Darden Restaurants Inc. (DRI - Free Report) posted third quarter fiscal 2012 earnings from continuing operation of $1.25 per share, a penny ahead of the Zacks Consensus Estimate and above the year-ago earnings of $1.08 per share.
Total revenue grew 9.3% from the prior-year quarter to $2,159.7 million and surpassed the Zacks Consensus Estimate of $2,144.0 million. Combined same-store sales for the company’s three core brands, Olive Garden, Red Lobster and LongHorn Steakhouse, rose 4.1% and recorded better-than-expected growth of 2.6% as per the Knapp-Track benchmark of U.S. same-restaurant sales.
Blended same-restaurant sales results in the quarter were benefited by nearly 60 basis points, thanks to a shift in the Lenten season. The upside in revenue was also led by significant growth in Specialty Restaurant Groups unit expansion and a comfortable winter.
By restaurant concepts, Olive Garden’s sales grew 5.5% year over year to $957.0 million in the third quarter, driven by contributions from 33 net new restaurants as well as a 2.0% upside in comps growth.
Sales at Red Lobster increased 7.4% to $712.0 million attributable to revenues from 8 net new restaurants as well as a 6.0% rise in comps.
At LongHorn Steakhouse, sales were up 16.2% at $311.0 million on the back of a 6.7% growth in comps. Moreover, revenues from 27 net new restaurants in the quarter also contributed to the upside.
Sales at The Specialty Restaurant Groups increased 27.8% to $178.0 million, driven by comps growth of 5.7% at The Capital Grille, 5.9% at Bahama Breeze and 6.1% at Seasons 52. The growth in revenues was also backed by the addition of one new Capital Grille restaurant, six new Seasons 52 restaurants and three new Bahama Breeze restaurants. The addition of 11 restaurants purchased from Eddie V's restaurants in November last year also contributed to the growth.
Darden ended the quarter with cash and cash equivalents of $88.5 million and long-term debt (less current portion) of $1452.8 million. In the third quarter, the company bought back 1.8 million shares of its common stock and declared a quarterly dividend of 43 cents per share.
Orlando, Florida-based company foresees its sales growth for fiscal 2012 in the range of 7% to 7.5% based on a 2.5% to 3.0% increase in the blended same-store sales estimate for its three core brands. However, the company has an expectation of 85 to 90 net new restaurants' opening goal for fiscal 2012 (excluding the addition of 11 Eddie V's units). The company reaffirmed its guidance for earnings per share from continuing operations growth in the 4–7% range.
We heard a clear positive tone from Darden’s recent third quarter earnings echoed by strong numbers across all its concepts as well as the expectation ahead. Olive Garden was a true relief in the quarter. Darden took a set of initiatives to blow up recent woes at the brand and succeeded at posting positive comps. On a positive note, the flaring cost environment is also cooling off and Darden looks forward to post strong result in the quarter ahead.
Darden, which competes with Kona Grill Inc. (KONA - Free Report) and Brinker International Inc. (EAT - Free Report) , currently retains a Zacks #3 Rank that translates into a short-term Hold rating.
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