Olive Garden owner Darden Restaurants (NYSE: DRI ) reported Q4 and full-year earnings Friday. The news was not good.
Sales at the company that runs not only Olive Garden, but the Red Lobster and LongHorn Steakhouse chains besides, grew 11% in the final quarter of fiscal 2013. That didn't keep profits from heading the other way, however -- down 12% year over year, to $1.15 per diluted share. Thus continued Darden's year-long slump, which has seen fiscal 2013 profits fall an equal 12% in comparison with fiscal 2012. Darden ended fiscal 2013 with just $3.14 per diluted share in profits.
Among Darden's several chains, Olive Garden posted the weakest same-restaurant sales, with receipts growing only 1.1% in the quarter as compared with a year ago. Red Lobster did nearly three times better than that at 3.2%. Meanwhile, shoppers who could still afford to buy steak helped lift LongHorn to the best performance of all, with sales climbing 3.5%.
Grin and bear it
Darden did its best to put a bright face on the numbers. CEO Clarence Otis took pains to point out that at least Darden's same-restaurant sales are growing, and "well above industry average" this quarter. He's right about that. If Darden's sales look weak this week, then the numbers coming out of rivals Bloomin' Brands (NASDAQ: BLMN ) and Brinker (NYSE: EAT ) -- growth of just 3.5% and 0.1%, respectively -- are downright depressing.
This being the case, Otis' warning that this year's economy will look a lot like last year's -- "slow and uneven" -- doesn't bode well for anyone. Darden predicts fiscal 2014 same-restaurant sales growth of no more than 2%, and perhaps as little as zero. Counting all stores, new and old, plus Darden's new Yard House restaurants, total sales growth could climb as high as 6% to 8%.
Then again, even 11% total sales growth couldn't keep earnings growing last year.
Adding insult to injury, Darden warned Friday that "projected costs associated with the next phase of implementation of the Affordable Care Act" -- Obamacare -- are likely to weigh on this year's results. When all's said and done, we're probably looking at earnings down a further 3% to 5% from 2013's already weak levels -- perhaps as low as $2.98 per share.