Darden Restaurants To See Accelerated Market Share Gains And Development Despite Macro Pressures, Analyst Says

Truist Securities analyst Jake Bartlett reiterated a Buy rating on the shares of Darden Restaurants, Inc. DRI, raising the price target to $177 from $163,  driven by accelerating market share gains and development.

Bartlett believes DRI is not yet seeing signs of waning restaurant demand, and both Olive Garden and LongHorn are well positioned to boost growth, even if macro pressures build. 

Market share gains continue to accelerate for DRI, with guest satisfaction metrics at or near all-time highs and an attractive everyday value at Olive Garden, notes the analyst.

Also Read: Darden Restaurants Q4 Review: Strong Performance Despite Lower Same-Store Sales - Analyst's Perspective

Going ahead, the analyst expects a continued boost to sales from improved labor productivity, higher service levels, and table turns. 

While development headwinds are expected to crimp FY24 growth, Bartlett expects an acceleration in FY25.

The analyst lowered the FY24 same-store sale (SSS) estimate to +3.0%, from +3.5%, but sees an upside potential (actual annual SSS have outperformed initial guidance by ~130bps on average since FY16).

The bidding activity has increased among contractors, which should lower costs and boost returns, allowing DRI to accelerate toward the high end of its 2% to 3% LT range beginning in FY25. 

Price Action: DRI shares are trading higher by 0.08% to $162.26 on the last check Friday.