What happened
Shares of Darden Restaurants (DRI +0.39%) were down 3.9% as of 1:00 p.m. EDT Thursday after the parent company of chains including Olive Garden and Longhorn Steakhouse served up mixed quarterly results and underwhelming full-year guidance.
For Darden's first quarter of fiscal 2020 (ended Aug. 25, 2019), sales climbed 3.5% year over year to $2.13 billion, translating to net earnings from continuing operations of $171.8 million, or $1.38 per share. Analysts, on average, were modeling lower earnings of $1.36 per share on slightly higher revenue of $2.14 billion.
IMAGE SOURCE: DARDEN RESTAURANTS.
So what
Darden's top line was driven by a combination of 40 net new restaurants and a same-restaurant sales increase of 0.9% -- though the latter metric was technically below most investors' expectations for a 1.3% increase. Within that, same-restaurant sales grew 2.2% at Olive Garden, 2.6% at LongHorn Steakhouse, 1.5% at The Capital Grille, and 1.2% at Eddie V's. They declined 5.4% at Cheddar's Scratch Kitchen, 1.9% at Yard House, and 4.2% at both Seasons 52 and Bahama Breeze locations.
But management remained optimistic.
"I'm pleased with our results this quarter as we continued to gain market share," stated Darden CEO Gene Lee. "Our teams remained focused on improving the guest experience by focusing on our back-to-basics operating philosophy and leveraging our competitive advantages, all while managing costs effectively."
Now what
Given its performance in the fiscal first quarter, Darden also reiterated its previous guidance for full-fiscal-year 2020 sales growth of 5.3% to 6.3%, same-restaurant sales growth of 1% to 2%, and earnings per share from continuing operations of $6.30 to $6.45. In this case, however, most analysts were hoping for more, with consensus estimates predicting earnings of $6.40 per share (slightly above the midpoint of Darden's guidance range) and sales growth slightly above the high end of Darden's outlook.
