Darden Restaurants (DRI), owner of The Olive Tree and Red Lobster, lowered their full year forecast.
They lowered same store sales expectations for fiscal year 2009 from 2% growth to 0%-1% growth, revenue growth from 14%-15% to 12%-13% and EPS growth, exluding items, from 9%-10% to 0%-5%.
The stock is down 13% on heavy volume. Just another concrete piece of evidence that consumer spending is under pressure. The stock is cheap here at about 10 times earnings ($28 a share/$2.74 EPS FY 2008)
The economy is getting tighter with more expensive food costs, higher oil prices, higher gas prices, etc. All this means that people will have less discretionary income to spend at restaurants, such as Darden's various restaurants.
Analysts have lowered their forecasts for same-store sales to a 3.9% decrease. This factored into a decrease of forecast 2009 earnings per share from $2.74 to $2.05. As consumers discretionary income falls to higher debt payments and costs of living, they will spend less eating out at restaurants, such as those owned by Darden.