A customer carries an Olive Garden shopping bag in Pittsburg, California, US, on Friday, Dec. 9, 2022.
David Paul Morris | Bloomberg | Getty Images
Darden Restaurants on Thursday reported earnings and revenue that topped analysts’ expectations for its first quarter as the owner of Ruth’s Chris Steak House.
But some consumers are pulling back on their restaurant spending. Same-store sales for Darden’s fine dining segment fell more than expected as consumers earning at least $125,000 dined out less often. Casual dining chains Olive Garden and LongHorn Steakhouse saw customers order fewer alcoholic drinks and choose cheaper entrees.
“Overall, we think the consumer continues to be resilient, but they seem to be a little bit more selective,” CEO Rick Cardenas told analysts on the company’s conference call.
Shares of the company rose less than 1% in morning trading.
Here’s what the company reported for the quarter ended Aug. 27 compared with what Wall Street was expecting, based on a survey of analysts by LSEG, formerly known as Refinitiv:
- Earnings per share: $1.78 adjusted vs. $1.74 expected
- Revenue: $2.73 billion vs. $2.71 billion expected
Darden reported fiscal first-quarter net income of $194.5 million, or $1.59 per share, up from $193 million, or $1.56 per share, a year earlier.
Excluding its acquisition of Ruth’s Chris, integration costs related to the deal and other items, the restaurant company earned $1.78 per share from continuing operations.
Net sales rose 11.6% to $2.73 billion, fueled by menu prices that were about 6% higher than the year-ago period.
Darden’s same-store sales, excluding those of Ruth’s Chris, rose 5% in the quarter.
The company won’t include Ruth’s Chris in its same-store sales results until it has owned the steakhouse chain for 16 months. The $715 million acquisition was completed in mid-June.
Cardenas said that Darden is now expecting to “realize more synergies” than previously expected from the acquisition. About $10 million of the $35 million in cost-savings will be reinvested into the business.
LongHorn Steakhouse was the top performer in Darden’s portfolio this quarter. The chain reported same-store sales growth of 8.1%, topping StreetAccount estimates of 6.1%.
Olive Garden, which accounts for roughly 45% of Darden’s revenue, reported same-store sales growth of 6.1%, meeting expectations.
The Italian-inspired chain will bring back its popular Never Ending Pasta Bowl, starting Monday. Its loyalty members were able to use the promotion this week. But Darden executives said that they won’t lean into deep discounts to draw customers to restaurants.
Darden’s fine dining restaurants saw same-store sales shrink 2.8%, wider than expectations of a 1.8% decline. The segment includes The Capital Grille and Eddie V’s, but its same-store sales metric doesn’t yet include Ruth’s Chris.
Darden also reiterated its outlook for fiscal 2024. The company is forecasting net sales of $11.5 billion to $11.6 billion, same-store sales growth of 2.5% to 3.5%, and adjusted earnings per share from continuing operations of $8.55 to $8.85.
