American consumers are finally back to eating out. A strong forecast from an industry giant shows that, at least for now, the “reopen” trade is still on the menu.
Wall Street gave its compliments to the chef on Thursday morning, as Darden Restaurants reported fiscal third-quarter results. While sales were down sharply from a year earlier for the quarter, which ended in February, there is clear evidence that the coronavirus crisis is abating. For the week that ended Sunday, sales grew by 5.7% at the company’s Olive Garden restaurants from the same period two years ago. Comparable sales at its LongHorn Steakhouse rose 23.2% over that same period.
What’s more, Darden gave strong guidance for its fiscal fourth quarter and reinstated its dividend and stock repurchase plans. Unsurprisingly, the stock jumped in morning trading. Shares have more than doubled over the past year.
While demand for an evening out is as high as ever after a year of lockdowns, investors should keep in mind that current stock prices reflect plenty of optimism.
Darden’s guidance for the current quarter ending in May calls for $2.1 billion in sales. It booked $2.35 billion in its final quarter before the pandemic arrived. Meanwhile, adjusted earnings guidance of $1.60 to $1.70 a share compares unfavorably to pre-pandemic levels of $1.90 a share, thanks to dilution from selling stock last year. Darden shares are nevertheless about 15% higher from February 2020.
