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Darden Restaurants posts Q1 profit, reaffirms FY outlook, shares rise

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Darden Restaurants (NYSE:DRI) said Friday that first-quarter results were “very solid”, noting a 24 per cent increase in sales for its specialty foods segment, and reaffirmed its 2013 fiscal guidance.

Shares of the company rallied 4.79 per cent on the news, trading at $57.34 as at about 9:45 a.m. ET.

For the quarter ended August 26, Darden posted a profit of $111.0 million, or 85 cents per share, up nine per cent from $106.8 million, or 78 cents a year earlier. 

Sales rose 4.8 per cent to $2.03 billion reflecting same-restaurant sales growth of 2.2 per cent for its specialty restaurant group, the acquisition of 11 Eddie V's restaurants in late 2011, and the addition and operation of another 92 net new restaurants compared to the first quarter last year.

Darden said the increase was offset by a combined same-restaurant sales decline of 0.3 per cent for its flagship Olive Garden, Red Lobster and LongHorn Steakhouse restaurants. 

Analysts polled by Thomson Reuters forecast earnings of 84 cents per share on revenue of $2.03 billion.

Darden said that costs associated with the acquisition of Yard House USA, Inc., completed on August 29, adversely affected diluted net earnings per share for this year's first quarter by approximately one cent.

"We're pleased with our very solid start to the fiscal year," said chairman and CEO Clarence Otis. 

"Red Lobster's sales held up well given the exceptional same-restaurant sales results in last year's first quarter and its margins expanded, Olive Garden had meaningful sales and margin improvement and LongHorn Steakhouse and the Specialty Restaurant Group continued to have good sales momentum. 

“We also benefitted from our diverse food basket, with a decline in seafood costs on a year over year basis moderating the significant spike in the cost of beef.”

By restaurant, Olive Garden's first quarter sales were up 4.3 per cent, driven by revenue from 40 net new restaurants and a 0.3 per cent increase in U.S. same-restaurant sales. 

Darden said Red Lobster's first quarter sales fell 2.1 per cent as a result of a U.S. same-restaurant sales decrease of 2.6 per cent that was offset somewhat by revenue from six net new restaurants. 

Longhorn Steakhouse's first quarter sales were up 12.7 per cent, driven by revenue from 34 net new restaurants and a U.S. same-restaurant sales increase of 3.6 per cent.

The company said its specialty restaurant group's first quarter sales were up 26.4 per cent, driven by same-restaurant sales increases of 4.0 per cent at The Capital Grille, 1.2 per cent at Bahama Breeze and 1.3 per cent at Seasons 52.

Looking ahead to fiscal 2013, the company continues to expect that combined U.S. same-restaurant sales growth in fiscal 2013 for Red Lobster, Olive Garden and LongHorn Steakhouse will be approximately one to two per cent and that it will open approximately 100 to 110 net new restaurants in fiscal 2013, not including Yard House. 

With these same-restaurant sales and net new restaurant opening expectations and the acquisition of Yard House, the company continues to expect total sales growth in fiscal 2013 to be between nine and 10 per cent and to anticipate that diluted net earnings per share growth from continuing operations for the year will be between five and nine per cent. 

Darden Restaurants is the world's largest full-service restaurant company. It owns and operates more than 2,000 restaurants that generate over $8.0 billion in annual sales. It is headquartered in Orlando, Florida and has 185,000 employees.

Quick facts: Darden Restaurants

Price: 121.08 USD

NYSE:DRI
Market: NYSE
Market Cap: $15.78 billion
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