Shares of Darden Restaurants (DRI) tumbled 10% Tuesday after the parent of Red Lobster and the Olive Garden warned its fiscal second-quarter earnings will badly miss Wall Street’s expectations due to heavy promotions.

In addition to its gloomy quarterly outlook, Darden, which also owns the Longhorn Steakhouse chain, downgraded its full-year targets below forecasts.

The Orlando-based company now sees second-quarter EPS of 25 cents to 26 cents. Excluding one-time items, that translates to quarterly EPS of 31 cents to 32 cents, which compares poorly with the Street’s view of 47 cents. 

Management warned that U.S. same-restaurant sales at Red Lobster, Olive Garden and Longhorn are expected to drop 2.7%. Comparable sales at Olive Garden alone are expected to retreat 3.2%.

“Promotions did not resonate with financially stretched consumers as well as newer promotions from competitors. Our disappointing results for the quarter point to the need for bolder changes in the promotional approach at our three large brands,” CEO Clarence Otis said in a statement.

Meanwhile, Darden cut its fiscal 2013 EPS view to $3.29 to $3.49. Even the high end of that new range would badly trail consensus calls from analysts for $3.88.

Darden said total sales are expected to rise 7.5% to 8.5%, but U.S. same-restaurant sales are seen at flat to down 1% for the three leading chains.

Otis said Darden is being “cautious” about its full-year guidance due in part to efforts to retool the promotional calendars at its restaurants.

He also said the outlook reflects “the potential impact” of recent negative media coverage on how Darden might accommodate health-care reform.

Darden is “committed to accommodating healthcare reform in ways that work for our employees and guests,” Otis said.

Wall Street punished Darden for its negative outlook, driving the company’s shares down 10.44% to $46.94 in recent trading. The selloff could halve Darden’s 2012 gain of about 15%.

Full quarterly results from Darden are scheduled to be released on December 20.

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