Darden Restaurants, the parent of Olive Garden and LongHorn Steakhouse, reported fiscal fourth-quarter earnings that topped Wall Street's expectations, but softer-than-hoped sales at its flagship Italian chain and its fine-dining brands left investors unimpressed, sending the shares lower in premarket trading despite the profit beat.
For the quarter, the company posted adjusted diluted earnings of $3.66 per share from continuing operations, an increase of nearly 23% from a year earlier and a touch above the consensus estimate of around $3.64. Reported earnings came in at $3.54 per share, with the difference reflecting costs tied to restaurant closures, impairments and the integration of its Chuy's acquisition. An extra week of operations in the period contributed about $0.25 to the result, flattering the year-over-year comparison.
The reaction in the shares pointed to the market's focus on the underlying sales trends rather than the headline beat. Same-restaurant sales at Olive Garden, the company's anchor brand, rose 4.0% in the quarter, while its fine-dining segment, which includes higher-end names, grew just 1.2%. Both fell short of what analysts had been looking for, raising questions about momentum at the brands that matter most to the company's profitability, even as the broader portfolio held up. LongHorn Steakhouse was a standout, with same-restaurant sales climbing 7.2%.
For the full fiscal year, Darden delivered total sales of $13.21 billion, up 9.4%, helped by the extra week of operations, a blended same-restaurant sales increase of 4.5% and the contribution of dozens of net new restaurants. Adjusted full-year earnings rose 11.4%. The company also continued to return cash to shareholders, repurchasing $138 million of its stock during the quarter.
The mixed report underscores the balancing act facing large casual-dining operators. Darden has leaned on a multi-brand model and promotional levers to keep traffic flowing through an uneven consumer environment, but investors have grown sensitive to any sign that growth at the core brands is cooling, particularly with the stock having run up over the past year. The softer fine-dining figures also echo a broader theme of caution at the higher end of the dining market.
Darden operates a portfolio of full-service restaurant brands spanning Olive Garden, LongHorn Steakhouse, Yard House, Ruth's Chris Steak House, Cheddar's Scratch Kitchen, The Capital Grille and others. The company has been pruning parts of that lineup, including winding down one of its smaller brands, as it concentrates resources on its biggest growth engines.
The premarket decline in the shares reflects how a strong bottom line can be overshadowed by the metrics investors scrutinize most closely in the restaurant sector, namely same-restaurant sales and traffic trends that signal whether demand is sustainable. With the beat in hand but the top-line details under scrutiny, attention will turn to management's outlook for the new fiscal year and its commentary on consumer spending patterns across both its casual and upscale concepts, which will help shape how the stock trades from here.