Investors waiting for a turnaround at Darden Restaurants' (NYSE: DRI) Red Lobster better order another round of drinks. Darden reported Thursday that second-quarter profits dipped lower, pinning the blame on continued lackluster sales at the seafood chain.
Yes, Darden's earnings beat analyst expectations by $0.02 per share, coming in at $0.18 cents for the quarter, but that's down from $0.21 per share for the same quarter last year. Sales rose 6.6% to $1.14 billion, largely reflecting the success of Olive Garden.
Oddly, while Red Lobster flounders and Olive Garden sizzles, Darden has several other concepts waiting in the wings. Given how rarely it pays to put all one's eggs in one Olive Garden basket, these other chains seem a good bit underutilized, especially given flagship Red Lobster's persistent woes.
Not wholly out of ideas, Darden is looking to expand lunch service chain-wide at Carribean-themed Bahama Breeze. (Good thinking, guys.) And the company is looking into a lower-cost Bahama Breeze knockoff.
Still, of Darden's 1,236 restaurants, Bahama Breeze and barbecue house Smokey Bones represent just 90. Around the time we learned of October's lackluster same-store sales (again, Red Lobster), a publicized survey revealed low wait times at many of Darden's restaurants, with Bahama Breeze showing no wait time at all.
It's a growing disconnect and lack of execution that has not been lost on investors, as the stock continues to lag the casual dining pack.
Just this week, Fool Rick Munarriz dished up some appetizing stocks in the group. Investors hungry to invest might want to take a gander at these, including Outback Steakhouse (NYSE: OSI) and Cheesecake Factory (Nasdaq: CAKE). Increasingly, Darden is a tough sell.
Do you see a turnaround as imminent for Red Lobster? Or does Darden need a whole new plan? Let other Fools know what you think on the Darden discussion board.
Alyce Lomax welcomes your feedback at alomax@fool.com.
Terms & Conditions
RSS Headlines
Fool UK