Shares of Darden Restaurants (DRI) traded lower on Tuesday following a warning by the company's chief executive that rising gas prices may increase costs and hurt diner demand, threatening the restaurant industry’s recovery.
The Orlando, Fla.-based operator of Red Lobster, Olive Garden and LongHorn Steakhouse chain restaurants, revealed late Thursday stronger-than-expected 13% improvement in third-quarter profit.
But the company warned that the economic environment remains “more fragile than normal,” reiterating its outlook for food cost inflation of 3.5% to 4% by February 2012.
During the latest period, Darden revealed an unexpected decline in the number of diners visiting its more established Olive Garden restaurants, which it blamed on unsuccessful promotions.
Despite the warning though, the company stood by its forecast that restaurants open at least 14 months will improve between 1.5% and 2% for the fiscal year ending in May.