Darden Restaurants stock jumps following Q1 earnings

(Updated - September 19, 2024 9:45 AM EDT)

Darden Restaurants, Inc. (NYSE:DRI ) reported first-quarter fiscal 2025 results that missed analyst expectations but saw its stock jump as the company maintained its full-year outlook and noted improving sales trends. In a separate release, DRI also said it has entered into an exclusive multi-year delivery partnership with Uber, set to begin with Olive Garden in late 2024.

At the time of writing, DRI shares are up over 6% on Thursday, shortly after the open.

The parent company of Olive Garden and LongHorn Steakhouse posted adjusted earnings per share of $1.75, below the consensus estimate of $1.84. Revenue came in at $2.8 billion, slightly under the $2.81 billion analysts expected but up 1% YoY.

Darden's total sales growth was driven by 42 net new restaurant openings, which offset a 1.1% decline in blended same-restaurant sales. LongHorn Steakhouse was a bright spot with 3.7% same-restaurant sales growth, while Olive Garden saw a 2.9% drop.

"While we fell short of our expectations for the first quarter, I firmly believe in the strength of our business," said Darden President & CEO Rick Cardenas. He noted that sales trends have improved since July's "significant step down in traffic."

The company reiterated its fiscal 2025 outlook, projecting earnings per share of $9.40 to $9.60. This guidance excludes impacts from the pending Chuy's acquisition.

"The significant step down in traffic during July, led to our first quarter earnings being lower than expected," said Darden CFO Raj Vennam. "Following the softness in July, our sales trend has continued to improve. Considering this recovery as well as the planned initiatives to support the remainder of the fiscal year, we are reiterating our guidance for fiscal 2025."

Darden repurchased $172 million of stock during the quarter and declared a quarterly dividend of $1.40 per share.

Following the report, analysts at Bank of America said that "while DRI posted a comp miss (-1.1% vs ++0.4%/+0.5% BofAE/VA consensus), the underlying dynamics were consistent with prior quarters."

"Revenue ($2.76bb vs BofAE/VA consensus $2.82 bb/$2.81bb) was light, but we think the signals from high frequency data intraquarter suggest the market likely anticipated at least the OG miss," the bank added.

Barclays said it expected DRI shares to outperform following the results. The bank highlighted three positives: The company's comps improving since July, its F25 guidance being reiterated and the separate announcement that Darden is to partner with Uber.

Meanwhile, analysts at Stephens stated: "We believe most of the casual segment could see some pressure this morning given the softer results seen at OG & Fine Dining. This softness was partially offset by healthy results at LH as the value steakhouse category continues to show strength."

Source: Investing.com