Olive Garden Parent Suffers 28% Slide in Profits

Darden Restaurants (NYSE:DRI) disclosed on Friday an in-line 28% drop-off in fiscal second-quarter profits due to deteriorating sales at its Olive Garden restaurants.

Orlando-based Darden, which also owns Red Lobster and LongHorn Steakhouse, said it earned $53.7 million, or 41 cents a share, last quarter, compared with a profit of $74.5 million, or 54 cents a share, a year earlier. Those results matched estimates from analysts.

Overall revenue increased 6.1% to $1.83 billion, also matching the Street’s view.

Darden, which is the largest full-service restaurant company, said same-store sales at its U.S. restaurants gained 1.8%, highlighted by 6.8% growth at Red Lobster and a 6% gain at LongHorn.

However, Darden’s results continue to be held back by its struggling Olive Garden business, which suffered a 2.5% contraction in same-store sales.

“Strong sales growth this quarter at Red Lobster, LongHorn Steakhouse and our Specialty Restaurant Group was offset by below expectation sales results at Olive Garden, pressure on check averages as guests continue to be cautious about spending and unfavorable year-over-year food costs," CEO Clarence Otis said in a statement.

The comments come 10 days after Darden axed its 2012 financial projections and issued a disappointing forecast for the current quarter due to the slumping Olive Garden.

"To rebuild its value leadership position in the industry, Olive Garden is developing new promotional and core menu offerings and new advertising and is focused on remodeling its older restaurants,” Otis said.

Darden, which employs 180,000 people through its 1,900 restaurants, said on Friday it still sees fiscal 2012 combined same-store sales rising 2% to 3%, translating to a 4% to 7% increase in earnings.