Olive Garden parent says diners at its steakhouses spent less on booze in the latest quarter

By Steve GelsiCiara Linnane

Darden Restaurants is parent to Olive Garden, Longhorn Steak House and Ruth's Chris Steak House

The stock of Darden Restaurants Inc., owner of Olive Garden and Longhorn Steak House, fell 3% Thursday, after the company posted better-than-expected fourth-quarter profit but guidance that was slightly short of expectations.

The company (DRI), which completed its $715 million acquisition of Ruth's Chris Steak House on June 14, had net income of 315.1 million, or $2.58 a share, from $281.7 million, or $2.24 a share, in the year-ago quarter, ahead of the FactSet consensus for $2.54.

Fourth-quarter revenue moved up to $2.77 billion from $2.60 billion and matched analysts' forecasts.

"We had a solid quarter to conclude a strong year in which we met or exceeded our financial outlook, despite a tough operating environment," said Darden president and CEO Rick Cardenas.

On a call with analysts, Cardenas said fine dining had a tough quarter as it was lapping the strong performance in the year-earlier period, when diners returned in droves after the omicron variant of COVID-19 had eased.

"And so, this quarter, as we alluded to at the end of the third quarter, was going to be a little bit tougher for fine dining," he told analysts according to a FactSet transcript.

Specifically, fine diners spent less on alcohol, as the euphoria seen a year ago evaporated. Darden is expecting that trend to be repeated in the first quarter, but also views its customer as being "pretty strong overall."

Looking ahead, Darden said it expects adjusted fiscal 2024 profit of $8.55 to $8.85 a share, compared with a FactSet consensus of $8.80. Darden also projected fiscal 2024 revenue of $11.5 billion to $11.6 billion, ahead of the Wall Street view of $11.17 billion.

Read: McDonald's introduces plant-based McNuggets

"A softer than expected FY24 guide ($8.55-$8.85 vs. $8.70-$9 expectations) trumps an otherwise okay Q4 print that was relatively in line ex-tax benefit," said Wells Fargo analysts led by Zachary Zadem. "While DRI appears to be faring better for now, softening traffic trends bear monitoring."

In other news, Darden boosted its quarterly dividend by 8% to $1.31 a share. The company also said chairman and former CEO Eugene I. Lee Jr. will retire and will not stand for re-election at the company's 2023 annual meeting.

Darden stock has gained 17% in the year to date, compared with a 14% rise by the S&P 500 .

See also: Chipotle plans to pause price hikes and lean into menu 'hidden gems,' as new stores and cheaper avocados boost earnings

-Steve Gelsi

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06-22-23 1443ET

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