Darden Restaurants (DRI) Q2 2021 profit beats, sales decline

Customers arrive at an Olive Garden location in San Antonio, Texas.

Callaghan O’Hare | Bloomberg | Getty Images

Darden Restaurants reported quarterly sales on Friday that fell short of analysts’ expectations as another wave of pandemic food restrictions weighed on sales in the same store.

For the next quarter, Olive Garden’s parent company expects sales to deteriorate by 30% to 35%.

The company’s shares fell more than 1% in premarket trading.

The company reported for the quarter ended November 29th, versus Wall Street’s expectations, based on an analyst survey conducted by Refinitiv:

  • Earnings per share: 73 cents compared to 71 cents expected
  • Revenue: $ 1.66 billion versus $ 1.69 billion expected

The company reported net income of $ 96 million, or 73 cents per share, for the second quarter, compared to $ 24.7 million, or 20 cents per share, a year earlier. Analysts polled by Refinitiv expected earnings of 71 cents per share.

Net sales declined 19.4% to $ 1.66 billion, falling short of expectations of $ 1.69 billion. Sales of all brands in the same store decreased 20.6% in the quarter. Revenue was also impacted by the timing of Thanksgiving, which shifted from the third fiscal quarter to the second fiscal quarter this year.

Olive Garden, the jewel in Dardens portfolio, saw sales drop 19.9% ​​in the same store. LongHorn Steakhouse, which saw strong demand for its take-out, saw sales in the same store decline just 11.1%.

Dardens gourmet business, which also includes The Capital Grille, was hit hardest. The segment’s revenue in the same store decreased 31% for the quarter.

During the previous quarter’s earnings call, CEO Gene Lee said Darden needs states to relax its food restrictions in order to improve sales in the same business. Instead, the governors did the opposite when the number of new Covid-19 cases increased. About a quarter of Darden restaurants had their dining rooms closed by December 13, up from just 8% of locations in the week ending November 8.

During November and December, combined sales of Darden in the same store declined in turn as more states rolled back restrictions on personal dining and temperatures dropped. After falling just 23.4% for the week ending November 8, sales in the same store were down 36.9% for the week ending December 13.

For the third quarter of the financial year, Darden expects earnings per share from continuing operations of 50 to 75 cents. The company reiterated its full year guidance of 35 to 40 net new restaurants and total investments of $ 250 to 300 million.

Darden also said it would pay a dividend of 37 cents to shareholders on February 1.

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