Darden Restaurants downgraded amid concerns over sales performance
Written by Emily J. Thompson, Senior Investment Analyst
Updated: Jul 11 2024
0mins
Should l Buy DRI?
Source: MarketWatch
Darden Restaurants Inc. shares rose by 3.00% and reached a 20-day high, reflecting some investor interest despite recent downgrades.
Truist Securities analyst Jake Bartlett downgraded Darden from Buy to Hold and cut the price target from $240 to $207, citing concerns over limited sales drivers for 2026 and weak sales performance at Olive Garden. Despite a market cap of $23.32 billion, the downgrade reflects cautious sentiment regarding Darden's future profitability amid rising commodity costs and limited margin upside.
The downgrade may lead to increased scrutiny of Darden's operational strategies as it navigates a challenging market environment. Investors will be watching closely for any signs of improvement in sales performance and margin management.
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Analyst Views on DRI
Wall Street analysts forecast DRI stock price to rise
20 Analyst Rating
13 Buy
7 Hold
0 Sell
Moderate Buy
Current: 218.660
Low
200.00
Averages
224.35
High
261.00
Current: 218.660
Low
200.00
Averages
224.35
High
261.00
About DRI
Darden Restaurants, Inc. is a restaurant company. The Company owns and operates full-service dining restaurants in the United States and Canada under the trade names Olive Garden, LongHorn Steakhouse, Yard House, Ruth's Chris Steak House, Cheddar's Scratch Kitchen, The Capital Grille, Chuy's, Seasons 52, Eddie V's and Bahama Breeze. It owns and operates approximately 2,140 restaurants in the United States and Canada. Its segments include Olive Garden, LongHorn Steakhouse, Fine Dining, and Other Businesses. Olive Garden is a full-service Italian dining restaurant operator in the United States. LongHorn Steakhouse is a full-service steakhouse restaurant, which features a variety of menu items including signature steaks and chicken, as well as salmon, shrimp, and burgers. Fine Dining includes Ruth’s Chris, The Capital Grille and Eddie V’s. Other businesses include Cheddar’s Scratch Kitchen, Yard House, Bahama Breeze, Seasons 52, and The Capital Burger.
About the author
Emily J. Thompson
Emily J. Thompson, a Chartered Financial Analyst (CFA) with 12 years in investment research, graduated with honors from the Wharton School. Specializing in industrial and technology stocks, she provides in-depth analysis for Intellectia’s earnings and market brief reports.
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- Future Expansion Plans: Darden anticipates opening 65 to 70 new restaurants in fiscal 2026, indicating the company's commitment to expanding its market share and business scale while adjusting its brand portfolio.
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Auction Purpose: Tim Niedecken from the Jordan Cattle Auction indicates that the cow will be sold as a packer animal, meaning it is intended for slaughter.
Market Factors: The decision to sell the cow may be influenced by her declining breeding capabilities or the high market price of beef.
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- Restaurant Closure Plan: Darden Restaurants announced the permanent closure of 14 Bahama Breeze locations, expected to operate until April 5, with plans to convert the remaining 14 into other Darden brands over the next 12-18 months, thereby optimizing its brand portfolio and enhancing overall business efficiency.
- Strong Stock Performance: Darden's stock rose over 2% on Tuesday, marking its best day in two weeks, with a nearly 13% increase year-to-date, reflecting positive market sentiment towards its value meal initiatives and bolstering investor confidence.
- Analyst Rating Upgrade: Mizuho upgraded Darden from 'Neutral' to 'Outperform' and raised its price target from $195 to $235, anticipating strong performance in the casual dining sector in 2026, positioning Darden to benefit from this trend and drive market share growth.
- Cautious Consumer Spending: Despite facing pressures from rising beef prices and heavy advertising investments, Darden remains focused on improving margins, expecting to attract consumers through value meal offerings, thus maintaining stable traffic in a competitive market.
See More
Darden Restaurants to Close 14 Bahama Breeze Locations
- Strategic Shift: Darden Restaurants announced the permanent closure of 14 Bahama Breeze locations while converting the remaining 14 into other concepts, reflecting a reassessment and optimization of its brand portfolio.
- Limited Financial Impact: Despite the closure of 14 restaurants, Darden anticipates that this move will not materially affect its overall financial results, indicating the company's financial resilience during the adjustment process.
- Transformation Timeline: The closed units are expected to remain operational until early April, with conversions rolling out over the next 12 to 18 months, showcasing the company's strategic planning for new brand implementations.
- Brand History: Since its inception in 1996 in Orlando, Bahama Breeze expanded to over 40 locations in the U.S., but as competition intensified, it became a niche player within Darden's portfolio, prompting this strategic review and adjustment.
See More
Darden Restaurants to Close 14 Bahama Breeze Locations Amid Strategic Review
- Brand Strategy Shift: Darden Restaurants has completed a strategic review of the Bahama Breeze brand, deciding to close 14 locations while converting the remaining 14 into other brands, reflecting the company's reassessment of its brand mix to better align with long-term growth objectives.
- Limited Financial Impact: Although the closure and conversion plan involves 28 Bahama Breeze restaurants, management asserts that these changes will not materially affect the company's financial performance, demonstrating Darden's robust strategy in brand integration.
- Future Expansion Plans: Darden anticipates opening 65 to 70 new restaurants in fiscal 2026, indicating the company's commitment to expanding its market share and business scale while adjusting its brand portfolio.
- Employee Placement Initiative: The company aims to place as many affected workers as possible within its other brands, reflecting Darden's sense of responsibility towards its employees and emphasizing the importance of maintaining morale and brand image during the transition.
See More
