Olive Garden Sales Miss Drives Down Shares of Parent Darden

(Bloomberg) -- Darden Restaurants Inc. fell the most in six months after sales missed estimates last quarter, driven by a decline in foot traffic at Olive Garden, its biggest chain.

• Darden reported same-store sales rose 1.6% in the period that ended May 26, trailing projections. The company also forecast comparable sales growth for the year of 1% to 2%, while analysts had estimated 2.7%, according to Consensus Metrix.

Key Insights

• Olive Garden has focused on everyday value on its menu to attract customers, but that failed to boost visitors. Traffic last quarter dropped 0.4%.
• Like other restaurant companies, Darden, which also owns LongHorn Steakhouse, may be seeing higher food costs, especially for proteins. A swine fever outbreak in Asia has crimped pork supplies globally and driven up prices for chicken and beef, too.
• On a positive note, LongHorn’s same-store sales topped projections last quarter and the chain saw traffic rise.
• Darden is facing heightened competition from rivals such as Chili’s, which has revamped its loyalty program and partnered with DoorDash for delivery. Darden, meanwhile, has mostly shunned delivery, opting instead to promote takeout.

Market Reaction

• The shares fell as much as 4.2% on Thursday -- the most since December. They had gained 18% this year through Wednesday’s close, topping the advance in the S&P 500 Index.

Get More

• For the company statement, click here.
• For more on the results, click here.

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