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(Bloomberg) -- Darden Restaurants Inc. shares rallied to a record after the Olive Garden-owner’s raised full-year sales outlook topped estimates, suggesting casual diners are eating out more.
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The stock gained as much as 18% to $188.82, the biggest jump since November 2020. Before today, the shares were down 2.7% this year. The company now expects fiscal 2025 sales of $12.1 billion, above the average analyst estimate of $11.9 billion and the company’s earlier projection. The financial outlook was updated to include results from Chuy’s, an acquisition it completed in October.
Second-quarter revenue of $2.89 billion was in line with estimates, while comparable sales of 2.4% topped expectations, lifted by Olive Garden and LongHorn Steakhouse’s higher-than-expected same-store sales growth.
“It looks like the consumer is starting to feel a little bit better than they were in prior quarters,” Chief Executive Officer Rick Cardena said on an earnings call. Visits from diners who make $50,000 to $100,000 a year are up, helping the restaurant operator’s casual dining brands. However, Darden has seen a pullback among diners making $150,000 or less, affecting fine-dining brands like The Capital Grille, Cardena said.
Demand is expected to return in 2025 after persistent inflation and weak consumer spending hurt the casual dining industry, according to Bloomberg Intelligence. Darden rolled out a delivery partnership with Uber Technologies Inc. last quarter. It also ran its “Never Ending Pasta Bowl” promotion at Olive Garden from mid-August to mid-November, four weeks longer than last year.
Third-quarter sales and earnings growth will be slower than the fourth quarter because the Thanksgiving holiday was in the third quarter this year, Chief Financial Officer Raj Vennam said on the call.
(Adds outlook details, company comments starting in second paragraph.)
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