Olive Garden's parent company, Darden Restaurants, saw its shares rise 8.5% on Thursday after the company reported a recent sales recovery from a summer slump and announced a new delivery partnership with Uber.
Darden reported weaker-than-expected profits on Thursday but reaffirmed its full-year outlook and said sales had improved since the quarter that ended Aug. 25.
“While the first quarter fell short of our expectations, I remain firm in the strength of our business,” CEO Rick Cardenas said in a statement. “I am confident in the steps all of our brand teams are taking to address our guests' needs, and we will not sacrifice the long-term health of our business for short-term gains.”
The company also announced an exclusive two-year deal with Uber Technologies Inc, overturning its previous aversion to third-party delivery services.
Customers can order Olive Garden favorites like pasta and breadsticks through the Olive Garden app, and the food will be delivered by Uber's network of drivers.
“Guests continue to show us they want a delivery option and are willing to pay for that convenience,” Cardenas said in a statement.
Food prices mirror in-store prices, and customers pay an average delivery fee of $7 per order. According to the Wall Street Journal:.
Before Thursday's gains, the company's shares had fallen 1.9 percent this year as the restaurant industry struggles to win back customers who are continuing to dine-in and saving money on dining out because of inflation.
Olive Garden's same-store sales fell 2.9%.
Like many fast-food restaurants, Olive Garden is banking on deals to attract customers, and the chain is bringing back its Neverending Pasta Bowl to the menu later this month.
“First-quarter profits were lower than expected due to a significant decline in traffic volume in July,” Chief Financial Officer Raj Vennam said in a statement.
“Following a weak July period, our sales trends continue to improve. Given this recovery and the initiatives planned to support the remainder of the fiscal year, we are reiterating our guidance for fiscal 2025,” Venham said.
Darden's fine-dining division, which includes Eddie V's and Capital Grille and will include the newly acquired Ruth's Chris Steak House next quarter, was hit hardest, with same-store sales falling 6%.
The company reported net income of $207.2 million, or $1.74 per share, up from $194.5 million, or $1.59 per share, a year earlier.
Darden reported adjusted earnings per share of $1.75, excluding costs related to its acquisition of Tex-Mex chain Chuy's, below LSEG analysts' expectations of $1.83 per share.
Darden reported sales of $2.76 billion, falling short of expectations of $2.8 billion.
Total sales increased 1%, but same-store sales for the same period were down 1.1%.
LongHorn Steakhouse was the only Darden business to report a same-store sales increase.
Same-store sales increased 3.7%. Casual-dining steak restaurants have been Darden's best performing businesses throughout the pandemic.
Darden in July bought Austin, Texas-based Chuy's Holdings Inc., a Tex-Mex chain with about 100 restaurants across the southern U.S., for about $605 million. The deal is expected to close next quarter.
Chuy's is Darden's first acquisition in two years. Acquires Ruth's Chris Steak House in June 2023 for approximately $715 million.
Darden reiterated its outlook for fiscal 2025. The company now expects earnings per share of $9.40 to $9.60 and net sales of $11.8 billion to $11.9 billion.
