Hurricane Harvey weighed heavily on Olive Garden parent Darden Restaurants during its fiscal first quarter, causing same-store sales to fall short of Wall Street expectations. And Hurricane Irma threatens to damage the brand's sales even more next quarter.
Darden said Tuesday that its same-store sales, a key metric of restaurants open at least a year, climbed 1.7 percent in the quarter, below Wall Street's estimate for a rise of 2.1 percent. This figure doesn't reflect its acquisition of Cheddar's Scratch Kitchen, which closed in March.
"Hurricane Harvey made landfall on the last weekend of our quarter," Rick Cardenas, Darden's CFO, said during the company's earnings call Tuesday. "The day before Harvey made landfall in Texas, same-restaurant sales quarter-to-date were running plus 2 percent, 30 basis points higher than where we ended the quarter."
Despite weaker-than-expected same-store sales, the company said that revenue in the quarter grew 12.9 percent from a year ago to $1.936 billion. Revenue was just a touch better than expectations of $1.931 billion.
While Olive Garden's same-store sales grew 1.9 percent in the first quarter, its 12th-consecutive quarter of positive growth, they fell short of Wall Street's expectation of 2.5 percent, according to StreetAccount.
Darden said that Olive Garden's same-store sales would have been up 2.2 percent if not for Hurricane Harvey.
Darden's Bahama Breeze also saw same-store sales that were below estimates. However, same-store sales at The Capital Grille and LongHorn Steakhouse exceeded analysts' expectations.
No comparisons were available for Eddie V's, which saw same-store sales growth of 2.5 percent in the quarter; Yard House, which fell 0.4 percent; or Seasons 52, which was down 2.2 percent.
Same-restaurant sales for Cheddar's Scratch Kitchen, which has many locations in Texas where Harvey caused extensive damage, were down 1.4 percent, the company said.
Analysts had predicted that the storms will hurt restaurant sales in August and September. Lynne Collier, an analyst at Canaccord, estimates the causal dining industry, in which Darden operates, saw same-store sales in August fall 2.5 percent and same-store sales in September fall 2 to 4 percent.
Darden said that Harvey not only squelched sales, but additional hurricane-related costs that affected first-quarter EPS by 1.5 cents.
The company reported on Tuesday that net income from continuing operations rose 8 percent to $119 million, or 95 cents per share. The company's earnings were hurt by 4 cents due to the integration of Cheddar's Scratch Kitchen, which Darden acquired in March.
Excluding this expense, the company earned 99 cents per share, in line with Wall Street expectations, according to Thomson Reuters.
Darden said that the impact of Hurricane Irma will be double that of Harvey. The company expects that Irma will lower same-store sales by 60 basis points, or about 0.6 percent, and will bump EPS down about 3 cents in the fiscal second quarter.
Despite this, the company reaffirmed its 2018 outlook, expecting overall same-store sales to grow 1 to 2 percent. It also said it still expects total sales growth for the year to be 11.5 percent to 13 percent, driven in part by the addition of Cheddar's Scratch Kitchen.
Darden also anticipates that full-year earnings will be in the range of $4.38 to $4.50 per share. Last quarter, the company noted that this figure excluded any expenses related to the integration of Cheddar's Scratch Kitchen into its portfolio.
Darden shares were down 6.3 percent midmorning Tuesday.