- Darden Restaurants reported fiscal fourth-quarter earnings that topped Wall Street's estimates.
- Former CEO Gene Lee plans to step down as chair of the board.
- Darden's results for the quarter ended May 28 do not include its $715 million purchase of Ruth's Chris Steak House.
But investors were disappointed by the company's forecast for fiscal 2024. Darden is anticipating adjusted earnings per share from continuing operations of $8.55 to $8.85, but analysts surveyed by Refinitiv were expecting earnings of $8.79 per share for the fiscal year.
Shares of the company fell more than 3% in morning trading. Ahead of its earnings report, the stock had been approaching its all-time high of $168.98, set on June 15.
Here's what the company reported compared with what Wall Street was expecting, based on a survey of analysts by Refinitiv:
- Earnings per share: $2.58 vs. $2.54 expected
- Revenue: $2.77 billion, meeting expectations
Darden reported fiscal fourth-quarter net income of $315.1 million, or $2.58 per share, up from $281.7 million, or $2.24 per share, a year earlier.
Net sales rose 6.4% to $2.77 billion.
The company's same-store sales increased 4%, led by a strong performance from LongHorn Steakhouse. The steakhouse chain reported same-store sales growth of 7.1%, topping StreetAccount estimates of 4.9%.
But Olive Garden, which accounts for roughly 45% of Darden's sales, reported a weaker-than-expected performance for the quarter. The Italian chain's same-store sales rose 4.4%, falling short of expectations for 5% growth.
Darden's fine dining segment reported same-store sales declines of 1.9%. The division includes The Capital Grille and Eddie V's.
Executives said they expect softer fine-dining sales through the fiscal first quarter. Traffic for its fine-dining restaurants has more than doubled in the last three quarters compared with 2019 levels, but the segment still faces tough comparisons to surging demand a year ago.
"We expect traffic to stabilize on a year-over-year basis after the first quarter," CFO Raj Vennam told investors on the company's conference call.
Next quarter, the company's fine dining options will also include Ruth's Chris Steak House, which the company bought for $715 million. Darden's results for this quarter, which ended May 28, do not include its latest addition because the company completed the acquisition June 14.
Looking forward to fiscal 2024, Darden is forecasting net sales of $11.5 billion to $11.6 billion, same-store sales growth of 2.5% to 3.5%, and adjusted earnings per share from continuing operations of $8.55 to $8.85.
Its earnings outlook excludes about 34 cents per share, after tax, of expenses related to the Ruth's Chris integration. The rest of its fiscal 2024 forecast includes Ruth's Chris's operating results.
The restaurant company is also anticipating capital spending of $550 million to $600 million and total inflation of 3% to 4%. The company expects to raise menu prices by 3.5% to 4% in response to rising costs, particularly for labor.
The company also announced that former CEO Gene Lee plans to step down as chair of the board. Lee retired a little over a year ago as chief executive. He won't stand for reelection at the company's annual shareholders meeting, which is scheduled for Sept. 20.
"I am proud of what we have accomplished and believe that Darden is well-positioned to continue to grow and prosper for years to come," Lee said in a statement.