Darden Faces Dining Divide: Lower-Income Consumers Pull Back

Darden Restaurants ( DRI ), the parent company of popular chains like Olive Garden and LongHorn Steakhouse, is experiencing a shift in consumer behavior that reflects broader economic trends. While lower-income customers are cutting back on dining out, wealthier diners are showing an increased appetite for restaurant meals.

CEO Rick Cardenas revealed that diners earning below $75,000, particularly those below $50,000, are noticeably reducing their visits across Darden's brands. This trend, attributed to an "ongoing" shift, is most evident in the company's fine-dining segment, marking a return to pre-pandemic consumer patterns.

However, there's a silver lining for Darden ( DRI ) as affluent customers demonstrate a willingness to dine out more frequently. At LongHorn Steakhouse, for instance, higher-earning patrons are not only visiting more often but also spending more per visit. This disparity in consumer behavior underscores a widening dining divide influenced by income levels.

Despite facing headwinds in certain regions like Texas and California, Darden ( DRI ) remains resilient. The company has adapted its strategy by scaling back on deep discounting and heavy promotions, instead focusing on marketing efforts and brand equity building. This shift signals a departure from pre-pandemic tactics and a commitment to long-term pricing strategies.

While same-restaurant sales experienced a slight decline across Darden's brands, Olive Garden and LongHorn Steakhouse still showcased resilience. Despite a drop in foot traffic, both brands saw an increase in average check size, indicating a balancing act between consumer spending habits and dining preferences.

Technical Outlook
The price of DRI shares has decreased $11.34 since the market last closed on Thursday, March 21. This is a 6.50% drop. but a Revival might be possible for DRI which is up by 0.47% on Friday morning trading. DRI has a Relative Strength Index (RSI) of 38 indicating selling pressure on the ticker.