The Olive Garden and LongHorn Steakhouse owner earned $2.05 a share, exactly what analysts expected, on revenue that fell $10 million short of forecasts. It reaffirmed its full-year guidance.
Darden Restaurants delivered almost exactly the quarter Wall Street had modeled. The stock fell anyway.
For its fiscal first quarter, the parent of Olive Garden and LongHorn Steakhouse reported earnings of $2.05 a share, matching analysts' forecasts. Revenue came to $3.20 billion, just shy of the $3.21 billion analysts had expected. The company reaffirmed its guidance for the full fiscal year.
Shares fell 6.6% in premarket trading on Thursday.
The size of the miss was small. A $10 million revenue shortfall on a $3.21 billion forecast is about 0.3%. Earnings landed on the number. The outlook did not change.
That leaves a gap between the report and the reaction. One explanation is that investors had positioned for a beat and a raise, so a quarter that only met forecasts disappointed relative to what was priced. A second is that the sector's backdrop has shifted enough that a reaffirmed outlook no longer reassures.
The industry context is difficult. McDonald's said this week that it expects customer traffic in its major markets to stay flat for years and described inflation as sticky. Operators surveyed by the National Restaurant Association reported losing more customers than they gained in all but one of the 12 months through July. Beef prices have nearly doubled over five years in McDonald's largest markets, and fuel costs remain elevated with Brent crude above $100 a barrel.
Darden's premarket decline also came on a morning when stock futures were under pressure from a bond selloff that pushed the 30-year Treasury yield to its highest since 2004.
The regular session is the first check on whether the premarket move holds. Beyond that, Darden's next report will carry more weight than usual. A reaffirmed guide is a promise about the rest of the year, and the second quarter will show whether Olive Garden and LongHorn traffic can hold up in the conditions McDonald's described.