Olive Garden Restaurant in Times Square, New York.
Richard Levine | Corbis | Getty Images
Darden Restaurants on Thursday reported disappointing quarterly earnings and earnings for analysts, saying that the Omicron variant of Covid-19 disappointed the sales of the Olive Garden chain.
The company also lowered its revenue outlook for 2022, We expect food and labor costs to continue to rise.
Darden’s share price fell slightly in the morning trading.
Outgoing CEO Jean Lee said in a statement that Omicron recorded record sales in December, before it disrupted customer traffic, staff levels and operating costs the following month. However, the company said Darden’s restaurants had begun to recover from the recession by February.
Olive Garden, which accounts for about half of Darden’s revenue, reported 29.9% same-store sales growth, but lacks the Street Account estimate of 36.7%.
Based on an analyst survey by Refinitiv, the company reported:
- Profit per share: $ 1.93 vs. $ 2.10 forecast
- Revenue: $ 2.45 billion vs. $ 2.51 billion forecast
The restaurant company’s third-quarter net income increased from $ 128.7 million (98 cents per share) in the year-ago quarter to $ 247 million ($ 1.93 per share). Analysts surveyed by Refinitiv expected earnings per share to be $ 2.10.
Teleconference executives said commodity inflation in the quarter rose 11% year-on-year.
Net sales were up 41.3% to $ 2.45 billion, below the expected $ 2.51 billion. Same-store sales increased 38.1% across all Daden restaurant chains. Wall Street expected total same-store sales to increase by 43.5%, according to StreetAccount estimates. A year ago, Darden’s same-store sales fell 26.7%.
Darden’s luxury dining business was also disappointed, despite reporting an 85.8% increase in same-store sales. This segment included chains like The Capital Grille, which suffered the most pandemics. Analysts expected same-store sales growth of 91.1%.
Same-store sales at LongHorn SteakHouse increased 31.6% in the quarter. Chain sales recovered faster than Olive Garden after building a strong takeaway business early in the pandemic, but accounted for only about a quarter of Darden’s sales.
Darden raised its earnings forecast in the previous quarter and then lowered it on Thursday. The company currently expects earnings per share in 2022 from $ 7.30 to $ 7.45 for continuing operations, down from the previous outlook of $ 7.35 to $ 7.60.
Lee said the war in Ukraine created greater uncertainty and the company had announced a wider outlook by this time of the year.
Inflation is expected to rise by 6%, slightly higher than previously predicted 5.5%, Darden said. Commodity inflation is expected to rise by 9%. To counter rising food and labor costs, the company plans to raise prices by 3% for the full year.
“Obviously, we will continue to look for pricing opportunities below inflation,” Lee said. “… and as inflation rises, we need to try to overcome it, which will be a combination of pricing and productivity initiatives.”
The company also narrowed its earnings outlook for 2022. Its sales forecast is now $ 9.55 billion to $ 9.62 billion, compared to the previous range of $ 9.55 billion to $ 9.7 billion.
Read the full earnings report here.