Darden Restaurants Inc - Thomson 158 Reuters

Stocks making the biggest moves midday: Tesla, Mobileye Global, Darden Restaurants and more

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Darden Restaurants earnings disappoint as Olive Garden, fine dining sales struggle

admin — Thu, 19 Sep 2024 20:05:55 +0000

Darden Restaurants on Thursday reported weaker-than-expected quarterly earnings and revenue as sales weakened at Olive Garden and its fine dining restaurants.

“While we fell short of our expectations for the first quarter, I firmly believe in the strength of our business,” CEO Rick Cardenas said in a statement. “I am confident in the actions all our brand teams are taking to address their guests’ needs, which do not compromise the long-term health of our business for short-term benefits.”

The company shared a number of initiatives that it’s implementing to boost sales, including its first partnership with Uber, ending its resistance to third-party delivery.

Shares of the company closed Thursday up 8%. Excluding Thursday’s gains, the stock has fallen 3% this year as investor concerns about the health of the consumer weigh on the restaurant industry at large.

Here’s what the company reported for the quarter ended Aug. 25 compared with what Wall Street was expecting, based on a survey of analysts by LSEG:

Earnings per share: $1.75 adjusted vs. $1.83 expected
Revenue: $2.76 billion vs. $2.8 billion expected

Darden reported fiscal first-quarter net income of $207.2 million, or $1.74 per share, up from $194.5 million, or $1.59 per share, a year earlier.

Excluding costs related to its purchase of Tex-Mex chain Chuy’s, the restaurant company earned $1.75 per share.

Net sales rose 1% to $2.76 billion, but the company’s same-store sales declined 1.1% in the quarter. Traffic to its restaurants fell sharply in July but then improved, according to CFO Raj Vennam. Executives at other restaurant companies have also said that traffic struggled this summer, chalking it up to increased travel or diners growing even more cautious.

Olive Garden’s same-store sales shrank 2.9% in the quarter. The chain is reviving its Never Ending Pasta Bowl later this month in the hopes of bringing back customers. Olive Garden is running the promotion about a month earlier than usual and extending it for three weeks longer than last year.

Darden is also looking to Uber to boost its sales. The two-year, exclusive deal will start with a pilot at select Olive Garden restaurants. Unlike many chains, Darden rejected third-party delivery companies even during pandemic lockdowns and instead chose to use its own employees to deliver meals to diners.

It’s too early to tell if delivery will lift sales significantly for Darden.

“Our gut reaction is given the brand skews to a more mature customer base & is known more for hospitality than off-premise, we do not expect as material a sales lift vs other concepts launching third-party delivery,” TD Cowen analyst Andrew Charles wrote in a note to clients on Thursday.

Darden’s fine dining segment, which includes Eddie V’s and The Capital Grille, reported same-store sales declines of 6%.

“It seems like there were other places where the luxury consumer was spending dollars, especially this summer,” Cardenas said, adding that the company is seeing a pullback from consumers who make as much as $200,000.

LongHorn Steakhouse was the company’s only division to report same-store sales growth. The chain, a top performer in Darden’s portfolio since the pandemic, saw same-store sales growth of 3.7%. Cardenas said that consumers are trading down from fine-dining restaurants into LongHorn’s steaks.

Darden bought Chuy’s Holdings in July for roughly $605 million, its second acquisition in two years. The company expects the Chuy’s deal to close in its fiscal second quarter, which is also when Ruth’s Chris Steak House’s results will appear in its same-store sales numbers. Darden bought Ruth’s Chris a little over a year ago.

Despite the gloomy quarter, Darden reiterated its full-year outlook. For fiscal 2025, the company is forecasting earnings per share from continuing operations of $9.40 to $9.60 and net sales of $11.8 billion to $11.9 billion.

To date, Darden’s fiscal second-quarter same-store sales are growing, a promising sign that this summer’s slump could just be a blip, Cardenas said.

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Stocks making the biggest moves premarket: Darden Restaurants, Nvidia, DoorDash, Coursera and more

admin — Thu, 19 Sep 2024 15:33:51 +0000

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Stock futures rise as traders weigh Fed’s super-sized rate cut: Live updates

admin — Thu, 19 Sep 2024 04:12:28 +0000

A trader works on the trading floor at the New York Stock Exchange following the Federal Reserve rate announcement on Sept. 18, 2024.

Andrew Kelly | Reuters

U.S. stock futures rose early Thursday as traders digested the Federal Reserve’s earlier decision to lower interest rates by a half percentage point.

Dow Jones Industrial Average futures rose 259 points, or 0.6%. Futures tied to the S&P 500 climbed about 1%, while Nasdaq 100 futures added 1.4%.

The U.S. central bank slashed its overnight lending rate to a range of 4.75% to 5.00% from 5.25% to 5.5% on Wednesday, which came as a surprise to some investors who criticized the size of this initial cut. This is the first rate reduction delivered by the Fed in four years.

After seesawing for most of the afternoon, stocks ultimately closed Wednesday’s session lower. Both the S&P 500 and 30-stock Dow initially rallied to new record highs right after the Fed announced its interest rate cut decision.

Tom Porcelli, chief U.S. economist at PGIM Fixed Income, attributed the market’s Wednesday move lower to Powell’s emphasis that an initial 50 basis point rate cut does not set the precedence for further drastic rate reductions to follow.

“The market was thinking to itself, ‘If you go 50, another 50 has a high likelihood.’ But I think he really dashed that idea to some extent. It’s not that he thinks that’s not going to happen, it’s that he’s not pre-committing to that to happen. That is the right call,” Porcelli said.

Darden Restaurants, shipping giant FedEx and homebuilder Lennar will report their earnings Thursday. Traders will also watch out for August’s existing home sales and the latest weekly jobless claims.

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