NEW YORK (TheStreet) -- Fewer consumers were shopping at malls this summer and it seems that fewer customers were eating at full-service restaurants like Olive Garden and Red Lobster.
Darden Restaurants (DRI), the restaurants' parent company, reported disappointing fiscal first-quarter earnings, fueled by lower same-restaurant sales at its two largest concepts.
Darden reported Friday net income from continuing operations fell 37% to $70.3 million, or 53 cents a share. Estimates were calling for earnings of 70 cents a share from the Orlando-based company, according to Yahoo! Finance.
Darden's first quarter ended on Aug. 25.Shares were falling 3.5% to $47.57 soon after the market opened Friday. Sales rose 6.1% to $2.03 billion from the year-earlier period but they were softer than analysts' expectations of $2.2 billion. Darden blamed a 3.3% decline in same-store restaurant sales from Olive Garden, Red Lobster and LongHorn Steakhouse compared to last year. In addition to its three largest brands, Darden's Specialty Restaurant Group owns concepts such as The Capital Grille, Bahama Breeze, Eddie V's and Yard House. The company said it plans to reduce annual spending by about $50 million through work force reductions and program spending cuts. For fiscal 2014, the actions will reduce spending by $25 million, offset this year by $10 million in upfront costs related to implementing the plan. Darden also announced that is Chief Operating Officer Drew Madsen will retire in November, following the company's second quarter. Madsen will be succeeded, effective immediately, by Gene Lee, who currently serves as president of Darden's Specialty Restaurant Group. Darden said it continues to expect diluted net earnings for the year to decline between 3% and 5%. "Following our industry's pronounced spikes up and down in same-restaurant sales last winter and spring, the results this summer are further evidence that we can expect sharper sales volatility as the slow and uneven recovery in the economy persists," Chairman and CEO Clarence Otis said in the earnings statement. The company saw improvement in restaurant sales in August. "Still, like the rest of the quarter, August was a challenging month on an absolute basis and we have to be prepared for consumers to continue to be cautious in their spending," Otis said. -- Written by Laurie Kulikowski in New York.
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