Darden (DRI) Outlook Weighs on Casual Restaurant Industry

Shares of Darden Restaurants (NYSE: DRI), the largest publicly-traded casual restaurant company, reported Q2 earnings after the close yesterday, issuing guidance for 2008 that was relatively weak. Darden said it expects FY08 same-restaurant sales to rise by 2-4% for its major restaurants, Olive Garden, Red Lobster and LongHorn.

As the largest company by market cap in the casual restaurant industry, Darden's results could foreshadow a slowdown in the entire industry, most likely tied to a weakening U.S. dollar. Today, stock performance is certainly reflecting this possibility, as shares of many other large companies involved in the casual restaurant business are down a good amount.

While none are as bad as Darden's 18% decline, losses within the industry are substantial, and several companies have hit new 52-week lows on the news: Brinker International (NYSE: EAT), owner of Chili's, Romano's Macaroni Grill and On The Border Mexican Grill, has fallen by more than 5%, hitting a new 52-week low at $19.17, P.F. Chang's China Bistro (Nasdaq: PFCB) is down about 7%, sinking to a new low at $23.47, and shares of Ruby Tuesday (NYSE: RT) have moved down by more than 3% to set a new 52-week low at $11.42.

Elsewhere in the sub-sector, Texas Roadhouse (Nasdaq: TXRH), Panera Bread (Nasdaq: PNRA) and Red Robin Gourmet Burgers (Nasdaq: RRGB) have all moved down by more than 4% and are trading near a 52-week low but have yet to break through to a new one.

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