Darden Restaurants saw its same-store sales slip at its fine dining locations amid consumers’ concerns about inflation and the job market.
Rick Cardenas, president and CEO at Darden Restaurants, said Thursday (June 20) that those concerns are greatest among consumers with incomes below the median household income of $75,000 and especially among those with incomes below $50,000.
Darden’s transactions with these consumers were lower in the fourth quarter than they were a year earlier, Cardenas said during the company’s quarterly earnings call held Thursday.
“These impacts were even greater in our fine dining brands, so that’s why you saw fine dining had a more negative comp than others,” Cardenas said.
During the fourth-quarter and fiscal year ended May 26, same-store sales at the company’s fine dining restaurants were down 2.6%, those at Olive Garden were down 1.5% and those at its other businesses were down 1.1%. LongHorn Steakhouse was the company’s only brand that saw a gain, with a 4.0% increase, Darden Restaurants said in a Thursday (June 20) earnings release.
The same-store sales figures for the company’s fine dining segment include The Capital Grille. They do not yet include the Ruth’s Chris Steak House restaurants that Darden acquired in June 2023, according to a presentation released Thursday.
The company-owned Ruth’s Chris stores will be added to those figures after Darden has owned them for 16 months, according to the presentation.
While the company’s same-store sales were flat overall, they outpaced the industry by 80 basis points, Darden Chief Financial Officer Raj Vennam said during the earnings call.
“Olive Garden guest count growth was near the top quartile of the industry and LongHorn Steakhouse was at the top decile of the industry,” CFO said. “This is impressive when you consider the increased levels of discounting and promotional activity by some competitors within casual dining.”
Looking ahead, across all its brands, Darden expects to see same-store sales growth of 1.0% to 2.0% in fiscal 2025, according to the release.
This guidance takes into account the weaking gross domestic product (GDP) growth expected by most economists, Vennam said during the earnings call.
“We started to see a little bit more weakness in the back half of the fiscal year, so we’re taking that into consideration as we look at next year,” Vennam said.
Cardenas said during the call that consumers have been focused on the high prices they’ve seen everywhere — not just in restaurants — and that those costs have impacted their discretionary spending.
“So, if inflation in the non-discretionary gets better, that may give them a little bit more discretionary,” Cardenas said.
