By Steve Gelsi, MarketWatch
NEW YORK (MarketWatch) — Darden Restaurants Inc. tumbled 10% on Tuesday in its biggest one-day loss in a a year after the company warned it would fall short of Wall Street’s profit estimates as its recent meal-discount programs failed to fatten its bottom line.
The results drew at least one downgrade of the stock and bearish comments from a hedge fund that has taken out a short position on the company’s shares.
Darden (NYSE:DRI) , which operates Olive Garden and Ed Lobster eateries among others, said it expects adjusted second-quarter profit of 25 or 26 cents a share, below the analyst estimate of 46 cents a share in a survey by FactSet.
Shares of Darden fell $5.24 to $47.18 as the worst performer among components of the S&P 500.It’s the biggest move down for the stock since it fell 12% on Dec. 6, 2011, according to FactSet data.
S&P Capital IQ cut its rating on Darden to hold from buy.
“Besides a slow-growing economy, we believe DRI’s marketing campaign has not succeeded in rebuilding its brand,” analyst Jim Yin said in a note to clients. “Thus, we think traffic will stay weak, as consumers continue to shift toward lower-priced menu offerings. We also see margin pressure from rising commodity prices.”
In a statement, Darden Chief Executive Clarence Otis said promotions by the company were comparable to past plans but they “did not resonate with financially stretched consumers as well as newer promotions from competitors.”
He said the results for the quarter were “disappointing.”
November same-restaurant traffic at Olive Garden fell 4.8%, on top of an 8.2% drop in October. Red Lobster’s same-restaurant traffic dropped 3.3% in November and 6.1% in October.
Recently, Red Lobster offered a buy-one-get-one deal on Black Friday.
On Nov. 19, Darden announced the departure of its chief marketing officer, who left to become chief executive of Ruby Tuesday. A successor has not been named.
Howard Penney, managing director of Hedgeye Risk Management, said in a phone interview he took out a short position on Darden over the summer. Such an investment produces profits for investors if the stock price goes down.
He’s long on Yum Brands Inc. (NYSE:YUM) , Jack in the Box Inc. (NASDAQ:JACK) and Starbucks Corp. (NASDAQ:SBUX) , he said.
Darden should consider eliminating its dividend, he said.
“They can’t afford to do what they’re doing,” he said. “There seems to be no plan to fix it. It’s really a disaster.”
Red Lobster has been offering lunches for a roughly 60% discount of $7.99 and “it isn’t working,” he said.
In his Twitter feed, Penney said Darden, “can’t pay all its bills with more leverage” and added that its promotional efforts aren’t bearing fruit. He also said the drop in same-store traffic at Olive Garden “is a secular decline, not economic conditions.”
The Orlando, Fla., restaurant chain said it’ll book about 5 cents a share in second-quarter acquisition costs related to its purchase of Yard House, USA Inc.
Superstorm Sandy also impacted its second-quarter results by about a penny a share.
For fiscal 2013, Darden cut its adjusted earnings outlook to a range of $3.29 to $3.49 a share, which includes 10 cents a share in closing costs. Analysts estimated 2013 earnings of $3.87 a share. The company’s earlier outlook was $3.83 to $4 a share.
I’VE HEARD THAT EVEN FRIEDCHICKENLAQUESHA HAS CUT BACK TO THREE BUCKETS PER DAY
Persnickety says:
I still eat out a fair bit. Most chains have really slashed quality while raising prices moderately. The quality cuts have basically eliminated from consideration half the chains I would have eaten at 5 years ago – I’m not eating crap no matter how cheap. In the entire realm of chain restaurants the one and only that doesn’t seem to have cut quality, and has only raised prices somewhat, is Texas Roadhouse. Locally there is one restaurant I can think of that has not cut quality in the last 5 years, and their prices now are at 50-75% higher than they were 6 years ago. I guess I’m getting used to eating mostly at home… oh but it’s harder to get good, especially fresh, food at the local supermarket too. WTF, people. At least our garden is mostly reliable (except in this year’s drought, yeah…) and we still have our own chickens, and some remaining beef from the steers we raised two years ago.
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4th December 2012 at 1:48 pm
Yojimbo says:
Admin
Thanks for continuing to share your knowledge with us. I truly appreciate it.
I’ve been buying presents through your Amazon link, and I’m continuing the $10 monthly donation.
I’m still working on the billboard – It will happen sometime in the first quarter of 2013.
I hope as many of the flock wake up as soon as possible – but I doubt it.
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4th December 2012 at 1:49 pm
Administrator says:
Plus, Texas Roadhouse has those peanut shells all over the floor for atmosphere. We’ve eaten there twice in the last year and liked both meals.
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4th December 2012 at 1:59 pm
Administrator says:
Yojimbo
Thanks for your continued financial support. I think you account for 20% of annual TBP income.
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4th December 2012 at 2:00 pm
TeresaE says:
@Persnick
Great point. The quality of what many Americans are willing to shovel down their troughs is becoming more disgusting by the day. Followed the uptick in filth I noticed starting about a decade ago. “Back in the day” of the golden myopic decades of the 70s and 80s, cleanliness was demanded in most public spaces. By the end of the 90s I can remember having to leave a Burger King, while starving, to find somewhere else because the dining room was so trashed and OLD filthy that I couldn’t even imagine how horrific the kitchen would be. Microwaved, deep-fried and char-broiled filth, yum!
First we stopped caring about appearances, then we stopped caring about everything.
I don’t eat true junk very often. My sis lives on it. (I’m not sick, she is, that’s a different rant) The last couple times I’ve gone there I’ve noticed that processed “food” is starting to taste more plastic-y, more salty. Same thing at the many restaurants.
Of course if I’m feeling lazy, I’d just as soon eat a peanut butter sandwich, or have a fruit/veg smoothie, so I’m really not best suited to judge. But, yuck, really.
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4th December 2012 at 2:07 pm
ThePessimisticChemist says:
I just put in a bid on a house the other day (fingers crossed) and got to talking with my realtor later on.
Her: Hopefully we can find you guys one sooner rather than later, prices are going up!
Me: Prices are going up because banks are keeping foreclosed homes off the market to artificially keep the price up despite the low demand and high supply. Kind of like how DeBeers handles the diamond markets.
Her: What? But all of our indicators say that prices are legitimately rising!
Me: How can home prices be rising if US median household income is falling?
She looked at me like I just slapped her, and she said “Oh my god, 2007 was so bad I don’t know what I’ll do if we have to go through that again.”
I guess I won that one, though it still felt like a loss.
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4th December 2012 at 2:20 pm
Mark says:
The dinning experience in America sucks anyway. It’s all fast food wether its McDonalds or not. It’s all about how many tables can be turned or how fast a bartender can churn out drinks.
I think one of the main culprits of a shitty American dinning experience is the custom of tipping. People should be hired a set salary and more of them should be hired. Their job should be your dinning or bar experience. And not being a bunch of money grubbers. Slow down, be patient, talk to people.
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4th December 2012 at 2:21 pm
Administrator says:
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4th December 2012 at 2:24 pm
AWD says:
Admin throws a grenade into the room with “BUTTER DRIBBLING DOWN AN OBESE BOOMER’S CHIN” in the title, and nobody takes the bait. What a bunch of pussies. This will not stand (ignoring obvious taunts), we (me and Colma) shall respond in kind.
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4th December 2012 at 2:42 pm
Stucky says:
1. I personally know three pizza parlor owners … mom & pop, not a franchise. All three appear (big houses, fancy cars) to be doing very well financially. I know … SMALL sample size. Just sayin’
2. I don’t get it regarding what I SEE vs the reporting.
We saw the movie ‘Pi” last week, and the place was packed. Ms Freud met a friend at the Cheesecake Factory yesterday, and it took over an hour to get seated. Other stores we;ve been to in the last two weeks; Trader Joes, Home Depot, Shop Rite, and Marshalls … same story, all crowded with shoppers. Anyone else seeing this?
Of course, there are so many variables to account for this, not the least of which is perhaps what I’m observing is limited to a small piece of real estate in NJ. Eyes are unreliable … I’ll stick with the numbers.
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4th December 2012 at 2:44 pm
Stucky says:
TPC’s realtor after he was done bitch-slapping her with his logic.
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4th December 2012 at 2:51 pm
Administrator says:
I’ve detailed the long decline of the Towamencin Village Shopping Center in previous posts. They’ve lost:
Genuardi’s grocery store
Sears Hardware
Blockbuster
Danatos restaurant
Pizza Pub
Book store
Things are so bad, the Dollar Tree just announced they are closing.
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4th December 2012 at 2:51 pm
Stucky says:
She can run, but she can’t hide.
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4th December 2012 at 2:56 pm
AWD says:
We have a mall 1/2 hour away (nearest mall) that is 2/3 empty. It’s the mall of pain. Some idiot will open a store there, music store, jesus/religious store etc., and be out of business in 2-3 months having lost thousands of dollars. I just look at the people running the stores and groan for them. We only go there because they have a pet store the kids like (it’s still in business, people will spend any amount of cash on their pets).
Face it folks, computers and the internet have wiped out a great deal of the jobs and retail economy, and Wal Mart.
I see so many new cars on the road I’m almost embarrassed I drive a 7 year old car (a very nice 7 year old car). I don’t know where they’re getting the cash for the cars, until I remember 60% of the people around here are government employees. They are still living the high life, they are recession-proof, and they’re looking forward to massive pensions when they retire at 50. I’d like to take a baseball bat to their cars and heads. They deserve shit. They’re fat lazy stupid ignoramuses that perform absolutely zero useful tasks, but are still living the high life. I suppose that means it’s better to be a socialist party member (or FSA member) and live off the 1.2 people that are supporting you than try to get by in the private sector.
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4th December 2012 at 3:02 pm
sangell says:
How about we get rid of Food Stamps and let restaurants provide meals to those in need? An Olive Garden or other restaurant would have a SNAP menu Food Stampers could select from. It would meet certain cost and dietary guidelines and people could use their EBT cards to pay for it with a daily limit on number of meals.
The idea would be to feed the needy but limit fraud as a person could not easily sell the EBT card’s balance at a discount to a convenience store owner or their neighbor for 50 cents on the dollar or whatever it is the go for. Keep restaurant employment up too as well as provide the illusion of a busy restaurant.
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4th December 2012 at 3:04 pm
AWD says:
Study: Baby Boomers’ Health Very Poor, Getting Worse
Obesity among baby boomers is more than double the rate of their parents at the same age, and boomers with three or more chronic conditions was 700 percent greater than the previous generation.
http://washington.cbslocal.com/2012/10/01/study-baby-boomers-health-very-poor-getting-worse/
They made a movie about obese baby boomers (are there any other kind?)
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4th December 2012 at 3:06 pm
AWD says:
I’m an obese baby boomer and I voted for Obama
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4th December 2012 at 3:09 pm
AWD says:
Fat = Lazy
Lazy = Unhealthy
Unhealthy = Bad
Bad = Social Reject
Social Reject = Become Depressed
Become Depressed = Eat More
Eat More = Become even Fatter
What a vicious cycle.
“So I guess all the fatties who survived banded together against society in the 90s and early 2000s in an effort to “take back the fat.” Now they’ve recruited record numbers into their ranks and tried to make it a “bad” thing to be skinny.”
“Unbelievable. Can’t we just lock them all in a basement, make them run on oversized hamster wheels, drink only water and feed them ramen for a few years until they’re normal?”
“Skinny people are the ones we need to be wary of, not fat people. Skinniness is a dead give away of someone who is generally mean with their money, and always full of stress (or is that distress). Not the nicest people to be around. Fat people are generally jovial, and great fun and generous.”
“they should put fat people in camps and forcefully make them run on treadmills or operate machinery that produces energy to ease our dependence on foreign oil. Two birds: meet one stone.”
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4th December 2012 at 3:14 pm
Colma Rising says:
BBEB
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4th December 2012 at 3:41 pm
Stucky says:
Jeezus. You cornholes are really having an effect on me. I’m about ready to jump on the Boomer Bashing train.
Is there a more putrid commercial on TV than Eldercare Medicare Supplemental?? No.
That’s where a bunch of old fucks are dancing around singing an old 60′s rock classic … so fucking happy for their free shit … fuck you very much. Self centeredness on mega steroids.
YOU’VE GOT TO GO WHERE YOU WANNA GO,
DO WHAT YOU WANNA DO,
WITH WHOEVER YOU WANNA DO IT, BABY!
…. somberly mimicking SAH’s voice here …”Just die already!”
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4th December 2012 at 3:48 pm
AWD says:
Great news! if you are abnormal (not obese), there is now measures you can take. I think Stucky would look good in this outfit.
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4th December 2012 at 4:04 pm
Colma Rising says:
Lol, Her Stuchenmeister. I see a business opportunitybusiness opportunity for a new cheap restaraunt chain:
“Red Boomer”
I see a wide variety of delicacy in the pic, even Salsa Boomer and Soul Food Boomer to go with the Milk Toasted Boomer, the Burnout Boomer and Comfort Food Boomer.
Open that shit in Mongolia.
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4th December 2012 at 4:05 pm
Maddie's Mom says:
@TeresaE,
I will not eat in a fast food trough. Those places are, generally speaking, nasty. Even some of the employees you see outside those places, taking out trash, etc., are enough to make me lose my appetite. I will also, happily, eat my cooking or a pb&j over that anytime. I actually think bread and water would be preferable.
“First we stopped caring about appearances, then we stopped caring about everything.”
Indeed.
@Stucky,
It’s kinda bizarro world out there…
My hubby works in sales in the oil & gas industry. He sold $2.2 million in November.
Dear daughter also works in the o&g industry. She and co-workers are sweating a possible layoff.
She works with a drilling group…North Dakota basin. Oops.
Five new homes have been built in our neighborhood in the past year. Two are still for sale. Two more custom-built homes are currently under construction. This is in a small town .
Our neighbor (retired) said his wife had gone back to work because “I planned for the money part, but not for the insurance part.”
Huh?????
@AWD,
I know one thing. People who are not overweight, let alone obese, are quickly becoming the “freaks” of society.
I rarely meet another female that my lack of extra poundage doesn’t come up in the conversation, and usually pretty early on. I’m talking about strangers; women I’m meeting for the first time. I’ve often wondered how it would go if I remarked on their (usually excess) weight instead. Yeah, right. It’s as if they’re obsessed with weight issues, but not about taking control of their own situation. It’s easier to just hate on me, I guess.
Bitches.
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4th December 2012 at 4:41 pm
Maddie's Mom says:
“And not being a bunch of money grubbers. Slow down, be patient, talk to people.”
You must be from another country, Mark?
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4th December 2012 at 4:47 pm
Administrator says:
——————————————————————————–
Posted 2012-12-04 10:14
by Karl Denninger
in Consumer Darden Says “We’re Screwed”
It’s bubbling to the surface…..
(Reuters) – Darden Restaurants Inc (DRI.N) warned on Tuesday that earnings for the latest quarter would miss expectations after unsuccessful promotions led to a decline in sales at its Olive Garden, Red Lobster and LongHorn Steakhouse chains.
Promotions my ass.
The simple reality is that the devaluation of purchasing power is biting the consumer and the more QE The Fed does to cover deficit spending, and thus the more deficit spending The Government does, the worse this problem is going to get.
You can cover it up for a while with more borrowing, such as in Student Loans. But eventually that “goosing” of the economy runs out, as acceptance of credit tops, and when that happens the trend re-asserts itself and the driver of it, which is the government’s deficit spending, comes back to the fore.
Bubble TV is trying to play this off as “fiscal cliff” concerns. Nonsense.
The trend was evident more than six months ago in the macro-level data and I’ve been talking about it since. There is no evading the impact of what the government has done with its handmaiden The Fed.
Remember that we were told that “Christmas would be strong” and other similar lines of crap. Well, if sales are going to be strong, why the profit warnings?
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4th December 2012 at 5:05 pm
avalon says:
I’m in the biz…….please continue to eat out at your local restaurants
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4th December 2012 at 7:54 pm
llpoh says:
Avalon – you can get arrested for that.
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4th December 2012 at 8:11 pm
DaveL says:
Admin:”The economy is in recession. The middle class has been crushed. Taxes are going up. Obamacare is poised to destroy the healthcare of the middle class. Corporate profits are declining. China is unraveling. Europe is imploding. The Middle East is exploding. Merry Christmas!!!”
But if we can just raise the tax rates on the top 2% we’ll be rolling in dough. Oh, wait, that dough has been used to make Moochers breadsticks.
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4th December 2012 at 8:35 pm
DaveL says:
AWD: “Unbelievable. Can’t we just lock them all in a basement, make them run on oversized hamster wheels, drink only water and feed them ramen for a few years until they’re normal?”
Better yet. Hook the hamster wheels up to generators and sell the electricty back to the grid
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4th December 2012 at 8:42 pm
DaveL says:
AWD: Oops, didn’t see the next quote
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4th December 2012 at 8:44 pm
avalon says:
Llpoh – very funny lol
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4th December 2012 at 9:04 pm
llpoh says:
Avalon – you seem to be the only one astute enough to have caught my drift. I thought it was hilareous. At least I amuse myself.
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4th December 2012 at 9:29 pm
Makati1 says:
Maybe the Boomer Generation will get to experience the real boom when their retirement blows up and takes everything with it?
Did the Mayan’s get it right? Is Civilization coming to an end? Will the climate change into Venus before 2100? Will visitors from some far planet find some ruins scattered all over a desolate planet and wonder what catastrophe struck down a race that was capable of going to the moon, but not able to say ‘No’ to their desires?
Who ever named us homo ‘sapiens’ must have had a wicked sense of humor. ^_^
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4th December 2012 at 1:55 am
Gayle says:
AWD
If everyone was responsible for their own health care costs, do you think people would be more interested in the quality of the food they put in their mouths?
As an aside, I noticed when I was in France (where the only heavy people I saw were American tourists) there were no fast food restaurants except an occasional McDonald’s, and definitely no drive-throughs. Machines dispensing crappy chips and sweets were nonexistent. In restaurants plates are not piled high like the Himalayas.
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4th December 2012 at 6:18 pm