Darden Restaurants recently disclosed mixed quarterly results, with Olive Garden’s same-store sales declining for the second consecutive quarter. This news comes as a disappointment, especially considering the overall performance of the restaurant chain.
While Darden managed to beat analysts’ expectations in terms of earnings per share ($2.65 adjusted versus $2.61 expected), the revenue fell short of predictions ($2.96 billion versus $2.97 billion expected). This discrepancy raises concerns about the company’s ability to sustain growth in the future.
Olive Garden, a key brand under Darden Restaurants, experienced a 1.5% decline in same-store sales, which was worse than analysts’ estimates. This drop in performance could be attributed to various factors, including changing consumer preferences and economic challenges.
Mixed Performance Across Brands
The overall same-store sales at Darden were flat for the quarter, with the fine-dining restaurants also facing a decline in performance. While LongHorn Steakhouse showed growth in same-store sales, other brands like The Capital Grille and Eddie V’s reported negative results. This mixed performance across brands poses a challenge for Darden in terms of portfolio management.
Outlook for Fiscal 2025
Looking ahead, Darden is forecasting modest growth in earnings per share, with expectations ranging from $9.40 to $9.60. The company also anticipates net sales of $11.8 billion to $11.9 billion, which is slightly below analysts’ estimates. Additionally, Darden is projecting total inflation of 3% and same-store sales growth of 1% to 2% for fiscal 2025.
To address the challenges faced by Olive Garden and other brands, Darden plans to invest $550 million to $600 million in capital expenditures. This investment is crucial for revitalizing the performance of underperforming brands and maintaining growth across the portfolio. Moreover, the inclusion of Ruth’s Chris in the same-store sales calculation from the second quarter of fiscal 2025 could potentially impact future results.
Darden Restaurants’ quarterly report reflects a challenging period for the company, with mixed results across brands and concerns about revenue and earnings. The focus must now be on implementing effective strategies to improve performance, enhance brand value, and drive sustainable growth in the coming quarters.