Like watching a tasty Olive Garden breadstick tumble to the dirty floor, you're going to miss the dough.
Olive Garden parent Darden Restaurants (NYSE: DRI ) posted disappointing fiscal second-quarter results yesterday. The company earned $0.30 a share for the period, or $0.41 a share before a series of mostly acquisition-related charges after October's purchase of RARE Hospitality. Analysts were looking for an adjusted profit of $0.50 a share.
Sales climbed 17% higher to $1.5 billion, but don't go waving that lobster bib in buttery jubilation. If you back out the $163 million contributed to the top line by RARE's LongHorn Steakhouse and Capital Grille chains, Darden's sales inched up by a mere 4.5%.
The standout performer was Olive Garden, but only by default. Comps dipped at LongHorn, while clocking in essentially flat at Red Lobster, Capital Grille, and Bahama Breeze. As you might imagine, Darden didn't even come close to making my list of the best restaurant stocks to buy for 2008.
There are worse things than flattish popularity, though it's hard to show Darden some love when other casual dining and quick-service chains like IHOP (NYSE: IHP ) , BJ's (Nasdaq: BJRI ) , and Chipotle (NYSE CMG) (NYSE: CMG-B ) have been posting consistently positive quarterly comps for several years.
So what's the rub at Darden? The company isn't rudderless, though one can argue over the logic of unloading one carnivore concept in Smokey Bones for two more in LongHorn and Capital Grille.
Investors could call for more focus at Darden, but that's just the way it goes in the industry. Companies like Yum! Brands (NYSE: YUM ) and Brinker (NYSE: EAT ) aren't barnburners at the moment, but they are adequately juggling varied concepts.
If anything, maybe Darden should take a cue from its multiheaded-hydra peers and embrace a snazzier grub-worthy ticker symbol like YUM or EAT. I mean, really now; who wants to eat at a DRI restaurant?
I'm joking, of course. Then again, when you're a shareholder in a company that missed as badly as Darden, you can use a good chuckle -- after all, you're not exactly going to laugh all the way to the bank.
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