On a recent Thursday, Darden Restaurants disclosed its quarterly earnings and revenue figures, revealing results that aligned with analyst expectations while surpassing projections for same-store sales at two of its notable chains, Olive Garden and LongHorn Steakhouse. Following this announcement, shares of Darden surged by an impressive 13% during morning trading sessions, reflecting market optimism regarding the company’s performance.
The figures reported by Darden painted a broadly positive picture: the company recorded earnings per share (EPS) of $2.03 on an adjusted basis, marginally exceeding the $2.02 anticipated by analysts. Revenue reached $2.89 billion, slightly below the expected $2.90 billion, but still indicative of healthy growth. Net income for the fiscal second quarter amounted to $215.1 million or $1.82 per share, a rise from $212.1 million or $1.76 per share a year ago. When excluding expenses related to the acquisition of Chuy’s, Darden’s earnings climbed to $2.03 per share, showcasing resilience despite economic headwinds.
Darden experienced a commendable 6% increase in net sales, with same-store sales rising by 2.4%, surpassing StreetAccount’s estimates of 1.5%. CEO Rick Cardenas highlighted a potential improvement in consumer sentiment, indicating that diners, especially those with incomes ranging between $50,000 and $100,000, are increasingly returning to Darden’s establishments. However, it’s worth noting that higher-income customers have yet to mirror this trend, suggesting an uneven recovery in consumer confidence.
The report also mentioned challenges posed by recent hurricanes, particularly for one of its locations in Asheville, North Carolina, which remains closed but is expected to reopen next year. Despite these setbacks, the LongHorn Steakhouse chain emerged as a key performer this quarter, exhibiting a remarkable same-store sales growth of 7.5%, significantly outpacing the 4.1% growth anticipated by analysts. This achievement can be attributed to the chain’s successful blend of quality offerings at reasonable prices, which continues to resonate well with customers.
Olive Garden, accounting for a substantial share of Darden’s quarterly revenue—over 40%—achieved a rise in same-store sales of 2%, outperforming the 1.4% expectation set by analysts. One standout highlight was the reintroduction of the popular Never Ending Pasta Bowl promotion, which encouraged customers to indulge further by adding proteins. In a bid to adapt to changing consumer behaviors, Olive Garden is also testing Uber delivery at 100 locations, with plans for a broader rollout post-holiday season.
Conversely, the fine-dining segment, encompassing brands like The Capital Grille and Ruth’s Chris Steak House, faced hurdles with a same-store sales decline of 5.8%, which was steeper than the anticipated drop of 2.8%. The high price point of fine-dining experiences has deterred cost-conscious consumers, further exacerbated by the timing of Thanksgiving affecting sales this fiscal quarter. Darden’s CFO, Raj Vennam, acknowledged this calendar shift as a significant factor influencing performance.
In an effort to enhance its portfolio, Darden added 39 net new locations during the quarter, including the strategic acquisition of the Tex-Mex chain Chuy’s for $605 million, officially completed in October. Despite not factoring Chuy’s into same-store sales metrics until fiscal 2026, Darden has updated its fiscal 2025 revenue projection now expecting total sales to reach $12.1 billion, an increase from the previous estimate of $11.8 to $11.9 billion.
Moreover, Darden reiterated its guidance for net earnings per share from continuing operations, maintaining an outlook between $9.40 and $9.60. As the company navigates challenges in the fine-dining sector and adapts to consumer preferences through innovations like delivery services, it remains poised to continue its growth trajectory amid evolving market conditions.
While Darden Restaurants faces certain challenges, its strategic adjustments and successful chains like Olive Garden and LongHorn Steakhouse position it favorably for future success. The ability to react to consumer trends, coupled with strong financial performance, underscores the company’s resilience in the competitive restaurant landscape.