Darden reports a slowdown in fine dining: ‘I think this segment will remain strong’

Darden Restaurants Inc (NYSE: DRI) is slightly in the red this morning even though it reported a strong fourth quarter and issued upbeat future guidance.

Why is Darden stock down today?

Investors are still disappointed because the company said its comparable sales in the fine dining segment came in down 1.9%. Still, Anastasia Amoroso – the Chief Investment Strategist at iCapital said on Yahoo Finance Live:

Darden suggests there’s some weakness in fine dining. But big macro picture is that consumer has a job and is getting paid more. That discretionary spending power is still very much for the consumer.

Olive Garden, the business that makes up about 45% of Darden’s overall sales noted a 4.4% annualised growth in same-store sales versus 5.0% expected.

Darden stock is still up more than 15% for the year.

Darden Restaurants’ future guidance

For fiscal 2024, Darden Restaurants now forecasts between $8.55 to $8.85 of adjusted per-share earnings on up to $11.6 billion in revenue, as per the earnings press release.

In comparison, analysts were at $7.96 per share and $11.17 billion, respectively. iCapital’s Amoroso added:

There’s $1.5 trillion of excess savings consumers still have. [Their] balance sheets, cash flows are in good shape. They’re continuing to prioritise spending on food and drinking. I think this segment will remain strong.

The restaurant operator also raised its quarterly dividend on Thursday to $1.31 a share – an 8.0% year-on-year increase. Wall Street currently has a consensus “overweight” rating on the food stock.

Notable figures in Darden’s Q4 earnings report

• Earned $315.1 million versus the year-ago $281.7 million
• Per-share earnings also climbed from $2.58 to $2.24
• Revenue jumped 7.0% year-on-year to $2.77 billion
• Consensus was $2.54 a share on $2.77 billion revenue

On Thursday, Darden Restaurants said Eugene I. Lee Jr. – its Chairman and former CEO will retire at the 2023 annual meeting. Last week, the Orlando-headquartered firm completed its acquisition of Ruth’s Chris Steak House (read more).