Olive Garden parent Darden, Uber stocks pop after delivery deal announcement

Investors are cheering a newly announced partnership between Uber (UBER) and Olive Garden. The Italian restaurant chain’s owner, Darden Restaurants (DRI), saw its stock rally as much as 9% to its highest price in months on Thursday.

Darden and Uber’s multiyear deal will allow Olive Garden to leverage Uber’s delivery technology to bring its breadsticks and pastas to the doorsteps of customers. The deal is a reversal of Darden’s 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.

Uber’s 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.

Darden’s stock spike comes despite its disappointing quarterly earnings report earlier in the day. The company posted earnings of $2.76 billion, below Wall Street’s expectations of $2.79 billion. Olive Garden’s performance was especially poor. Same-restaurant sales at Olive Garden fell 2.9% during the three months ended Aug. 25. That’s 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 “surprised by the significant step down in traffic beginning with the Fourth of July holiday” but noted that sales rebounded in August. The company reiterated its financial outlook for the rest of the year.

And Darden’s CEO seems to be betting on Olive Garden’s new deal with Uber to turn the tides.

“This partnership allows us to strengthen and defend our competitive advantages of significant scale and extensive data and insights,” said CEO Ricardo Cardenas. “It 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.”

Citi analysts said Darden’s Uber deal is “a positive surprise” and “likely drives shares higher in the near-term.”

However, TD Securities analysts said that while the Uber partnership presents a new bull case, investors shouldn’t get too excited about Olive Garden’s delivery program compared to its competitors. “Our 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.”

Laura Bratton is a reporter for Yahoo Finance.

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