Darden Restaurants Inc. said diners are watching how much they spend on alcohol, particularly at the company’s high-end chains.
(Bloomberg) — Darden Restaurants Inc. said diners are watching how much they spend on alcohol, particularly at the company’s high-end chains.
Eddie V’s Prime Seafood and the Capital Grille steakhouse posted a decline in same-restaurant sales from a year ago in the quarter ended May 28, while analysts were expecting growth. The weaker results are in part because of a comparison to a surge in sales in 2022 as the industry recovered from the omicron wave of Covid-19, Darden executives said Thursday on a call with analysts.
As demand levels off from the post-pandemic surge, alcohol is one area restaurant goers are keeping an eye on as they try to manage the size of their tabs, Chief Executive Officer Rick Cardenas said.
“There was probably a little bit of euphoria” spending last year, Cardenas said.
US consumers’ ability to spend is in focus as the country’s economy shows signs of softening. Inflation-adjusted spending in restaurants fell in the 12 months ended in May for the first time since 2021, suggesting that demand is leveling off after the pandemic-reopening boom. A faster moderation in inflation for groceries than for food away from home is likely also denting demand for dining out.
The company’s outlook for the year ending May 2024 assumes negative customer traffic, though Cardenas said he expects the firm to fare better than the industry. Darden also owns casual-dining restaurants LongHorn Steakhouse and Olive Garden, its biggest brand by sales.
Darden’s shares fell 1.4% at 11:05 a.m. in New York, bringing the company’s advance to 19% this year. The S&P 500 Restaurants Industry Index rose 11% during that period.
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