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Slow Days At Darden Restaurants

Written By Brian Hicks

Posted August 27, 2008





Way before I became famous market guy, I was a famous restauranteur.

I owned a 5 star dive called Peppers Tavern. It was enough to send me down another career path if you know what I mean.

So I know how sad an empty restaurant can really be. It’s not exactly for the squeamish we used to say.

After all, the restaurant business is one where you invest a lot to make a little.

Margins? What margins?

That’s never a good sign and why I never buy a company without earnings

But hey….the beer was sort of free.

But that was then and this is now.

For the restaurant business it is just getting tougher with discretionary income shrinking like a raisin these days.

Here’s the skinny from a salad bar near you. Here’s a hint: Nobody there is in the weeds.

From Reuters by Brad Dorfman entitled: Darden warns on quarter and year; stock plummets.

“Darden Restaurants Inc warned investors that its quarterly profit will come in well below Wall Street estimates and cut its forecast for the full year on Tuesday, sending its shares down 15 percent.

 Traffic at the company’s chains — which include Red Lobster, Olive Garden and LongHorn Steakhouse — was worse than expected, a spokesman for the company said.

“People were not in the restaurants in the volume we were anticipating,” said Darden spokesman Rich Jeffers.

 Casual dining restaurants — the moderately priced, sit-down chains run by Darden and rivals like Brinker International Inc and DineEquity Inc— have been hammered by the weak U.S. economy and soaring gasoline prices.

“For a large part of that period, gas prices were extraordinarily high,” John Owens, analyst at Morningstar, said. “It was a challenging consumer environment and it’s possible that consumers at the tail end of the quarter were watching Phelps instead of going out,” he added, referring to gold-medal winning U.S. Olympic swimmer Michael Phelps.

Sure blame it on the kid from Baltimore. That’s the ticket.

At least there won’t be long wait for a table—especially at the 5 star dives.