By Dean Seal

Darden Restaurants recorded higher sales and earnings in the winter quarter as it expanded its footprint and lured cost-conscious diners with popular menu items.

The restaurant operator said Thursday that comparable sales were up slightly for the quarter ended Feb. 23 despite tougher weather conditions. A small gain at Olive Garden and a bigger one at LongHorn Steakhouse more than offset declines at its fine dining chains and other businesses.

Waning consumer confidence hasn't yet translated to material changes in spending, at least at casual dining restaurants, Chief Executive Rick Cardenas said on a call with analysts.

Lower-income consumers have been feeling more pressure, the CEO said. But for the time being, consumers whose wages are outpacing inflation still look to casual dining as a way to treat themselves, particularly if they feel like they're getting a good deal, he said.

"We still think that consumers want to splurge on something, and they splurge on things that they get a great value for and they get a great experience on," Cardenas said. He then warned that "it doesn't mean that that won't change in the future."

The CEO said Darden is trying to emphasize value in its marketing to appeal to core guests and value seekers. Next week, Olive Garden is bringing back its "buy one, take one" entree deal for the first time since the pandemic in an effort to drive traffic. Darden is aiming for comparable sales to rise 3% in the current quarter, Chief Financial Officer Rajesh Vennam said on the call.

Shares jumped 7.5% to $202.22 in morning trading.

For the third quarter, Darden posted a profit of $323.4 million, or $2.74 a share, up from $312.9 million, or $2.60 a share, in the same quarter a year earlier.

Stripping out one-time items, adjusted earnings were $2.80 a share, directly in line with the consensus estimate of analysts polled by FactSet.

Sales rose 6.2% to $3.16 billion, missing analyst forecasts for $3.21 billion, according to FactSet.

A big part of the gain came from Darden's acquisition of the Chuy's Tex-Mex chain, which was completed in October and included 103 locations, as well as 40 net new restaurants compared with the year-earlier quarter.

Third-quarter same-restaurant sales were up less than a percentage point. Analysts had been looking for a 1.6% gain, according to FactSet. Multiple analysts said in recent days that investors were prepared for a miss on comparable sales after bad weather conditions, a challenging flu season and softer consumer spending translated to sloppy industry data for January and February.

Darden's sales momentum was largely driven by strong menu additions that were well advertised, Cardenas said, pointing to Olive Garden bringing back fan-favorite menu items including Steak Gorgonzola Alfredo, Stuffed Chicken Marsala and two manicotti dishes.

Marketing is now a lower percentage of sales than it was before the pandemic as Darden focuses promotions on menu items that it already had or previously featured, rather than new items, to simplify operations for its restaurants, the CEO said.

"I don't think we've had any promotional items that aren't something that's in our pantry in the last couple of years," he said.

The company has also narrowed its outlook for adjusted earnings, which exclude about $47 million pretax of transaction and integration-related costs tied to the Chuy's deal, to a range of $9.45 to $9.52 a share for the fiscal year that concludes at the end of this quarter. They were previously estimated at $9.40 to $9.60 a share.

Write to Dean Seal at dean.seal@wsj.com

(END) Dow Jones Newswires

March 20, 2025 11:38 ET (15:38 GMT)

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