Darden Restaurants (DRI 79.69, -3.45, -4.2%), which operates Olive Garden and LongHorn Steakhouse, along with a number of other restaurant concepts, reported its fiscal first quarter results before the open. Its top and bottom-line results were in-line with analysts' average estimates, yet its same-restaurant sales growth was a bit weaker than expected.
Specifically, Darden reported a 12.9% year-over-year increase in revenue of $1.94 billion and a 12.5% increase in adjusted earnings from continuing operations of $0.99 per share.
Blended same-restaurant sales increased 1.7%, yet analysts were reportedly expecting more, which is one of the causes of the stock's weakness in the wake of the earnings report.
Same-restaurant sales for Olive Garden were up 1.9%, helped by pricing and menu-mix, yet same-restaurant traffic at the core concept decreased 0.3%. Same-restaurant sales for LongHorn Steakhouse rose 2.6%, bolstered by a slight 0.1% uptick in traffic, a 1.5% increase in pricing, and a 1.0% increase in menu-mix.
Darden held the line on its fiscal 2018 outlook.
The restaurant operator continues to expect total sales growth of 11.5% to 13.0%, including the addition of Cheddar's Scratch Kitchen, and same-restaurant sales growth from legacy Darden brands of approximately 1.0% to 2.0%.
The company is still projecting adjusted diluted net earnings per share from continuing operations to be between $4.38 and $4.50. Notably, this guidance incorporates the expected financial impact of Hurricanes Harvey and Irma, which was not part of the equation when Darden Restaurants provided its fiscal 2018 guidance in late June.
It is a positive consideration that Darden felt it could maintain its full-year guidance after the hurricanes, yet worries about rising labor costs and a tough competitive environment appear to be in the mix of concerns for investors considering Darden's earnings prospects.