Darden Restaurants recently reported mixed quarterly results, with one of its most well-known chains, Olive Garden, experiencing a decline in same-store sales for the second straight quarter. This disappointing trend is a cause for concern for the company, as Olive Garden has historically been a key contributor to Darden’s overall success.
Looking ahead to fiscal 2025, Darden is forecasting modest growth of 1% to 2% in same-store sales. Despite this outlook, the company exceeded Wall Street’s expectations in terms of earnings per share, reporting $2.65 adjusted compared to the expected $2.61. However, revenue fell slightly short of estimates, coming in at $2.96 billion versus the anticipated $2.97 billion.
While Darden’s overall same-store sales remained stagnant, Olive Garden saw a concerning 1.5% decrease in same-store sales. This decline comes on the heels of a 1.8% drop in the previous quarter, primarily driven by decreased spending from lower-income consumers. The fine-dining segment of Darden, including The Capital Grille and Eddie V’s, also struggled, experiencing a significant 2.6% decrease in same-store sales.
On a positive note, LongHorn Steakhouse emerged as a bright spot for Darden, surpassing Olive Garden in terms of same-store sales growth. LongHorn reported a 4% increase in same-store sales, showcasing its strength and resilience within Darden’s portfolio. However, this positive performance from LongHorn was not enough to offset the declines seen in Olive Garden and the fine-dining restaurants.
Future Outlook
Looking towards fiscal 2025, Darden is projecting earnings per share between $9.40 to $9.60, aligning with Wall Street’s expectations. The company anticipates net sales of $11.8 billion to $11.9 billion, slightly below analysts’ estimates of $11.94 billion. Darden is also bracing for a total inflation rate of 3% and modest same-store sales growth of 1% to 2% in the upcoming fiscal year.
Darden Restaurants’ mixed quarterly results, fueled by Olive Garden’s decline in same-store sales, paint a challenging picture for the company. While there are some bright spots, such as LongHorn Steakhouse’s strong performance, Darden will need to address the underlying issues impacting Olive Garden and the fine-dining segment to ensure sustainable growth and success in the future.