ORLANDO FLA. Darden Restaurants Inc. sharply lowered its full-year financial forecast and warned that results of the newly ended quarter would fall below Wall Street expectations. Many analysts said the warning does not bodes well for other operators, especially those in Darden’s casual-dining sector. —Just days after the end of its fiscal first quarter,
A bellwether of the industry that up until now has withstood the consumer spending slowdown, Darden said its previous expectations for same-store sales increases throughout the year and into the next “proved optimistic.” Results, it said, were affected by a “more challenging-than-anticipated economic and consumer environment.” Its sales, the company added, would “remain under pressure for the balance of the fiscal year.” —Just days after the end of its fiscal first quarter,
(To view financial charts featured in this week's issue, click here.) —Just days after the end of its fiscal first quarter,
Darden operates more than 1,700 restaurants under the Red Lobster, Olive Garden, LongHorn Steakhouse, The Capital Grille, Bahama Breeze and Seasons 52 brands. —Just days after the end of its fiscal first quarter,
“The new news for Darden and other restaurants is slowing industry same-store sales as year-over-year unemployment increases ramp up and the impact of tax rebates diminishes,” David Palmer, a restaurant securities analyst at UBS Equity Research in New York, said in a research note. —Just days after the end of its fiscal first quarter,
Other analysts also pointed to an even further deceleration of sales trends during the current calendar third quarter and the remainder of the year. —Just days after the end of its fiscal first quarter,
An Aug. 26 report by restaurant securities analyst Jeff Farmer at Jefferies & Co. Inc. collected data from 40 public restaurant companies and revealed that from the 30 companies that offered forward-looking guidance into same-store sales trends, just three pointed to top-line improvement for the remainder of this year. Those three—McCormick & Schmick’s, Ruby Tuesday and Starbucks—said sales would improve slightly, although that improvement would be measured against slowed or negative results for the year-ago period. For the remaining 27 restaurant companies that offered guidance, 13 expected same-store sales to slow in the current third quarter and for the remainder of the year, and 14 expected same-store sales to remain at current levels. —Just days after the end of its fiscal first quarter,
“Heavily watched Olympic coverage kept millions of casual-dining customers home in August,” Farmer said. —Just days after the end of its fiscal first quarter,
In addition, he pointed to a still-softening “wealth effect” that is “likely to keep consumers cautious with discretionary spending.” The wealth effect refers to continued declines in home prices, which were down 7.1 percent on average in July; lowered stock market returns, down 1 percent in July; and still-eroding employment figures, the most recent of which shows another 51,000 jobs lost in July and unemployment at 5.7 percent, the highest in 12 months. —Just days after the end of its fiscal first quarter,
Darden weathered the economic downturn better than most of its competitors, posting positive sales at Red Lobster and Olive Garden through most of its latest fiscal year ended in May. But the economy finally caught up to the Orlando-based casual-dining giant. For its first quarter ended Aug. 24, same-store sales fell 3.7 percent at Red Lobster and 4.9 percent at LongHorn. Same-store sales remained positive at Olive Garden, up 2.4 percent for the period. —Just days after the end of its fiscal first quarter,
The lower-than-anticipated sales moved Darden to project first-quarter earnings between 60 cents per share and 62 cents per share, excluding one-time charges and integration costs surrounding its purchase of Rare Hospitality in October 2007. On average, analysts had expected per-share earnings of 75 cents, according to Thomson Financial. —Just days after the end of its fiscal first quarter,
For the full year Darden said it expects earnings per share to be unchanged from a year ago or at the best up 5 percent. Earlier, the company had predicted per-share earnings growth of between 9 percent and 10 percent. Estimates for revenue growth were cut by 2 percentage points to between 12 percent and 13 percent. —Just days after the end of its fiscal first quarter,
Combined same-store sales for Red Lobster, Olive Garden and LongHorn now are expected to be flat to up 1 percent for the year, versus previous expectations for growth of 2 percent, the company reported. —Just days after the end of its fiscal first quarter,
Darden’s full first-quarter earnings are expected on Sept. 16. —Just days after the end of its fiscal first quarter,
