UPDATE 1-Darden Restaurants shares fall on consumer concern

* Shares down 4 percent

* FY ’11 view assumes same-restaurant sales up 2-3 percent

* Sees less industry discounting

* Except for oysters, no impact yet from Gulf oil spill
(Adds analyst comment, byline; updates share activity)

By Lisa Baertlein

LOS ANGELES, June 24 (BestGrowthStock) – Shares in Olive Garden and
Red Lobster parent Darden Restaurants Inc (DRI.N: ) fell 4.1
percent on Thursday after the company issued a full-year
earnings forecast that assumes sales at its major chains will
grow and that was above analyst views.

Earlier this year, casual dining chains appeared to be
recovering from a multi-year sales slump, but stubbornly high
U.S. unemployment, a weak housing market and worries that
Europe’s debt crisis could usher in a double-dip recession have
some consumers pulling back on meals away from home.

Share in Darden fell $1.70 to $40.20 in midday trading on
the New York Stock Exchange, while the Dow Jones U.S.
Restaurant and Bars index (.DJUSRU: ) was off 3.7 percent.

Elsewhere, shares in Chili’s Grill & Bar parent and Darden
rival Brinker International Inc (EAT.N: ) shed 3.3 percent.

Darden on Wednesday reported quarterly profit that fell shy
of Street estimates, in part because of a charge related to
higher-than-expected gift card redemptions, and issued a fiscal
2011 profit forecast slightly above analysts’ target.

Its growth forecast for the year ending May 2011 translated
into earnings of $3.26 to $3.35 per share on a 2 percent to 3
percent gain in sales at its established Olive Garden, Red
Lobster and LongHorn Steakhouse restaurants.

“As we look ahead to 2011, we do expect operating
conditions to improve and that’s going to be a continuation of
the improvement we think that we saw throughout this fiscal
year,” Darden Chief Executive Clarence Otis said in a
conference call on Thursday.

Darden’s same-restaurant sales fell short of company
targets in the fourth quarter and for all of fiscal 2010, said
Jefferies & Co analyst Jeff Farmer.

Farmer expects Darden’s 2011 same-store sales to grow 1.5
percent. The guidance was “a show me story in the current
environment,” he wrote in a note to clients.

While sales remain volatile, Darden executives said the
industry’s rampant discounting appears to be easing. Darden,
which also owns the Capital Grille steakhouse chain and is
among the top-performing restaurant operators, has offered
special pricing for some meals, but has refrained from the deep
discounts and giveaways seen at some rival chains.

Still, some recent results suggest that it will be
difficult to wean customers off deals.

California Pizza Kitchen Inc (CPKI.O: ) on Monday cut its
second-quarter profit (Read more your timing to make a profit.) forecast after the absence of a popular
promotion contributed to weaker-than-expected sales.

On other fronts, Darden said that while it does source some
seafood from the Gulf of Mexico — the site of an
environmentally devastating BP (BP.L: ) oil spill [ID:nLDE65N02E]
— it gets the “large majority” of its seafood from other parts
of the globe and has so far seen “very little impact on costs
and availability”.

Thus far, Darden said, only oysters have been affected.

Investing Basics
(Reporting by Lisa Baertlein. Editing by Robert MacMillan)

UPDATE 1-Darden Restaurants shares fall on consumer concern