Episode summary
Darden Posts Weak Outlook as Olive Garden Sales Disappoint
Bloomberg Intelligence
· · 7 min · Guests: Michael Halen
Summary
Michael Halen said Darden Restaurants’ quarter was solid overall, with strong same-store sales at LongHorn helped by a viral social media post about the return of parmesan crusted lamb chops. The bigger concern was not the reported quarter but the forward view: fiscal 27 guidance came in light on EPS, and he expects same-store sales to slow sequentially as the industry laps unusually strong comparisons from last summer.
He argued that Olive Garden’s weaker outlook is mostly a function of tough comps rather than a sudden loss of consumer traction. Darden benefited last year from rolling out third-party delivery with UberEats, and now Olive Garden has to compare against that boost. Michael Halen still expects Darden to outperform most casual dining peers, but he said the broader restaurant industry is decelerating this summer because low-income consumers remain under pressure.
On the macro side, he described restaurants as a sensitive “canary in the coal mine” for the U.S. economy. He said low- and middle-income consumers are still stretched by inflation and higher gas prices, while beef inflation should be somewhat more manageable than last year even as steakhouse demand remains resilient.
Key takeaways
- Michael Halen said Darden’s quarter was “pretty good,” but fiscal 27 EPS guidance was the main disappointment.
- He expects Olive Garden sales to slow as Darden laps last year’s boost from UberEats rollout.
- Michael Halen still thinks Darden will outpace most casual dining peers, including Olive Garden.
- He said low-income consumers remain strapped, making restaurant sales vulnerable to a summer slowdown.
- He expects beef inflation to rise early in the year, then ease as Darden laps strong inflation in the back half of last year.
Notable quotes
“The issue would really be, you know, two fold. Number one is their fiscal 27 guidance came in light on the EPs line”
“so now we have to lap those tough comps. We have tough base effects and especially so for Darden Brands”
“Restaurants are very, very sensitive. It really is a canary for canary in the coal mine, for the economy in the United States”
“And so for that reason the chain is going to see less beef inflation. The entire industry is going to see US beef inflation as the year goes on”
How the episode opens
Yeah. You know, it was a pretty solid, uh, report, you know? Um, they were able to drive pretty strong.
Same store sales, especially at Longhorn. Uh, you know, they had a social media post go viral about the return of, uh, their parmesan crusted, uh, lamb chops. Um, so all in all, it was a is a pretty good quarter.
The issue would really be, you know, two fold. Number one is their fiscal 27 guidance came in light on the EPs line. Right.
This company is known to to guide pretty conservatively so that that could be uh what's going on there. And the other thing is, you know, sales are going to slow sequentially. So sales are going to slow sequentially for everyone because the restaurant industry had a very good summer last year.
Um, so now we have to lap those tough comps. We have tough base effects and especially so for Darden Brands. So Darden Brands had a nice boost last year from rolling out um third party delivery with UberEats.
And now that they're going to lap it, especially Olive garden, um, sales are going to slow. So Michael, they also own Ruth's Chris Steakhouse. You mentioned Longhorn, but what is happening at Olive garden?
We know that they've been trying to get things back on track, and they even were doing smaller portions. I think they're still doing that. That doesn't seem to be taking what what's going on?
Why can't they seem to gain traction with the consumer? Yeah. You know, I don't I don't necessarily feel that that's the case.
I mean, they had same store sales that were pretty strong, you know, um, last year. Right. Like, uh, it's basically part of the issue is, is their own success.
So last year Olive garden had a pretty good year.
From the episode’s captions: roughly the first two minutes, lightly cleaned. Keep watching on YouTube →
Topics
- restaurant earnings
- olive garden sales
- same-store sales
- industry outlook
- consumer demand concerns
Companies and tickers mentioned
- Darden Restaurants Inc.
Watch the episode
Watch “Darden Posts Weak Outlook as Olive Garden Sales Disappoint” on YouTube
Summary, takeaways and quote selection by Octagon. Quotes are short excerpts; the full conversation is in the episode.
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