Darden Falls on Food Inflation Forecast

ORLANDO ( TheStreet) -- Darden Restaurants ( DRI) beat fiscal third-quarter profit expectations but said that in still needs to offer promotions to draw in diners.

Darden, the operator of Red Lobster, Olive Garden and Longhorn Steakhouse restaurants, also reiterated its outlook for food cost inflation between 3.5% to 4% in fiscal 2012.

The company also warned that the U.S. restaurant industry remains under pressure as the economy works to recover, meaning diners remain reluctant to go out and spend money at restaurants without promotions and deals to entice them.

Those cautionary statements led investors to bid Darden shares 2.6% lower to $46.78 Friday morning despite its earnings beat.

Fewer-than-expected diners visited Olive Garden restaurants open at least 14 months last quarter as some of its promotions did not have the strong pull on diners Darden had hoped for. Olive Garden sales account for nearly half of the company's net revenue.

"The environment, while improving, remains more fragile than normal and it's very much driven by promotional effectiveness," CFO Brad Richmond told analysts on a conference call.

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