Darden Restaurants Inc. saw its shares fall after Olive Garden's fourth-quarter same-store sales growth of 2.4% missed analyst estimates of 3.4%. This underperformance suggests that promotional efforts and lighter portions were insufficient to counteract the financial pressures facing lower and middle-income consumers. The weaker sales at Darden's largest chain overshadowed an otherwise positive earnings report, where adjusted earnings from continuing operations reached $3.66 per share, surpassing expectations.
While the company's overall adjusted EPS of $3.66 beat the consensus of $3.63, and the company reported a net income of $404.9 million (up from $303.8 million in the prior year), the revenue of $3.72 billion slightly missed analyst estimates of $3.73 billion. This was despite a 13.7% increase in net sales, boosted by an extra week in the fiscal year. The fine-dining segment also underperformed, with comparable-store sales growth of 1.9% against a projected 3.1%.
In response to these mixed results, Darden's stock declined by approximately 3.0% in pre-market trading. This negative market reaction was amplified by broader cautious market conditions and an earlier downgrade by Evercore ISI, which moved Darden to "In Line" from "Outperform" on June 23. Despite the sales disappointment at Olive Garden, Darden did announce some positive news, including a new $1.5 billion share repurchase program and an 8.0% increase in its quarterly dividend to $1.62 per share.
