01—Abstract
Summary
Summary of the 10-K filed July 21, 2017. Cited figures are marked; the original filing is the authoritative source.
Darden Restaurants, Inc.'s 2017 10-K filing details a year of significant growth and strategic acquisition, highlighted by the $799 milliona purchase of Cheddar's Scratch Kitchen.
This acquisition substantially expanded the company's footprint, adding 140 company-owned and 25 franchised locations. Financially, Darden demonstrated robust performance with a 3.4% increase in sales from continuing operations, reaching $7.17 billionb, driven by a 1.8% same-restaurant sales increase (excluding Cheddar's) and new unit development. Net earnings from continuing operations saw a substantial 34.1% rise to $482.5 million, with diluted EPS increasing by 37.8% to $3.83, reflecting improved operational efficiencies and strategic brand management across its portfolio, which includes Olive Garden, LongHorn Steakhouse, and a growing fine dining segment.
Darden also provided a positive outlook for fiscal 2018, projecting same-restaurant sales growth of 1.0%c to 2.0% and overall sales growth of 11.5% to 13.0%, supported by plans to open 35-40 new restaurants. The company continued its commitment to shareholder returns through dividends and share repurchases, signaling financial strength and confidence in its ongoing growth strategy. The acquisition of Cheddar's is expected to be integrated into Darden's operational model in fiscal 2018, with management anticipating positive contributions and synergies.
02—Key points
Key Highlights
- Acquisition of Cheddar's Scratch Kitchen for $799 million, adding 140 company-owned and 25 franchised restaurants.
- Total sales from continuing operations increased by 3.4% to $7.17 billion in fiscal 2017.
- Same-restaurant sales (excluding Cheddar's) increased by 1.8%, driven by a combination of increased average check and guest counts.
- Net earnings from continuing operations grew by 34.1% to $482.5 million, with diluted EPS up 37.8% to $3.83.
- Company plans to open 35-40 new restaurants in fiscal 2018, including Cheddar's locations.
- Outlook for fiscal 2018 projects sales growth of 11.5%-13.0% and same-restaurant sales growth of 1.0%-2.0%.
- Continued commitment to shareholder returns through dividends ($2.24 per share in fiscal 2017) and share repurchases ($469.8 million remaining under the current program).
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2017, Darden Restaurants Inc kept $0.07.
- Revenue$7.17B100.0%
- Cost of revenue−$5.84B81.5%
- Gross profit$1.33B18.5%
- Operating costs−$652.2M9.1%
- Operating income$677.5M9.4%
- Interest, other & tax−$198.4M2.8%
- Net income$479.1M6.7%
Where FY2017 revenue went
$7.17B- Cost of revenue: $5.84B, 81% of revenue
- Net income: $479.1M, 6.7% of revenue
- Operating costs: $652.2M, 9.1% of revenue
- Interest, other & tax: $198.4M, 2.8% of revenue
Kept 6.7% as net incomeNet income $479.1M · 6.7%
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2017filed July 21, 2017Financial Statements
FY2017 against FY2016
| Line item | FY2017FY2016 | Change |
|---|---|---|
| Revenue | $7.17B$6.93B | +3.4% |
| Gross Profit | $1.33B$1.30B | +2.0% |
| Operating Expenses | $6.49B$6.31B | +2.9% |
| Operating Income | $677.50M$622.20M | +8.9% |
| Interest Expense | $34.40M$165.40M | −79.2% |
| Net Income | $479.10M$375.00M | +27.8% |
| EPS (Basic) | $3.85$2.94 | +31.0% |
| EPS (Diluted) | $3.80$2.90 | +31.0% |
| Shares Outstanding (Basic) | 124.30M127.40M | −2.4% |
| Shares Outstanding (Diluted) | 126.00M129.30M | −2.6% |
05—Questions
Frequently Asked Questions
What was the impact of the Cheddar's Scratch Kitchen acquisition?
The acquisition of Cheddar's Scratch Kitchen on April 24, 2017, for $799.0 million, significantly expanded Darden's restaurant portfolio by adding 140 company-owned and 25 franchised locations. The results of Cheddar's were included in Darden's financial statements from the acquisition date, contributing to the overall sales growth. Darden plans to integrate Cheddar's operations into its existing model in fiscal 2018.
How did Darden's major brands perform in terms of sales growth?
Olive Garden saw a 2.6% sales increase, driven by a 2.6% same-restaurant sales increase (2.4% average check, 0.2% guest count). LongHorn Steakhouse reported a 2.2% sales increase, with a 2.2% same-restaurant sales increase (1.6% average check, -0.4% guest count). The 'Other Business' segment, including Yard House, Bahama Breeze, and Seasons 52, experienced a 6.7% sales increase, largely due to new unit growth and positive same-restaurant sales at several brands, partially offset by a decrease at Yard House.
What is Darden's outlook for fiscal year 2018?
Darden anticipates combined same-restaurant sales to increase between 1.0% and 2.0% in fiscal 2018. Total sales from continuing operations are projected to grow between 11.5% and 13.0%, reflecting the full-year impact of Cheddar's and new restaurant openings. The company plans to open approximately 35 to 40 new restaurants and expects capital expenditures to be between $400 million and $450 million.
How did Darden manage its costs and expenses in fiscal 2017?
Darden improved its operating efficiency, with total operating costs and expenses decreasing as a percentage of sales to 90.6% from 91.0% in the prior year. Key improvements included lower food and beverage costs (28.9% of sales vs. 29.4%), flat restaurant labor costs (31.6% of sales), and reduced general and administrative expenses (5.4% of sales vs. 5.5%). Restaurant expenses as a percentage of sales increased slightly to 17.6% from 16.8%, primarily due to higher rent expenses related to real estate transactions.
06—Continue