(Bloomberg) -- Darden Restaurants Inc. is seeing more “softness” among households with incomes above $125,000 compared to last year, Chief Executive Officer Rick Cardenas said.
Consumers are still resilient but are being more “selective,” the CEO told analysts on a Thursday earnings call. Softness among higher-income consumers primarily affects the company’s fine-dining brands, a segment whose same-store sales declined 2.8% in the quarter ended Aug. 27.
At Darden’s higher-end locations, which include the Capital Grille and Ruth’s Chris Steak House, consumers are trading down to lower-priced alcohol compared to last year, Chief Financial Officer Raj Vennam said. Still, the company isn’t seeing a “big fall off” compared to pre-Covid levels, he said, which suggests 2022 brought “exuberance” that has subsided. Darden pointed to a similar trend last quarter.
Wealthier guests may have diverted their spending to international travel this summer, Cardenas said, which could explain why they’ve pulled back at the company’s restaurants.
Still, Darden won’t engage in “deep” discounting, Cardenas said. The company will instead focus on delivering value, which the executive said is “not always about low price.”
“If it means that our traffic is at the lower end of our guide, then it’s at the lower end of our guide,” Cardenas said. “We’re not going to do things that are going to impact us in the long term, just for short term.”
Darden posted quarterly sales and earnings results that exceeded analyst expectations. The company’s shares rose less than 1% at 9:56 a.m. in New York.
(Updates shares, adds details.)
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