Darden (DRI) continues to struggle on weakness at its Olive Garden chain, and is also being hit by higher costs. Those factors helped push Darden’s second quarter results 29% below last year’s results. Shares fell 2% in morning trading.
Darden posted 41 cents of EPS from continuing operations, in line with expectations. The company had predicted EPS of 41 cents from continuing operations last week, which was well below expectations at the time for 54 cents. Revenue met expectations, but the company’s gross margin fell to 25.4% from 28.7% as food and beverage costs jumped 16%. Same restaurant sales fell 2.5% at Olive Garden.
“As we previously announced, strong sales growth this quarter at Red Lobster, LongHorn Steakhouse and our Specialty Restaurant Group was offset by below expectation sales results at Olive Garden, pressure on check averages as guests continue to be cautious about spending and unfavorable year-over-year food costs,” said Chairman and CEO Clarence Otis. “To rebuild its value leadership position in the industry, Olive Garden is developing new promotional and core menu offerings and new advertising and is focused on remodeling its older restaurants.”
Correction: An earlier version of this article stated incorrectly that Darden earned 40 cents per share from continuing operations.
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