Shares of Olive Garden parent Darden Restaurants rose 8.5% on Thursday after the company said sales had improved after a weak summer and announced a new delivery partnership with Uber.
Darden reported lower-than-expected earnings on Thursday, but it reaffirmed its full-year outlook and said sales have been improving since the quarter ended Aug. 25.
“Although we missed our expectations in the first quarter, I remain confident in the strength of our business,” CEO Rick Cardenas said in a statement. “I have full confidence in the actions all of our brand teams are taking to meet the needs of our guests in a way that doesn't compromise the long-term health of our business for short-term gains.”
The company also announced it had signed an exclusive two-year contract with Uber Technologies, ending its previous dislike of third-party delivery services.
Customers will be able to order Olive Garden favorites — like pasta and breadsticks — through the Olive Garden app. Uber's network of drivers will be used to deliver the meals.
“Guests have been asking us about home delivery options and they continue to show they are willing to pay for this convenience,” Cardenas said in a statement.
The prices of the dishes will be in line with in-store prices, and customers will be charged a delivery fee that will average $7 per order. According to the Wall Street Journal,
The company's shares had fallen 1.9% this year before Thursday's surge, as the restaurant industry struggles to win back inflation-stricken customers who are still eating at home and skimping on meals.
Olive Garden's same-store sales declined 2.9%.
Like many other fast-service restaurants, Olive Garden is turning to bargains to lure customers. Putting your never-ending pasta bowl back on the menu later this month.
“Our first quarter revenue was below expectations due to a significant decrease in traffic during July,” CFO Raj Vennam said in a statement.
“After a softening in July, our sales trend has continued to improve. Taking into account this improvement, as well as planned initiatives to support the remainder of the fiscal year, we are reiterating our guidance for fiscal 2025,” Vennam said.
Darden's fine dining segment — which includes Eddie Weis and The Capital Grille, and next quarter will include the newly acquired Ruth's Chris Steak House — suffered the most. Its same-store sales fell 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, last year.
Excluding costs related to its purchase of Tex-Mex chain Chuy's, Darden reported adjusted earnings of $1.75 per share — below LSEG analysts' expectations of $1.83 per share.
Darden announced revenue of $2.76 billion, below estimates of $2.80 billion.
While total sales increased 1%, same-store sales declined 1.1% during the same period.
LongHorn Steakhouse was Darden's only business that posted same-store sales growth.
Its same-store sales increased 3.7%. Casual dining steak restaurants were the top-performing restaurants for Darden during the pandemic.
Darden in July bought Austin, Texas-based Tex-Mex chain Chuy's Holdings, which has about 100 stores in the southern U.S., for about $605 million. The acquisition is scheduled to close in the next fiscal quarter.
Chuy's is Darden's second acquisition in two years, having Acquires Ruth's Chris Steak House in June 2023 for approximately $715 million,
Darden reiterated its guidance for its full fiscal year 2025. The company is forecasting earnings per share in the range of $9.40 to $9.60 and net sales in the range of $11.8 billion to $11.9 billion.
