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Investors are cheering a newly announced partnership between Uber (UBER) and Olive Garden. The Italian restaurant chainās owner, Darden Restaurants (DRI), saw its stock rally as much as 9% to its highest price in months on Thursday.
Darden and Uberās multiyear deal will allow Olive Garden to leverage Uberās delivery technology to bring its breadsticks and pastas to the doorsteps of customers. The deal is a reversal of Dardenās long-standing resistance to working with third-party delivery apps. An initial pilot of the program will begin at a limited number of Olive Garden locations later this year and will eventually become available at 900 restaurants.
Uberās stock price jumped nearly 3% in late morning trading. Both Uber and Darden eased slightly from their initial spikes. Uber closed the day up 2.4% to $75.28, and Darden was up 8.2% to $172.27 at market close.
Dardenās stock spike comes despite its disappointing quarterly earnings report earlier in the day. The company posted earnings of $2.76 billion, below Wall Streetās expectations of $2.79 billion. Olive Gardenās performance was especially poor. Same-restaurant sales at Olive Garden fell 2.9% during the three months ended Aug. 25. Thatās worse than the 1.8% decrease in sales expected by analysts. The casual dining chain also underperformed the industry at large, which has struggled as inflation-weary customers have opted to stay home, Darden CFO Rajesh Vennam told investors in a call Thursday.
Vennam admitted that company executives were āsurprised by the significant step down in traffic beginning with the Fourth of July holidayā but noted that sales rebounded in August. The company reiterated its financial outlook for the rest of the year.
And Dardenās CEO seems to be betting on Olive Gardenās new deal with Uber to turn the tides.
āThis partnership allows us to strengthen and defend our competitive advantages of significant scale and extensive data and insights,ā said CEO Ricardo Cardenas. āIt enables us to use the scale of Uber's driver network to enhance our scale. And since guests will order through our online portal or mobile app, we keep the data.ā
Citi analysts said Dardenās Uber deal is āa positive surpriseā and ālikely drives shares higher in the near-term.ā
However, TD Securities analysts said that while the Uber partnership presents a new bull case, investors shouldnāt get too excited about Olive Gardenās delivery program compared to its competitors. āOur gut reaction is given the brand skews to a more mature customer base & is known more for hospitality than off-premise, we do not expect as material a sales lift vs other concepts launching third-party delivery.ā