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Darden (DRI) Q3 Earnings & Revenues Lag Estimates, Rise Y/Y
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Darden Restaurants, Inc. (DRI - Free Report) reported dismal third-quarter fiscal 2024 results, with earnings and revenues missing the Zacks Consensus Estimate. The metrics increased on a year-over-year basis.
Following the results, the stock dropped 4.3% in the pre-market trading session. Negative investor sentiments were witnessed as DRI provided a lower-than-expected sales outlook for fiscal 2024. Management cited concerns relating to a challenging operating environment.
Earnings & Revenues
During the fiscal third quarter, Darden reported adjusted earnings per share (EPS) of $2.62, missing the Zacks Consensus Estimate of $2.63. In the prior-year quarter, DRI reported an adjusted EPS of $2.34.
Darden Restaurants, Inc. Price, Consensus and EPS Surprise
Total sales during the quarter came in at $2.9 billion, missing the consensus mark of $3 billion. Sales increased 6.8% from the prior-year quarter’s level. The upside was backed by strong contributions from the addition of 79 company-owned Ruth's Chris Steak House (Ruth's Chris) restaurants and 53 other net new restaurants. This was partially offset by a blended same-restaurant sales decline of 1%.
Sales by Segments
Darden reports business under four segments — Olive Garden, LongHorn Steakhouse, Fine Dining, including The Capital Grille and Eddie V's and Other Business.
During the fiscal third quarter, sales at Olive Garden increased 0.7% year over year to $1.3 billion. Our estimate for the metric was $1.3 billion. Comps in the segment dropped 1.8% year over year against 4.1% growth reported in the previous quarter.
At LongHorn Steakhouse, sales were up 5.1% year over year to $730.7 million. Our estimate for the metric was $725.8 million. Comps in the segment rose 2.3% year over year compared with a 4.9% growth reported in the previous quarter.
Sales in Fine Dining increased 58.3% year over year to $372.9 million. Our estimate for the metric was $405 million. Comps in the segment dropped 2.3% year over year compared with a 1.7% fall reported in the previous quarter.
Sales at Other Business rose 1.3% year over year to $561 million. Our estimate for the metric was $589.7 million. Comps in the Other Business declined 2.6% year over year compared with a 1.1% fall reported in the previous quarter.
Operating Highlights
In the fiscal third quarter, total operating costs and expenses increased 6.2% year over year to $2.6 billion. The upside was primarily due to increased food and beverage costs, restaurant expenses and labor costs. The figure compares to our projection of $2.6 billion.
Balance Sheet
As of Feb 25, 2024, cash and cash equivalents came in at $243.9 million compared with $195.7 million as of Nov 26, 2023.
During the fiscal third quarter, inventories came in at $298.2 million compared with $310.6 million reported in the previous quarter. As of Feb 25, 2024, long-term debt was $1.3 billion compared with $1.4 billion as of Nov 26, 2023.
During the fiscal third quarter, Darden’s board of directors repurchased approximately 0.2 million shares of its common stock, worth approximately $33 million. During the quarter, the company initiated a new $1-billion repurchase program, replacing the previously existing share repurchase authorization. The program has no set expiration date.
Darden declared a quarterly cash dividend of $1.31 per share. The dividend will be payable on May 1, 2024, to shareholders of record as of Apr 10, 2024.
Updated Fiscal 2024 Outlook
For fiscal 2024, the company expects total sales to be approximately $11.4 billion compared with the previous projection of $11.5 billion. Same-restaurant sales growth in fiscal 2024 is anticipated to be in the range of 1.5-2% year over year from the previous expectation of 2.5-3%. EPS from continuing operations are anticipated in the band of $8.80-$8.90 compared with the previous guidance of $8.75-$8.90. Its mid-point of $8.85 is lower than the Zacks Consensus Estimate of $8.86.
The company expects to open 50-55 net new restaurants and projects a total capital spending of $600 million in fiscal 2024.
Zacks Rank & Key Picks
Darden currently carries a Zacks Rank #3 (Hold).
Some better-ranked stocks in the Zacks Retail-Wholesale sector include:
The Zacks Consensus Estimate for EAT’s 2024 sales and EPS indicates 4.9% and 30.4% growth, respectively, from the year-ago period’s levels.
Texas Roadhouse, Inc. (TXRH - Free Report) carries a Zacks Rank #2 (Buy). It has a trailing four-quarter negative earnings surprise of 3.9%, on average. The stock has gained 45.4% in the past year.
The Zacks Consensus Estimate for TXRH’s 2024 sales and EPS suggests rises of 14.1% and 25.8%, respectively, from the year-ago period’s levels.
Shake Shack Inc. (SHAK - Free Report) carries a Zacks Rank #2. It has a trailing four-quarter earnings surprise of 92.6%, on average. SHAK’s shares have surged 97.8% in the past year.
The Zacks Consensus Estimate for SHAK’s 2024 sales and EPS indicates 14.6% and 91.9% growth, respectively, from the year-ago period’s levels.
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Darden (DRI) Q3 Earnings & Revenues Lag Estimates, Rise Y/Y
Darden Restaurants, Inc. (DRI - Free Report) reported dismal third-quarter fiscal 2024 results, with earnings and revenues missing the Zacks Consensus Estimate. The metrics increased on a year-over-year basis.
Following the results, the stock dropped 4.3% in the pre-market trading session. Negative investor sentiments were witnessed as DRI provided a lower-than-expected sales outlook for fiscal 2024. Management cited concerns relating to a challenging operating environment.
Earnings & Revenues
During the fiscal third quarter, Darden reported adjusted earnings per share (EPS) of $2.62, missing the Zacks Consensus Estimate of $2.63. In the prior-year quarter, DRI reported an adjusted EPS of $2.34.
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 $2.9 billion, missing the consensus mark of $3 billion. Sales increased 6.8% from the prior-year quarter’s level. The upside was backed by strong contributions from the addition of 79 company-owned Ruth's Chris Steak House (Ruth's Chris) restaurants and 53 other net new restaurants. This was partially offset by a blended same-restaurant sales decline of 1%.
Sales by Segments
Darden reports business under four segments — Olive Garden, LongHorn Steakhouse, Fine Dining, including The Capital Grille and Eddie V's and Other Business.
During the fiscal third quarter, sales at Olive Garden increased 0.7% year over year to $1.3 billion. Our estimate for the metric was $1.3 billion. Comps in the segment dropped 1.8% year over year against 4.1% growth reported in the previous quarter.
At LongHorn Steakhouse, sales were up 5.1% year over year to $730.7 million. Our estimate for the metric was $725.8 million. Comps in the segment rose 2.3% year over year compared with a 4.9% growth reported in the previous quarter.
Sales in Fine Dining increased 58.3% year over year to $372.9 million. Our estimate for the metric was $405 million. Comps in the segment dropped 2.3% year over year compared with a 1.7% fall reported in the previous quarter.
Sales at Other Business rose 1.3% year over year to $561 million. Our estimate for the metric was $589.7 million. Comps in the Other Business declined 2.6% year over year compared with a 1.1% fall reported in the previous quarter.
Operating Highlights
In the fiscal third quarter, total operating costs and expenses increased 6.2% year over year to $2.6 billion. The upside was primarily due to increased food and beverage costs, restaurant expenses and labor costs. The figure compares to our projection of $2.6 billion.
Balance Sheet
As of Feb 25, 2024, cash and cash equivalents came in at $243.9 million compared with $195.7 million as of Nov 26, 2023.
During the fiscal third quarter, inventories came in at $298.2 million compared with $310.6 million reported in the previous quarter. As of Feb 25, 2024, long-term debt was $1.3 billion compared with $1.4 billion as of Nov 26, 2023.
During the fiscal third quarter, Darden’s board of directors repurchased approximately 0.2 million shares of its common stock, worth approximately $33 million. During the quarter, the company initiated a new $1-billion repurchase program, replacing the previously existing share repurchase authorization. The program has no set expiration date.
Darden declared a quarterly cash dividend of $1.31 per share. The dividend will be payable on May 1, 2024, to shareholders of record as of Apr 10, 2024.
Updated Fiscal 2024 Outlook
For fiscal 2024, the company expects total sales to be approximately $11.4 billion compared with the previous projection of $11.5 billion. Same-restaurant sales growth in fiscal 2024 is anticipated to be in the range of 1.5-2% year over year from the previous expectation of 2.5-3%. EPS from continuing operations are anticipated in the band of $8.80-$8.90 compared with the previous guidance of $8.75-$8.90. Its mid-point of $8.85 is lower than the Zacks Consensus Estimate of $8.86.
The company expects to open 50-55 net new restaurants and projects a total capital spending of $600 million in fiscal 2024.
Zacks Rank & Key Picks
Darden currently carries a Zacks Rank #3 (Hold).
Some better-ranked stocks in the Zacks Retail-Wholesale sector include:
Brinker International, Inc. (EAT - Free Report) sports a Zacks Rank #1 (Strong Buy). The company has a trailing four-quarter earnings surprise of 212.7% on average. Shares of EAT have surged 26.2% in the past year. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The Zacks Consensus Estimate for EAT’s 2024 sales and EPS indicates 4.9% and 30.4% growth, respectively, from the year-ago period’s levels.
Texas Roadhouse, Inc. (TXRH - Free Report) carries a Zacks Rank #2 (Buy). It has a trailing four-quarter negative earnings surprise of 3.9%, on average. The stock has gained 45.4% in the past year.
The Zacks Consensus Estimate for TXRH’s 2024 sales and EPS suggests rises of 14.1% and 25.8%, respectively, from the year-ago period’s levels.
Shake Shack Inc. (SHAK - Free Report) carries a Zacks Rank #2. It has a trailing four-quarter earnings surprise of 92.6%, on average. SHAK’s shares have surged 97.8% in the past year.
The Zacks Consensus Estimate for SHAK’s 2024 sales and EPS indicates 14.6% and 91.9% growth, respectively, from the year-ago period’s levels.