March 4, 2024

A Longhorn Steakhouse restaurant in Thornton, Colo., U.S., Friday, March 19, 2021. Darden Restaurant Company is scheduled to release earnings data on March 25.

Chet Strange | Bloomberg | Getty Images

Darden Restaurant Thursday report Quarterly earnings topped Wall Street expectations, driven by strong sales at LongHorn Steakhouse.

But investors were disappointed by the company’s fiscal 2024 forecast. Darden expected adjusted earnings per share from continuing operations of $8.55 to $8.85, but analysts polled by Refinitiv expected $8.79 per share for the current fiscal year.

Shares of the company fell more than 3% in early trade. Ahead of the earnings report, the stock was approaching its June 15 all-time high of $168.98.

The company’s report compared Wall Street expectations, according to a Refinitiv survey of analysts:

  • EPS: $2.58 vs. $2.54 expected
  • Revenue: $2.77 billion, in line with expectations

Darden reported fourth-quarter net income of $315.1 million, or $2.58 a share, up from $281.7 million, or $2.24 a share, a year earlier.

net sales It rose 6.4 percent to $2.77 billion.

The company’s same-store sales rose 4%, led by strong performance at LongHorn Steakhouse. The steak chain reported same-store sales growth of 7.1%, topping StreetAccount’s forecast of 4.9%.

But Olive Garden, which accounts for about 45 per cent of Darden’s sales, reported weaker-than-expected results for the quarter. Same-store sales at the Italian chain rose 4.4%, below expectations for a 5% increase.

Same-store sales at Darden’s fine dining division fell 1.9 per cent. The division includes The Capital Grille and Eddie V’s.

Executives said they expected sales at upscale restaurants to soften in the fiscal first quarter. Traffic at its fine-dining restaurants has more than doubled over the past three quarters compared to 2019 levels, but the segment still faces serious challenges compared with surging demand a year ago.

“We expect steady year-over-year traffic after the first quarter,” Chief Financial Officer Raj Vennam told investors on the company’s conference call.

Next quarter, the company’s premium dining options will also include Ruth’s Chris Steak House, which the company acquired for $715 million. Darden’s results for the quarter ended May 28 did not include the latest addition, as the company completed the acquisition on June 14.

Looking forward to fiscal year 2024, Darden expects 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.

Its earnings outlook excludes an after-tax charge of about 34 cents per share related to the integration of Ruth’s Chris. The remainder of the FY2024 forecast includes Ruth’s Chris’ operating performance.

The restaurant company also expects capital expenditures of $550 million to $600 million, with headline inflation of 3% to 4%. The company expects to raise menu prices by 3.5% to 4% in response to rising costs, particularly labor costs.

The company also announced that former CEO Gene Lee plans to step down as chairman of the board. Lee retired as chief executive just over a year ago. He will not be running for re-election at the company’s annual shareholder meeting, scheduled for Sept. 20.

“I am proud of what we have achieved and believe Darden is well-positioned to continue to grow and prosper in the years to come,” Lee said in a statement.