Darden Beats Overall - Analyst Blog
23 Marzo 2012 - 11:06AM
Zacks
Darden Restaurants Inc. (DRI) posted third
quarter fiscal 2012 earnings from continuing operation of $1.25 per
share, a penny ahead of the Zacks Consensus Estimate and above the
year-ago earnings of $1.08 per share.
Total revenue grew 9.3% from the prior-year quarter to $2,159.7
million and surpassed the Zacks Consensus Estimate of $2,144.0
million. Combined same-store sales for the company’s three core
brands, Olive Garden, Red Lobster and LongHorn Steakhouse, rose
4.1% and recorded better-than-expected growth of 2.6% as per the
Knapp-Track benchmark of U.S. same-restaurant sales.
Blended same-restaurant sales results in the quarter were
benefited by nearly 60 basis points, thanks to a shift in the
Lenten season. The upside in revenue was also led by significant
growth in Specialty Restaurant Groups unit expansion and a
comfortable winter.
Operating Highlights
By restaurant concepts, Olive Garden’s sales grew 5.5% year over
year to $957.0 million in the third quarter, driven by
contributions from 33 net new restaurants as well as a 2.0% upside
in comps growth.
Sales at Red Lobster increased 7.4% to $712.0 million
attributable to revenues from 8 net new restaurants as well as a
6.0% rise in comps.
At LongHorn Steakhouse, sales were up 16.2% at $311.0 million on
the back of a 6.7% growth in comps. Moreover, revenues from 27 net
new restaurants in the quarter also contributed to the upside.
Sales at The Specialty Restaurant Groups increased 27.8% to
$178.0 million, driven by comps growth of 5.7% at The Capital
Grille, 5.9% at Bahama Breeze and 6.1% at Seasons 52. The growth in
revenues was also backed by the addition of one new Capital Grille
restaurant, six new Seasons 52 restaurants and three new Bahama
Breeze restaurants. The addition of 11 restaurants purchased from
Eddie V's restaurants in November last year also contributed to the
growth.
Financial Position
Darden ended the quarter with cash and cash equivalents of $88.5
million and long-term debt (less current portion) of $1452.8
million. In the third quarter, the company bought back 1.8 million
shares of its common stock and declared a quarterly dividend of 43
cents per share.
Outlook
Orlando, Florida-based company foresees its sales growth for
fiscal 2012 in the range of 7% to 7.5% based on a 2.5% to 3.0%
increase in the blended same-store sales estimate for its three
core brands. However, the company has an expectation of 85 to 90
net new restaurants' opening goal for fiscal 2012 (excluding the
addition of 11 Eddie V's units). The company reaffirmed its
guidance for earnings per share from continuing operations growth
in the 4–7% range.
Our Take
We heard a clear positive tone from Darden’s recent third
quarter earnings echoed by strong numbers across all its concepts
as well as the expectation ahead. Olive Garden was a true relief in
the quarter. Darden took a set of initiatives to blow up recent
woes at the brand and succeeded at posting positive comps. On a
positive note, the flaring cost environment is also cooling off and
Darden looks forward to post strong result in the quarter
ahead.
Darden, which competes with Kona Grill Inc.
(KONA) and Brinker International Inc. (EAT),
currently retains a Zacks #3 Rank that translates into a short-term
Hold rating.
DARDEN RESTRNT (DRI): Free Stock Analysis Report
BRINKER INTL (EAT): Free Stock Analysis Report
KONA GRILL INC (KONA): Free Stock Analysis Report
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