Darden Restaurants, the parent company that operates renowned dining chains such as Olive Garden and LongHorn Steakhouse, recently reaffirmed its financial outlook for the full fiscal year, despite experiencing lower-than-anticipated results for the first quarter of the 2025 fiscal year. This announcement came against a backdrop of declining customer traffic in July, which had raised concerns among investors and analysts. According to an extensive earnings presentation released by the company, Darden continues to project its earnings per share for fiscal year 2025 to fall within the range of $9.40 to $9.60.
Sales are similarly expected to fluctuate between $11.8 billion and $11.9 billion, reflecting a cautious yet optimistic approach to the market. Notably, the consensus estimate from Capital IQ anticipates a GAAP earnings per share of $9.52 alongside expected revenue figures of approximately $11.84 billion. For the ongoing fiscal year, Darden has kept its target for same-restaurant sales growth at 1% to 2%, while market analysts foresee a somewhat higher growth of around 1.4%.
It’s worth mentioning that the company is also maintaining its ambitious plans to open between 45 and 50 new restaurants throughout the year, a move that signals its commitment to expansion despite current headwinds. "Following the softness in July, our sales trend has continued to improve," remarked Chief Financial Officer Raj Vennam, underscoring the company’s hopeful outlook for the rest of the fiscal year.
He further added, "Considering this recovery as well as the planned initiatives to support the remainder of the fiscal year, we are reiterating our guidance for fiscal 2025." Moreover, in the trading session on Thursday, shares of Darden surged by an impressive 7.5%, highlighting a positive reception from investors in light of the company's promising projections. During the quarter that ended on August 25, the adjusted earnings per share for Darden dipped to $1.75, down from $1.78 the previous year, ultimately falling short of the analysts' expectations for a normalized EPS of $1.83.
The company acknowledged that a marked decline in customer traffic during July was largely responsible for the underperformance in first-quarter earnings, a sentiment echoed by Vennam, who noted, "The significant step down in traffic during July led to our first quarter earnings being lower than expected." Sales reported for the quarter reached $2.76 billion, reflecting a year-over-year increase of 1%.
This growth was primarily driven by revenues generated from 42 net new restaurants. However, it still lagged behind the Street's anticipated figure, which approached $2.8 billion. Notably, same-restaurant sales recorded a decline of 1.1% for the quarter, significantly exceeding market expectations of a 0.1% decline.
While Olive Garden faced a challenging quarter with a 2.9% drop in same-restaurant sales, LongHorn Steakhouse experienced a more favorable outcome, with sales climbing by 3.7%. The fine dining segment, however, suffered a notable setback, falling by 6%. Chief Executive Rick Cardenas highlighted the challenging nature of the restaurant industry, stating, "We operate in a very dynamic, competitive industry and we have proven we can successfully navigate challenging environments due to our strategy." Cardenas remained steadfast in his belief regarding the company’s overall strength and resilience, despite the setbacks reflected in the first-quarter results. In an additional development, Darden announced a collaborative effort with ride-hailing giant Uber Technologies, which includes a multi-year exclusive delivery partnership set to launch with Olive Garden later this year.
This partnership aims to enhance delivery services while capturing the growing demand for convenient dining options. As of now, Darden restaurants stand at a stock price of $169.84, marking a change of +10.70, which translates into a percentage change of +6.72..