11:11 AM EDT, 03/21/2024 (MT Newswires) -- Darden Restaurants ( DRI ) reported a smaller increase in fiscal third-quarter revenue than analysts were projecting and cut its top-line guidance for the ongoing year as same-store sales dipped amid unfavorable weather and a pullback among low-income customers.
Sales rose to $2.97 billion for the three months ended Feb. 25 from $2.79 billion a year ago but was below the $3.03 billion average analyst estimate on Capital IQ. Adjusted earnings per share increased to $2.62 from $2.34 year over year, matching the consensus. Shares of Darden dropped 5.5% in Thursday trade.
Revenue growth was driven by the addition of 79 company-owned Ruth's Chris Steak House restaurants and 53 other net new restaurants, partially offset by a consolidated same-restaurant sales decline of 1%. By brand, Olive Garden ( DRI ) same-store sales fell 1.8% while LongHorn Steakhouse sales climbed 2.3%.
"The quarter started well with strong holiday performance in December, but unfavorable winter weather negatively impacted January traffic," Chief Executive Rick Cardenas told analysts on a conference call, according to a Capital IQ transcript. "And while February results improved, we experienced some underlying softness we had not seen in the months leading up to January."
Winter weather in January negatively impacted traffic results by roughly 100 basis points for the quarter, Chief Financial Officer Rajesh Vennam said on the call. At the same time, the lower income consumer appears to be pulling back, according to Cardenas.
For 2024, the restaurant operator lowered its sales outlook to $11.4 billion from the $11.5 billion guidance it provided in December. It now sees same-restaurant sales growth of 1.5% to 2%, trimmed from 2.5% to 3% previously.
Darden updated its adjusted EPS guidance to between $8.80 and $8.90, lifting the lower-end of the outlook from $8.75 previously. Analysts on average are modeling for revenue of $11.46 billion and normalized EPS of $8.86 in the ongoing year.
"Looking ahead, our focus remains on controlling what we can control, leveraging and strengthening our competitive advantages, and executing our back-to-basics operating philosophy in order to effectively manage the business for the long-term," Cardenas said in a statement.
Price: 165.62, Change: -8.96, Percent Change: -5.13