A customer carries an Olive Garden shopping bag in Pittsburg, California, USA, on Friday, December 9, 2022.
David Paul Morris | Bloomberg | Getty Images
Darden Restaurants on Thursday reported earnings and sales that beat analysts’ expectations for the first quarter as owner of Ruth’s Chris Steak House.
But some consumers are curbing their restaurant spending. Sales in Darden’s fine dining segment fell more than expected as consumers earning $125,000 or more ate out less. At casual dining chains Olive Garden and LongHorn Steakhouse, customers ordered fewer alcoholic drinks and chose cheaper entrees.
“Overall, we think the consumer continues to be resilient, but they appear to be a little more selective,” CEO Rick Cardenas told analysts on the company’s earnings call.
The company’s shares rose less than 1% in morning trading.
Here’s what the company reported for the quarter ended Aug. 27 compared to Wall Street’s expectations, based on an analyst survey by LSEG, formerly known as Refinitiv:
- Earnings per share: $1.78 adjusted vs. $1.74 expected
- Revenue: $2.73 billion vs. expected $2.71 billion
Darden reported 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 the Ruth’s Chris acquisition, transaction-related integration costs and other items, the restaurant company earned $1.78 per share from continuing operations.
Net sales rose 11.6% to $2.73 billion, driven by menu prices that were about 6% higher than the year-ago period.
Darden’s same-store sales, excluding Ruth’s Chris, rose 5% in the quarter.
The company will not include Ruth’s Chris in its store sales results until it has owned the steakhouse chain for 16 months. The $715 million acquisition was completed in mid-June.
Cardenas said Darden now expects to “realize more synergies” through the acquisition than previously expected. About $10 million of the $35 million in cost savings will be reinvested into the company.
LongHorn Steakhouse was the top performer in Darden’s portfolio this quarter. The chain reported same-store sales growth of 8.1%, beating StreetAccount estimates of 6.1%.
Olive Garden, which accounts for about 45% of Darden’s sales, reported same-store sales growth of 6.1%, meeting expectations.
The Italian-inspired chain is bringing back its popular Never Ending Pasta Bowl starting Monday. His loyalty members were able to take advantage of the promotion this week. But Darden executives said they would not rely on deep discounts to lure customers to its restaurants.
Darden’s fine dining restaurants posted a 2.8% decline in same-store sales, beating expectations for a 1.8% decline. The segment includes The Capital Grille and Eddie V’s, but Ruth’s Chris is not yet included in the same-store sales metric.
Darden also reiterated its outlook for fiscal 2024. The company forecasts net sales of $11.5 billion to $11.6 billion, same-store sales growth of 2.5 percent to 3.5 percent and adjusted earnings per share from continuing operations Business ranges from $8.55 to $8.85.