Sep. 30--Orlando-based Darden Restaurants' stock was dropping today after a first-quarter report that revealed improved profits, but a drop in sales.

In mid-day trading, the company's stock (DRI) had dipped almost 9 percent, falling to less than $33.

Earnings rose 16 percent for the quarter, which ended in August, were $95 million, or 67 cents per diluted share, according to the report released Tuesday. That's compared with $82.4 million, or 58 cents per diluted share, for the same period a year ago. Analysts had predicted earnings on average of 66 cents per share.

Revenues were $1.73 billion, compared with $1.77 billion in the prior year, for a 2.3 percent drop. Same-restaurant sales for Olive Garden, Red Lobster and LongHorn Steakhouse were down 5.3 percent, offset somewhat by the opening of new restaurants.

While profit beat many expectations, the sales numbers were a concern for some analysts.

"It's absolutely worse than we expected," said Brad Ludington, a research analyst with KeyBanc Capital Markets. The company's stock could suffer as a result, he said, and so could other casual-dining stocks. "I think we'll probably see pressure on shares," he said.

Clarence Otis, Darden chairman and CEO, said in a statement that the company's efficient operations, along with favorable food and energy costs, helped keep profits up even as sales lagged.

Together, the major chains' same-restaurant sales performed better than the industry average. But Red Lobster by itself did not..

The seafood chain, which has been trying to refresh its image with more emphasis on wood-fired grilling and remodeling, had an especially significant decrease -- 6.3 percent below the prior year, with a same-restaurant sales decrease of 7.9 percent. The casual dining industry average was a 7.8 percent decrease in same-restaurant sales.

R.J. Hottovy, an analyst with Morningstar, noted that Red Lobster's worst numbers were in June, and sales improved in the quarter's subsequent months.

Olive Garden's first quarter sales of $821 million were 1.2 percent above prior year, but its same-restaurant sales declined 2.9 percent.

Darden spokesman Rich Jeffers said Olive Garden had offered discounts that Red Lobster and LongHorn Steakhouse had not. LongHorn's same restaurant sales were down 6.2 percent.

Hottovy said the gap between Darden and the industry average has narrowed over the past couple of quarters, and "that's cause for a little bit of concern."

Looking ahead, the company warned its earnings per share for the entire year could hit the low end of its outlook, for a decrease of about 2 percent.

But Ludington said sales could start turning around in the next quarter.

"I don't think this is an absolute disaster by any means," he said. "I just think it was a really tough environment."

Sandra Pedicini can be reached at spedicini@orlandosentinel.com or 407-420-5240.

-----

To see more of The Orlando Sentinel or to subscribe to the newspaper, go to http://www.OrlandoSentinel.com.

Copyright (c) 2009, The Orlando Sentinel, Fla.

Distributed by McClatchy-Tribune Information Services.

For reprints, email tmsreprints@permissionsgroup.com, call 800-374-7985 or 847-635-6550, send a fax to 847-635-6968, or write to The Permissions Group Inc., 1247 Milwaukee Ave., Suite 303, Glenview, IL 60025, USA.

NYSE:DRI, NASDAQ-NMS:MORN,

A service of YellowBrix, Inc.