Darden falls short of sales estimates as fine dining takes a backseat

(Reuters) – Olive Garden owner Darden Restaurants on Friday forecast annual same-store sales largely below estimates and missed Wall Street expectations for second-quarter revenue as its fine dining business remained under pressure.

Shares fell about 2% in premarket trade as the fine-dining segment, with brands like Capital Grille and Ruth Chris, extended a weak run due to its higher-income customers leaning toward spending on experiences such as luxury travel.

Same-store sales at the business declined 1.7% in the second quarter, compared to a rise of 5.9% a year earlier.

Darden now expects annual same-store sales to increase in the range of 2.5% to 3%, compared with prior expectations of 2.5% to 3.5% growth. Analysts were expecting a 3.04% rise.

Meanwhile, quarterly same-store sales at its Olive Garden business beat expectations, largely fueled by limited promotions on its menu items and the relaunch of Never Ending Pasta Bowl.

Total sales rose to $2.73 billion in the second quarter but missed the average analyst estimate of $2.74 billion, according to LSEG data.

However, higher menu pricing and easing labor and ingredients costs helped Darden top second-quarter profit expectations and lift its annual earnings target.

Second-quarter adjusted profit of $1.84 per share topped market estimates of $1.74.

The LongHorn Steakhouse owner expects annual adjusted profit in the range of $8.75 to $8.90 per share, compared with its prior forecast of between $8.55 and $8.85.

(Reporting by Anuja Bharat Mistry and Juveria Tabassum in Bengaluru; Editing by Pooja Desai and Sriraj Kalluvila)