This page is temporarily not available. Please check later as it should be available shortly. If you have any questions, please email customer support at firstname.lastname@example.org or call 800-767-3771 ext. 9339.
Darden Restaurants Inc. (DRI - Analyst Report) posted third-quarter fiscal 2013 earnings from continuing operation of $1.02 per share, missing the Zacks Consensus Estimate by a penny. Earnings in the quarter were also down 18% from the year-ago level.
The company owns and operates restaurant chains such as Red Lobster, Olive Garden, LongHorn Steakhouse and The Specialty Restaurant Group.
Total revenues grew 4.6% year over year to $2.3 billion, in line with the Zacks Consensus Estimate. Quarterly revenues were driven by same-store sales (comps) growth of 2.3% at Darden’s Specialty Restaurant Group, new unit openings, and higher sales gain from the company’s previously acquired Yard House restaurants.
However, combined comps from the company’s other three core brands – Olive Garden, Red Lobster and LongHorn Steakhouse – were down 4.6%.
Olive Garden’s sales inched up 0.6% year over year to $962 million in the third quarter, buoyed by contributions from 42 new units. However, negative U.S. comps of 4.1% were a headwind.
Sales at Red Lobster decreased 6.0% to $669 million due to a 6.6% decline in U.S. comps. However, the sales decline was partly mitigated by revenue gains from the segment’s three new units.
At LongHorn Steakhouse, sales were up 6.9% to $332 million as 42 net new restaurants contributed to the upside. However, negative comps of 1.6% provided a partial offset.
Sales at The Specialty Restaurant Group jumped 61.1% to $287 million, backed by higher sales gain from 40 Yard House restaurants and newly opened units. Though the rise in comps at The Capital Grille, Eddie V's and Seasons 52 drove sales at The Specialty Restaurant Group, negative comps of 0.3% at Bahama Breeze proved to be a drag on the momentum.
Darden ended the quarter with cash and cash equivalents of $103.9 million versus $61.4 million in the previous quarter. Long-term debt (less current portion) remained nearly flat year over year at $2.5 billion in the third quarter.
Darden reiterated its guidance for fiscal 2013. Darden expects that its fiscal 2013 sales will grow in the range of 6%-7% based on a negative 1.5%-2.5% blended same-store sales growth estimate for its three core brands, Red Lobster, Olive Garden and LongHorn Steakhouse. However, sales in fiscal 2013 are expected to get a boost from the company’s Yard House restaurants and new unit openings.
The company projects earnings from continuing operations in the range of $3.06 and $3.22 per share for fiscal 2013. The earnings guidance includes the costs associated with the acquisition of Yard House of 9 cents.
Continuous slowdown in comps in three of Darden’s restaurant concepts during the past two quarters reflects wavering consumer confidence in the U.S. Moreover, the performance of Olive Garden and Red Lobster in the third quarter was weak. The Specialty Restaurant Group however came as a relief in the quarter.
In the end, the initiatives undertaken by Darden helped in posting positive comps. However, Darden’s sustained effect is still to be seen.
Darden currently carries a Zacks Rank #5 (Strong Sell). Other stocks in the restaurant industry that are currently performing well include Burger King Worldwide, Inc. (BKW - Analyst Report), Jack in the Box Inc. (JACK - Snapshot Report) and Cracker Barrel Old Country Store, Inc. (CBRL - Snapshot Report). All these companies carry a Zacks Rank #2 (Buy).