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Darden (DRI) Q1 Earnings Beat Estimates, Revenues Miss

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Darden Restaurants, Inc. (DRI - Free Report) reported first-quarter fiscal 2021 results, wherein the bottom line surpassed the Zacks Consensus Estimate, while the top line lagged the same. The company reported better-than-expected earnings for the seventh straight quarter. Following the results, the company’s shares are down 2.2% in pre-market trading session.

The company reported adjusted earnings of 56 cents per share, beating the Zacks Consensus Estimate of earnings of 5 cents. In the prior-year quarter, the company had reported adjusted earnings per share of $1.38.

Total sales of $1,527.4 million missed the consensus mark of $1,533 million. Moreover, sales declined 28.4% from the prior-year quarter on account of negative blended same-restaurant sales of 29%. Decline was partially mitigated by the opening of 14 net new restaurants. Results in the quarter were impacted by the coronavirus pandemic.

Sales by Segments

Darden reports business under four segments — Olive Garden, LongHorn Steakhouse, Fine Dining that includes The Capital Grille and Eddie V's, and Other Business.

Sales at Olive Garden decreased 27.7% year over year to $788.2 million. Comps slumped 28.2% at the segment, compared with the prior-quarter’s comp decline of 8.6%.

Sales at Fine Dining declined 38.9% to $83.1 million. Comps fell 39.1% at the segment.

Sales at Other Business slumped 38.9% year over year to $279.3 million. Moreover, comps Other Business plunged 39%.

At LongHorn Steakhouse, sales were down 16.3% to $376.8 million. Comps at the segment decreased 18.1%, compared with comps decline of 8.1% in the year-ago quarter.

Operating Highlights & Net Income

In the fiscal first quarter, total operating costs and expenses decreased 23.9% year over year to $1,470.8 million. The decline was owing to an overall decrease in food and beverage costs, restaurant expenses, and labor costs.

Darden Restaurants, Inc. Price, Consensus and EPS Surprise Darden Restaurants, Inc. Price, Consensus and EPS Surprise

Darden Restaurants, Inc. price-consensus-eps-surprise-chart | Darden Restaurants, Inc. Quote

Balance Sheet

Cash and cash equivalents as of Aug 30, 2020, totaled $654.6 million, down from $763.3 million as of May 31, 2020.

Inventories totaled $190.1 million at the end of the reported quarter. Long-term debt as of Aug 30, 2020, was $929.1 million, up from $928.8 million as of May 31, 2020.

The company declared quarterly cash dividend of 30 cents per share, payable on Nov 2, 2020 to shareholders of record as of Oct 9, 2020.

Q2 Guidance

The company expects total sales of nearly 82% of prior-year sales. EBITDA is anticipated in the range of $200 million to $215 million. Earnings per share from continuing operations are anticipated to be 65-75 cents.

The company expects to open 35-40 net new restaurants and total capital spending of $250 to $300 million in fiscal 2021.

Zacks Rank & Key Picks

Darden currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Some better-ranked stocks in the same space include Brinker International, Inc. (EAT - Free Report) , BJ's Restaurants, Inc. (BJRI - Free Report) and Chuy's Holdings, Inc. (CHUY - Free Report) . Papa John's and Chuy's Holdings Brinker sports a Zacks Rank #1, while BJ's Restaurants and Chuy's Holdings carry a Zacks Rank #2 (Buy).

Brinker has a three-five year earnings per share growth rate of 11.4%.

BJ's Restaurants has a trailing four-quarter earnings surprise of 54.9%, on average.

Chuy's Holdings 2021 earnings are expected to surge 133.8%.

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