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Darden (DRI) Q1 Earnings Match Estimates, Revenues Miss

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Darden Restaurants, Inc. (DRI - Free Report) reported first-quarter fiscal 2023 results, with earnings meeting the Zacks Consensus Estimate and revenues missing the same. The top line rose year over year, while the bottom line declined year over year. Following the results, the company’s shares dropped 2.5% in the pre-market trading session.

Darden President & CEO Rick Cardenas, stated, "I am pleased with the performance of all our brands in what remains a challenging inflationary and uncertain macroeconomic environment. We had a solid quarter and we saw more normal seasonality return to our business, which we did not experience last year.”

Earnings & Revenues

During the fiscal first quarter, Darden reported adjusted earnings per share (EPS) of $1.56, in line with the Zacks Consensus Estimate. In the prior-year quarter, DRI had reported an adjusted EPS of $1.76.

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

 

Total sales during the quarter came in at $2,446.1 million, missing the consensus mark of $2,470 million by 1%. Sales increased 6.1% from the prior-year quarter’s level on solid blended same-restaurant sales of 4.2%. The opening of 34 net new restaurants added to the positives.

Sales by Segments

Darden reports business under four segments, Olive Garden, LongHorn Steakhouse, Fine Dining and Other Business.

During the fiscal first quarter, sales at Olive Garden increased 3.7% year over year to $1,130.7 million. Comps in the segment rose 2.3% year over year compared with a 6.5% growth reported in the previous quarter.

At LongHorn Steakhouse, sales were up 6.6% year over year to $604.6 million. Comps in the segment climbed 4.2% year over year compared with a 10.6% growth reported in the previous quarter.

Sales in Fine Dining soared 8.6% year over year to $183.4 million. Comps in the segment increased 7.6% year over year compared with a 34.5% growth reported in the previous quarter.

Sales at Other Business rose 9.9% year over year to $527.4 million. Comps in the Other Business rose 7.6% year over year compared with an 18.5% increase reported in the previous quarter.

Operating Highlights

In the fiscal first quarter, total operating costs and expenses increased 8.7% year over year to $2,201.9 million. This escalation was primarily due to a rise in food and beverage costs, restaurant expenses and labor costs.

Balance Sheet

As of Aug 28, 2022, cash and cash equivalents came in at $377.5 million compared with $420.6 million as of May 29, 2022.

Inventories during the fiscal first quarter came in at $273.1 million compared with $270.6 in the previous quarter. Long-term debt as of Aug 28, 2022, was $895.1 million compared with $901 million as of May 29, 2022.

During the fiscal first quarter, Darden’s board of directors repurchased 1.7 million shares of its common stock worth approximately $199 million. As of Aug 28, the company stated the availability of approximately $912 million under the $1 billion repurchase program.

Meanwhile, the company declared a quarterly cash dividend of $1.21 per share. The dividend will be payable on Nov 1, 2022, to shareholders of record as of Oct 10, 2022.

Fiscal 2023 Outlook

For fiscal 2023, the company expects sales to be approximately $10.2-$10.4 billion. Same-restaurant sales in fiscal 2023 are anticipated to be 4-6%. EPS from continuing operations are anticipated in the band of $7.40-$8. Its mid-point of $7.7 is in line with the Zacks Consensus Estimate.

The company expects to open 55-60 net new restaurants and projects total capital spending of $500-$550 million in fiscal 2023.

Zacks Rank & Key Picks

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

Some better-ranked stocks in the Zacks Retail-Wholesale sector are Tecnoglass Inc. (TGLS - Free Report) , Cracker Barrel Old Country Store, Inc. (CBRL - Free Report) and Arcos Dorados Holdings Inc. (ARCO - Free Report) .

Tecnoglass sports a Zacks Rank #1. The company has a trailing four-quarter earnings surprise of 24.4%, on average. Shares of the company have increased 20.8% in the past three months.

The Zacks Consensus Estimate for Tecnoglass 2022 sales and EPS suggests growth of 28.2% and 47.7%, respectively, from the year-ago period’s levels.

Cracker Barrel carries a Zacks Rank #2 (Buy). Cracker Barrel has a long-term earnings growth of 6.9%. Shares of the company have increased 24.3% in the past three months.

The Zacks Consensus Estimate for Cracker Barrel’s 2022 sales and EPS suggests growth of 16.3% and 15.4%, respectively, from the year-ago period’s levels.

Arcos Dorados carries a Zacks Rank #2. Arcos Dorados has a long-term earnings growth of 34.4%. Shares of the company have increased 5.3% in the past three months.

The Zacks Consensus Estimate for Arcos Dorados’ 2022 sales and EPS suggests growth of 27.1% and 104.2%, respectively, from the year-ago period’s levels.