On December 20, 2024, Darden Restaurants, the largest multi-brand, full-service restaurant company in North America, released its quarterly earnings report that met analysts’ expectations. Olive Garden and LongHorn Steakhouse saw same-store sales growth exceeding expectations.
The company’s stock price rose by 13% in early trading.
Darden Restaurants, primarily a casual dining company, owns a variety of well-known brands including Red Lobster, Olive Garden, and LongHorn Steakhouse.
According to a survey conducted by the London Stock Exchange Group (LSEG) among analysts, here is how the company’s reported data compares to Wall Street expectations:
– Adjusted earnings per share: $2.03, expected $2.02
– Revenue: $28.9 billion, expected $29 billion
Darden reported second-quarter net income of $2.151 billion, or $1.82 per share, higher than the $2.121 billion, or $1.76 per share, from the same period last year.
Excluding costs related to the acquisition of Chuy’s, the company’s earnings per share were $2.03.
Net sales increased by 6%, reaching $28.9 billion.
Darden’s same-store sales grew by 2.4%, surpassing StreetAccount’s prediction of 1.5%.
CEO Rick Cardenas expressed optimism during the company’s conference call, noting that consumer sentiment appears to be slightly better than in previous quarters.
“We had a strong quarter, and I am pleased that all four of our brands – Olive Garden, LongHorn Steakhouse, Yard House, and Cheddar’s Scratch Kitchen – delivered positive same-store sales growth,” he said. “Additionally, three out of our four business segments performed well. I continue to believe in the strength of our strategies and our brands’ ability to compete effectively in any environment.”
Cardenas mentioned that while high-income customers did not increase their visit frequency, customers with incomes ranging from $50,000 to $100,000 visited Darden’s restaurants more frequently.
During the quarter, Darden opened 39 new restaurants and acquired 103 Chuy’s locations. The acquisition of this Tex-Mex chain for $605 million was completed in October.
LongHorn Steakhouse reported a same-store sales growth of 7.5%. This casual dining chain in Darden’s portfolio performed well, capturing customers’ preference with its food quality and pricing. Wall Street had predicted a 4.1% same-store sales growth for this chain.
Olive Garden, which contributes over 40% of Darden’s quarterly revenue, saw a same-store sales growth of 2% for the quarter. Analysts had expected a 1.4% growth, according to StreetAccount.
Darden’s upscale dining segment, including The Capital Grille and Ruth’s Chris Steak House, reported a 5.8% decline in same-store sales, exceeding analysts’ expectations of a 2.8% decline. The higher prices at upscale dining chains deterred many consumers trying to cut back on dining expenses.
According to Darden’s CFO Raj Vennam, the shift of Thanksgiving from the second quarter to the third quarter due to calendar changes also affected sales in the upscale dining segment. Excluding this impact and the sales softening related to hurricanes, same-store sales in the upscale dining segment only decreased by 3.8%, showing improvement from the previous quarter’s 6% decline.
Cardenas mentioned that Darden was significantly impacted by hurricanes “Helene” and “Milton.” However, only one Cheddar’s Scratch Kitchen restaurant in Asheville, North Carolina, remains closed. It is planned to reopen next year.
The company’s last segment, including Cheddar’s Scratch Kitchen and Yard House, reported a same-store sales growth of 0.7%, meeting expectations.
Darden updated its outlook for fiscal year 2025, factoring in Chuy’s performance. However, the chain will not be included in the same-store sales data until the fourth quarter of the 2026 fiscal year.
The company now expects total sales to reach $12.1 billion, higher than the previously estimated $11.8 to $11.9 billion. Darden also reaffirmed its forecast for continued earnings per share of $9.40 to $9.60.
Darden now anticipates opening 50 to 55 new restaurants, an increase from the previous projection of 45 to 50.
(This article is based on CNBC’s reporting)