Darden Restaurants reports lower profit; COO to retire
Darden Restaurants reported a much lower-than-expected quarterly profit on Friday and warned that shaky consumer spending was likely to keep hurting sales at its flagship Olive Garden and Red Lobster chains.
Shares of the company were down 5.2 percent at $46.75 in premarket trading.
Darden said net income fell to $70.2 million, or 53 cents per share, in the first quarter ended Aug. 25 from $110.8 million, or 85 cents per share, a year earlier.
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Analysts on average were expecting earnings of 70 cents per share, according to Thomson Reuters I/B/E/S.
An uneven economic recovery, higher taxes and intense competition for lower-cost meals have dented demand from the middle-income consumers who frequent Darden's restaurants, which also include the LongHorn Steakhouse chain.
Chief Executive Officer Clarence Otis said he was expecting more volatility in sales and that consumers would remain cautious about spending.
Sales at Olive Garden restaurants open at least 16 months fell 4 percent in the quarter. Analysts polled by Consensus Metrix expected a decline of 1.2 percent at the chain, which traditionally has accounted for almost half of Darden's overall revenue.
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Combined same-restaurant sales at Olive Garden, Red Lobster and LongHorn Steakhouse fell by 3.3 percent.
Same-restaurant sales at the company's more upscale Specialty Restaurant Group grew by 0.5 percent following the acquisition and opening of 46 Yard House restaurants. The group also includes the Seasons 52 chain.
Overall sales rose 6 percent to $2.16 billion from $2.03 billion.
Darden repeated its 2014 outlook of a 3 percent to 5 percent decline in earnings, excluding special items, from $3.13 per share posted in fiscal 2013.
The company also announced the departure of Chief Operating Officer Drew Madsen at the end of this quarter. Madsen will be replaced by Gene Lee, who now is president of Darden's Specialty Restaurant Group.