Shares of Darden Restaurants tumbled yesterday after same-store sales at Red Lobster and LongHorn Steakhouse dropped, causing the country's largest casual-dining company to forecast a softer-than-expected fiscal first-quarter profit. Shares fell $4.01, or 12 percent, to $28.25, but remain up about 15 percent so far this year.
The Orlando, Fla., company also cut its full-year profit outlook and said that while preliminary first-quarter U.S. same-store sales at Olive Garden rose 2.4 percent, they slipped 3.7 percent at Red Lobster and 4.9 percent at LongHorn Steakhouse.
Due to the economic downturn and high fuel prices, consumers are tightening their purse strings and eating out less frequently.
UBS analyst David Palmer said Darden is likely to post weak same-store sales for the next six months to a year as rising commodity costs pressure earnings.
"The new news for Darden and other restaurants is slowing industry same-store sales as year-over-year unemployment increases ramp up and the impact of tax rebates diminishes," Palmer wrote in a client note.
