(Reuters) -Darden Restaurants forecast annual same-store sales above estimates after strong quarterly results on Friday, banking on demand driven by food delivery and advertising efforts at its casual dining chains such as Olive Garden. The company also announced a new $1 billion share repurchase program and revealed plans to explore strategic alternatives for its Bahama […]
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Darden expects strong annual sales, posts upbeat quarter on casual dining demand
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(Reuters) -Darden Restaurants forecast annual same-store sales above estimates after strong quarterly results on Friday, banking on demand driven by food delivery and advertising efforts at its casual dining chains such as Olive Garden.
The company also announced a new $1 billion share repurchase program and revealed plans to explore strategic alternatives for its Bahama Breeze brand.
Casual dining and fast casual restaurant chains, including Olive Garden and Shake Shack, have benefited from menu innovations and promotions to entice customers, unlike fast food chains including McDonald’s and Domino’s Pizza, which struggle with persistent demand weakness.
Consumers are willing to spend their hard-earned money on casual dining, and “we think we’re taking some wallet share from fast food and fast casual,” CEO Rick Cardenas said on the post-earnings call.
Darden expects annual same-store sales to grow in the range of 2% to 3.5%, midpoint of which is above analysts’ estimates of 2.64%, as per data compiled by LSEG.
Initiatives such as home deliveries with the help of Uber Direct and “buy one, take one” offerings at Olive Garden have further helped the restaurant chain operator.
Its consolidated same-store sales were up 4.6% in the quarter compared to a year ago, with Olive Garden sales rising 6.9%.
Shares of the company were up 1% in early trading.
Cardenas said options for Caribbean cuisine restaurant Bahama Breeze include a possible sale or conversion to other Darden brands.
This move comes as the company, similar to other consumer-facing firms, looks to offload underperforming segments.
The company posted fourth-quarter sales of $3.27 billion, edging past estimates of $3.26 billion.
It logged adjusted profit of $2.98 per share for the quarter ended May 25, beating estimates of $2.97 per share, owing to moderate price hikes and lower input costs.
However, Darden forecast annual earnings per share between $10.50 and $10.70, compared with estimates of $10.75 per share.
(Reporting by Anuja Bharat Mistry in Bengaluru; Editing by Vijay Kishore)