(Bloomberg) -- Darden Restaurants Inc. is seeing lower-income consumers pull back, Chief Executive Officer Rick Cardenas said, depriving some of the company’s major brands a key revenue stream.   

Transactions from households with incomes below $75,000 “were much lower than last year,” Cardenas said on a Thursday earnings call, saying the operating environment was “tougher than we anticipated” and one that affected the overall restaurant sector.

The Olive Garden and LongHorn Steakhouse owner’s sales missed analysts expectations, attributing the results to unfavorable winter weather in January that cut traffic by 1%, and lower sales in February which “exposed consumer weakness,” the company’s Chief Financial Officer Raj Vennam added on the call, specifically highlighting softness in Texas and California. 

Additionally, Darden cut its 2024 same-store sales growth outlook, and forecast next quarter’s same-store sales growth of only -0.5% to 1%. The company’s shares dropped as much as 6.9% in early New York trading, the most since May 2022.

Conversely, transactions from households with incomes above $150,000 were higher than last year, Cardenas said, a reverse from two quarters ago. Sales from its fine-dining brands, Capital Grille and Ruth’s Chris Steak House, grew 58% from the same quarter last year, compared to overall company sales growth of 7%. 

Cardenas’ comments align with what has been seen in the overall restaurant industry. Low- and middle-income consumers have been hurt by hurt by high credit-card balances and delinquencies, Bloomberg Intelligence senior analyst Michael Halen wrote in a note. Meanwhile, high-income consumers have been bolstered by rising stock, crypto and home prices.

Darden plans to continue pricing below inflation to keep drawing customers, but will stop short of becoming a “heavily promotional brand.” 

Restaurant margin climbed to 21.7%, which Vennam attributed to commodities and labor inflation being lower than expected, reflecting trends seen in wider US economy. The company expects costs of all commodities except seafood to increase this quarter, with price gains overall to be 3%. 

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