same-store sales, particularly at Olive Garden and their fine-dining restaurants.
Segment Analysis
Olive Garden experienced a 1.5% decrease in same-store sales, while the company’s fine-dining restaurants saw a larger decline of 2.6%. LongHorn Steakhouse, on the other hand, showed strong performance with a 4% increase in same-store sales. This indicates a shift in consumer preferences within Darden’s portfolio, with LongHorn Steakhouse emerging as a standout performer.
Looking ahead to fiscal 2025, Darden is forecasting modest growth with earnings per share expected to range from $9.40 to $9.60. Net sales are projected to be between $11.8 billion to $11.9 billion, slightly below analysts’ expectations. The company also anticipates a total inflation rate of 3% and same-store sales growth of 1% to 2% for the upcoming fiscal year.
In response to the decline in same-store sales, Darden plans to focus on capital expenditures ranging from $550 million to $600 million. This investment is aimed at revitalizing their restaurant chains and attracting more customers. Additionally, the acquisition of Ruth’s Chris Steak House and new restaurant locations will play a key role in driving future growth for the company.
While Darden Restaurants may have faced challenges with declining same-store sales at Olive Garden and their fine-dining restaurants, the company’s overall performance remains steady. By implementing strategic initiatives and focusing on key growth drivers, Darden is poised for continued success in the competitive restaurant industry.