Darden's Weak Sales Weigh On Other Dining Chains
2009年9月30日 - 11:46PM
Dow Jones News
Darden Restaurants Inc. (DRI) shares sank on a disappointing
sales outlook and weighed down other casual dining stocks as it
pushed hopes of a recovery further down the road.
Darden shares were off $3.33, or 9.2%, in early trading, falling
to $32.82. Other decliners include Brinker International Inc.
(EAT), down 4.8% to $15.11, DineEquity Inc. (DIN), down 5.1% to
$24.46, and Cheesecake Factory Inc. (CAKE), down 5.4% to
$18.55.
Darden, which operates Olive Garden, Red Lobster and other
brands, relied on falling food and energy prices, and other cost
cutting efforts to narrowly top analyst estimates when it reported
a 15% rise in fiscal first-quarter earnings Tuesday, but investors
are craving signs of improving sales.
Darden disappointed in that respect, reporting same-store sales
declining 5.3% at Olive Garden, Red Lobster and Longhorn
Steakhouse, its three major brands, more than expected and the
company said same-store sales could fall as much as 3% for the
fiscal year, one percentage point worst than expected.
Most restaurants are close to lapping most of the cost cuts that
they made in the last year, as they cut back the number of hours
employees work and tried to better manage food waste. To grow
earnings, sales will have to make a comeback, but unemployment woes
continue to weigh on the consumer. Darden executives expect
September sales to remain similar to August at its three main
brands, similar to the broader industry.
"As long as there's meaningful job loss, it's going to be a drag
on consumer sentiment," Darden's Chief Financial Officer Brad
Richmond said on Wednesday's earnings call.
The casual-dining industry has also grown increasingly
promotional, cutting prices and offering deals to bring back
customers. Darden tried to stay out of that fray, limited its main
promotions to the Olive Garden brand in the latest quarter.
Executives said they would try more traffic-driving promotions
at Red Lobster and Longhorn in other quarters when its most
appropriate, but the company is not going to low-ball competitors
offers, as those customers are unprofitable.
"Some of the traffic that's available is not worth having in the
stores," Chairman and Chief Executive Clarence Otis said.
The chain reiterated full-year earnings guidance, but said it
was more likely to be in the low end of the range.
Analysts still largely consider Darden the marquee stock among
casual-dining names, with their differentiated brands that allow
them to avoid discounts to stand out. Sales also continue to
outperform the casual-dining industry as Darden brands pick up
market share.
-By Paul Ziobro, Dow Jones Newswires; 212-416-2194;
paul.ziobro@dowjones.com