10-KPeriod: FY2018

DARDEN RESTAURANTS INC Annual Report, Year Ended May 27, 2018

Filed July 20, 2018For Securities:DRI

Summary

Darden Restaurants, Inc. (DRI) reported strong performance in its fiscal year 2018, which ended May 27, 2018. The company saw a significant increase in sales, primarily driven by the acquisition of Cheddar's Scratch Kitchen and positive same-restaurant sales growth across its portfolio. Net earnings from continuing operations also saw a substantial increase, reflecting improved operational efficiency and the benefits of the Tax Cuts and Jobs Act. Looking ahead, Darden anticipates continued sales growth in fiscal year 2019, supported by new restaurant openings and sustained same-restaurant sales increases. The company is committed to returning value to shareholders through dividends and share repurchases, further demonstrating financial strength and confidence in its business strategy. Investors can look to Darden's diversified brand portfolio and focus on operational excellence as key drivers of future performance.

Financial Highlights

55 data points
Beta

Revenue

$8.08B

18.5% Gross Margin

Net Income

$596.00M

7.4% Net Margin

EPS (Diluted)

$4.73

Total Assets

$5.47B

Cash & Equivalents

$146.90M

Free Cash Flow

$623.80M

Financial Statements
Beta
Revenue$8.08B
Gross Profit$1.49B
Operating Expenses$7.31B
Operating Income$766.80M
Interest Expense$152.40M
Net Income$596.00M
EPS (Basic)$4.81
EPS (Diluted)$4.73
Shares Outstanding (Basic)124.00M
Shares Outstanding (Diluted)126.00M

Key Highlights

  • 1Total sales increased by 12.7% to $8.08 billion in fiscal year 2018, driven by the acquisition of Cheddar's Scratch Kitchen and same-restaurant sales growth.
  • 2Net earnings from continuing operations grew by 25.1% to $603.8 million, or $4.79 per diluted share.
  • 3The company added 51 net new company-owned restaurants in fiscal 2018, with plans to open approximately 45-50 new restaurants in fiscal 2019.
  • 4Olive Garden and LongHorn Steakhouse both experienced positive same-restaurant sales growth.
  • 5Darden's effective tax rate decreased significantly in fiscal 2018 due to the Tax Cuts and Jobs Act.
  • 6The company maintained a strong financial position with a total adjusted debt to adjusted total capital ratio of 60% as of May 27, 2018.
  • 7Shareholder returns were supported by a quarterly dividend of $0.75 per share declared in June 2018, representing a 19% increase.

Frequently Asked Questions

Darden's sales growth in fiscal year 2018 was primarily driven by two key factors: the acquisition of Cheddar's Scratch Kitchen, which contributed significant revenue, and a combined same-restaurant sales increase of 2.3% across its legacy brands. Additionally, the opening of 40 net new company-owned restaurants further boosted sales.

The Tax Cuts and Jobs Act, enacted in December 2017, significantly reduced the federal corporate income tax rate from 35% to 21% effective January 1, 2018. This led to a blended federal corporate income tax rate for Darden in fiscal year 2018 and resulted in a one-time adjustment benefit of $79.3 million from the remeasurement of deferred tax liabilities, positively impacting net earnings.

Darden's growth strategy focuses on improving core operational fundamentals, including culinary innovation, service, and atmosphere, supported by integrated marketing programs. This includes driving same-restaurant sales growth and expanding the company's restaurant portfolio through new unit development. Darden also aims to leverage its scale, insights, and experience across its brands to achieve best-in-class profitability.

Darden returns value to shareholders through its share repurchase program and dividends. In fiscal year 2018, the company repurchased shares totaling $234.8 million and declared a quarterly dividend of $0.75 per share in June 2018, reflecting a 19% increase over the previous fiscal year's annual dividend.