Darden Restaurants today reported that it anticipates lower earnings for the third quarter, ending February 23, 2014, citing diminished sales and higher direct costs associated with more severe winter weather.  

The company also estimates that legal, financial advisory, and other costs associated with implementation of its strategic action plan—announced in December 2013—reduced third-quarter revenues.

Only LongHorn Steakhouse is ending on an up note, showing an increase of 0.3 percent for same-store restaurant sales for the third quarter. Olive Garden and Red Lobster registered declines of 5.4 percent and 8.8 percent, respectively.

LongHorn Steakhouse recovered from a 3.0 percent decline in December, registering an increase of 2.1 percent and 2.2 percent in January and February, respectively.

Olive Garden’s December sales fell 10.5 percent, January sales 2.0 percent, and February sales 2.6 percent.

Red Lobster recorded double-digit declines in all three months, with December showing a 12.2 percent drop.

The weather took its toll on all three concepts, as restaurant traffic declined. Only LongHorn Steakhouse posted an increase, of  0.7 percent in January. In December and February traffic declined.

Olive Garden and Red suffered declines in restaurant visits all three months. In December, Olive Garden recorded its largest drop, at 12.9 percent. Red Lobster had its largest fall in visits in January, declining 18.7 percent.

Darden estimates that blended U.S. same-restaurant sales for the third quarter for its Specialty Restaurant Group will be down approximately 0.7 percent.

The company cites the harsh winter weather and the adverse effect of a shift in the Thanksgiving holiday week (which occurred in this year's fiscal third quarter and in last year's fiscal second quarter) for its earnings woes, noting that excluding these two events, its same-restaurant sales for the third quarter would have climbed approximately 2.9 percent at LongHorn Steakhouse, and shrunk around 2.8 percent at Olive Garden and 6.2 percent at Red Lobster. Sales for the Specialty Restaurant Group would have then climbed approximately 1.9 percent.

The company also reaffirmed its previous earnings outlook for fiscal year 2014, due in part to greater than anticipated progress in implementing its cost management initiatives, which helped to offset the impact of the severe winter weather and other topline challenges in the third quarter.

"Adjusting for weather and the Thanksgiving holiday shift, we had solid results at LongHorn Steakhouse and our Specialty Restaurant brands," says Clarence Otis, Darden chairman and CEO.  “At Olive Garden, we had a particularly difficult December, but same-restaurant sales results improved during the balance of the quarter, when they were consistent with results for the casual dining industry overall.”

Otis reports he is encouraged by developments at Olive Garden, pointing to the release of the concept’s new menu with enhanced offerings, introduced on February 24th.

Efforts to spin or sale off Red Lobster continue, with management working “diligently to complete the separation and to implement the other elements of our comprehensive plan to address changing industry dynamics, leverage the company's position as the premier casual dining restaurant company, enhance guest experiences, and reinvigorate performance,” says Otis.

Casual Dining, Chain Restaurants, Finance, Industry News, LongHorn Steakhouse, Olive Garden, Red Lobster