We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
Here's Why You Should Retain Darden (DRI) in Your Portfolio
Read MoreHide Full Article
Darden Restaurants, Inc. (DRI - Free Report) is likely to benefit from technological enhancements, an off-premise business model and the LongHorn business. Also, the emphasis on culinary innovation bodes well. However, inflationary pressures are a concern.
Let’s discuss the factors highlighting why investors should retain the stock for the time being.
Factors Driving Growth
Darden focuses on technological enhancements to drive growth. In fiscal 2022, the company implemented new technological platforms, paving the path for improved digital engagement and strengthening marketing and analytics capabilities. Also, it continued improving its online and mobile ordering system (for Olive Garden and LongHorn Steakhouse) and accelerating the rollout of online and mobile ordering and payment systems across other brands. The company emphasized on developing sophisticated customer relationship management programs, data analytics, and data-driven marketing approaches to target existing and potential guests across its portfolio of brands. The initiative allows the company to tailor messages and offerings depending on guest visit history, preferences and brand loyalty. DRI remains optimistic in this regard and anticipates the initiatives to boost restaurant value across its brands.
Darden continues to benefit from its robust off-premise sales. During first-quarter fiscal 2023, off-premise sales contributed more than 24% to total sales at Olive Garden, 14% at LongHorn and 13% at Cheddar's Scratch Kitchen. Notably, the company has been benefitting from technological enhancements regarding online ordering and To Go capacity management. Given the solid feedback on account of enhanced customer experience and reduced friction, the company expects off-premise sales to remain elevated for some time. The company intends to revamp its point-of-sale system to boost guest experience and manage off-premise offerings. Also, it emphasizes on culinary innovation, attentive service, guest engagement and integrated marketing efforts to drive growth.
Increased focus on LongHorn business bodes well. The company strives to attract its guests by focusing on the core menu and culinary innovation and providing regional flavors. It is also working on its marketing strategy to improve execution, customer relationship management and digital advertising. It has a strong promotional pipeline that leverages the segment’s expertise. The company is focused on strengthening its in-restaurant execution through investments in quality, improving staffing levels and simplifying operations to enhance the guest experience. During the fiscal first quarter, sales at LongHorn were up 6.6% year over year to $604.6 million. Sales are supported by various initiatives and personalized services, which are likely to drive long-term growth.
Image Source: Zacks Investment Research
Shares of Darden have gained 13.1% in the past three months compared with the industry’s 2.9% growth.
Concerns
Despite solid cost management, higher labor costs due to increased wages are expected to keep profits under pressure. Also, the company anticipates inflationary costs to persist for the remainder of the year.
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 (driven by commodities inflation of 15%), restaurant expenses (owing to supply chain challenges and utilities inflation of 16%) and labor costs (owing to labor inflation of 7.5%). For fiscal 2023, the company expects total inflation of 6%, commodities inflation of approximately 7% and total restaurant labor inflation of 8%, including hourly wage inflation.
Some better-ranked stocks in the Zacks Retail – Restaurants industry are Wingstop Inc. (WING - Free Report) , Chuy's Holdings, Inc. (CHUY - Free Report) and Chipotle Mexican Grill, Inc. (CMG - Free Report) .
Wingstop sports a Zacks Rank #1. WING has a long-term earnings growth rate of 11%. Shares of WING have declined 9.6% in the past year.
The Zacks Consensus Estimate for Wingstop’s 2023 sales and EPS suggests growth of 18.1% and 16.4%, respectively, from the comparable year-ago period’s levels.
Chuy’s Holdings currently carries a Zacks Rank #2 (Buy). CHUY has a trailing four-quarter earnings surprise of 18.6%, on average. Shares of CHUY have increased 5.4% in the past year.
The Zacks Consensus Estimate for Chuy’s Holdings 2023 sales and EPS suggests growth of 8.6% and 11.7%, respectively, from the corresponding year-ago period’s levels.
Chipotle currently carries a Zacks Rank #2. CMG has a trailing four-quarter earnings surprise of 4.1%, on average. The stock has declined 14.9% in the past year.
The Zacks Consensus Estimate for Chipotle’s 2022 sales and EPS suggests growth of 15.1% and 31%, respectively, from the corresponding year-ago period’s levels.
Unique Zacks Analysis of Your Chosen Ticker
Pick one free report - opportunity may be withdrawn at any time
Image: Bigstock
Here's Why You Should Retain Darden (DRI) in Your Portfolio
Darden Restaurants, Inc. (DRI - Free Report) is likely to benefit from technological enhancements, an off-premise business model and the LongHorn business. Also, the emphasis on culinary innovation bodes well. However, inflationary pressures are a concern.
Let’s discuss the factors highlighting why investors should retain the stock for the time being.
Factors Driving Growth
Darden focuses on technological enhancements to drive growth. In fiscal 2022, the company implemented new technological platforms, paving the path for improved digital engagement and strengthening marketing and analytics capabilities. Also, it continued improving its online and mobile ordering system (for Olive Garden and LongHorn Steakhouse) and accelerating the rollout of online and mobile ordering and payment systems across other brands. The company emphasized on developing sophisticated customer relationship management programs, data analytics, and data-driven marketing approaches to target existing and potential guests across its portfolio of brands. The initiative allows the company to tailor messages and offerings depending on guest visit history, preferences and brand loyalty. DRI remains optimistic in this regard and anticipates the initiatives to boost restaurant value across its brands.
Darden continues to benefit from its robust off-premise sales. During first-quarter fiscal 2023, off-premise sales contributed more than 24% to total sales at Olive Garden, 14% at LongHorn and 13% at Cheddar's Scratch Kitchen. Notably, the company has been benefitting from technological enhancements regarding online ordering and To Go capacity management. Given the solid feedback on account of enhanced customer experience and reduced friction, the company expects off-premise sales to remain elevated for some time. The company intends to revamp its point-of-sale system to boost guest experience and manage off-premise offerings. Also, it emphasizes on culinary innovation, attentive service, guest engagement and integrated marketing efforts to drive growth.
Increased focus on LongHorn business bodes well. The company strives to attract its guests by focusing on the core menu and culinary innovation and providing regional flavors. It is also working on its marketing strategy to improve execution, customer relationship management and digital advertising. It has a strong promotional pipeline that leverages the segment’s expertise. The company is focused on strengthening its in-restaurant execution through investments in quality, improving staffing levels and simplifying operations to enhance the guest experience. During the fiscal first quarter, sales at LongHorn were up 6.6% year over year to $604.6 million. Sales are supported by various initiatives and personalized services, which are likely to drive long-term growth.
Image Source: Zacks Investment Research
Shares of Darden have gained 13.1% in the past three months compared with the industry’s 2.9% growth.
Concerns
Despite solid cost management, higher labor costs due to increased wages are expected to keep profits under pressure. Also, the company anticipates inflationary costs to persist for the remainder of the year.
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 (driven by commodities inflation of 15%), restaurant expenses (owing to supply chain challenges and utilities inflation of 16%) and labor costs (owing to labor inflation of 7.5%). For fiscal 2023, the company expects total inflation of 6%, commodities inflation of approximately 7% and total restaurant labor inflation of 8%, including hourly wage inflation.
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 Zacks Retail – Restaurants industry are Wingstop Inc. (WING - Free Report) , Chuy's Holdings, Inc. (CHUY - Free Report) and Chipotle Mexican Grill, Inc. (CMG - Free Report) .
Wingstop sports a Zacks Rank #1. WING has a long-term earnings growth rate of 11%. Shares of WING have declined 9.6% in the past year.
The Zacks Consensus Estimate for Wingstop’s 2023 sales and EPS suggests growth of 18.1% and 16.4%, respectively, from the comparable year-ago period’s levels.
Chuy’s Holdings currently carries a Zacks Rank #2 (Buy). CHUY has a trailing four-quarter earnings surprise of 18.6%, on average. Shares of CHUY have increased 5.4% in the past year.
The Zacks Consensus Estimate for Chuy’s Holdings 2023 sales and EPS suggests growth of 8.6% and 11.7%, respectively, from the corresponding year-ago period’s levels.
Chipotle currently carries a Zacks Rank #2. CMG has a trailing four-quarter earnings surprise of 4.1%, on average. The stock has declined 14.9% in the past year.
The Zacks Consensus Estimate for Chipotle’s 2022 sales and EPS suggests growth of 15.1% and 31%, respectively, from the corresponding year-ago period’s levels.