Darden Earnings Call Reveals Olive Garden Owner Beat Earnings Estimates
Key takeaways
- Darden reported strong earnings per share and revenue in its latest earnings call
- Consumers are ordering less entrees and alcoholic drinks, while high-earners are eating out less overall
- Darden’s share price fell 2.66% on Thursday at the news
What cost of living crisis? Darden Restaurants, the owner of Olive Garden and the recently acquired Ruth’s Chris Steak House, beat Wall Street’s estimations this quarter with strong earnings — though it wasn’t a complete jackpot.
The company’s stock saw a slight gain during Thursday’s early trading, but the stock closed down and has been sliding ever since. Keep scrolling to find out what Darden’s earnings report shaped up like and what the market reaction was like.
What was Darden’s earnings call like?
Restaurant chain owner Darden’s earnings call was a mixed bag that reflected some customers still flocking to certain restaurant brands but fine dining suffering a fall.
Darden’s earnings per share arrived at $1.78 adjusted, beating the $1.74 predicted by analysts. Revenue also surprised on the upside, with Darden recording $2.73 billion in revenue versus the $2.71 billion forecast.
Fiscal Q1 net income was $194.5 million, a slight increase from the $193 million reported at the same time last year. Net sales rose 11.6% to $2.73 billion, partly fueled by higher menu prices.
Though Darden acquired Ruth’s Chris Steak House in June for $715 million, the company doesn’t count its same-store results until it’s owned the franchise for 16 months or longer. LongHorn Steakhouse was the MVP of Darden’s portfolio, seeing same-store sales growth of 8.1%, while Olive Garden recorded a 6.1% climb.
However, Darden’s fine dining restaurant segment suffered a hit. Same-store sales declined by 2.8%, which was worse than the 1.8% fall analysts had anticipated. Consumers earning over $125,000 dined out less often, while restaurant diners at Olive Garden and LongHorn Steakhouse ordered less alcohol and cheaper entrees.
How did Wall Street react?
As investors digested the news, Darden shares closed 2.66% down to $145.49 on Thursday. This year to date, Darden has seen a 4.74% climb in its stock.
The sell-off reaction to the earnings beat may have been a little overblown, given most of the report was positive aside from the steeper-than-expected decline in fine-dining growth. Darden still reiterated its full-year guidance, forecasting net sales of $11.5 billion to $11.6 billion.
“Overall, we think the consumer continues to be resilient, but they seem to be a little bit more selective,” CEO Rick Cardenas told analysts on the earnings call. It sounds to us like Darden believes it has everything in hand.
The bottom line
Darden’s earnings beat was surprisingly resilient, given the macroeconomic slowdown we’re seeing. Investors were spooked by the news that consumers were being more selective with their restaurant orders and high-earners eating out less, but overall, Darden looks to be in a solid position moving into the next few months.
