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Darden Restaurants (DRI+5.67%) shares soared as executives’ optimism about future demand outweighed mixed earnings for the last quarter, when two of the company’s flagship brands — Olive Garden and Longhorn Steakhouse — grew less than expected.
“Even if [consumers] say they’re feeling less optimistic, we haven’t seen a huge correlation between that and dining out,” CEO Rick Cardenas said on Thursday’s earnings call. “As incomes are going up and outpacing inflation, I think they’re likely to keep spending.”
In an environment where retailers like Walmart (WMT-0.37%) and Target (TGT-0.35%) are flashing warning signs that consumers aren’t spending, any words from a chief executive indicating continued demand sparks a rally. The stock gained 5.8% as of about 11:40 a.m. in New York, bringing its gain so far this year to 6.8%.
Last quarter wasn’t stellar: Darden’s total same-store sales rose 0.7%, less than the 1.7% increase projected by analysts, with growth of 0.6% at Olive Garden and 2.6% at Longhorn Steakhouse both short of expectations. Ruth’s Chris comparable sales fell, amid some softness in Darden’s luxury brands.
Net sales rose 6.2% to $3.16 billion, fueled largely by the addition of the Chuy’s restaurant chain to its portfolio.
Olive Garden is bringing back its Never Ending Pasta Bowl and its “buy one, take one” promotions, which have historically been big traffic drivers, Cardenas said. Darden is pleased with the rollout of Uber Direct (UBER+1.54%) to all Olive Garden locations, and is testing the service at the Cheddar’s chain.
Longhorn may continue to be a bright spot, according to Placer.ai, which said weakness in February was probably weather related as there was a strong rebound during the final week of the month.