01—Abstract
Summary
Summary of the 10-K filed July 20, 2018. Cited figures are marked; the original filing is the authoritative source.
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.
02—Key points
Key Highlights
- Total 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.
- Net earnings from continuing operations grew by 25.1% to $603.8 million, or $4.79 per diluted share.
- The company added 51 net new company-owned restaurants in fiscal 2018, with plans to open approximately 45-50 new restaurants in fiscal 2019.
- Olive Garden and LongHorn Steakhouse both experienced positive same-restaurant sales growth.
- Darden's effective tax rate decreased significantly in fiscal 2018 due to the Tax Cuts and Jobs Act.
- The company maintained a strong financial position with a total adjusted debt to adjusted total capital ratio of 60% as of May 27, 2018.
- Shareholder returns were supported by a quarterly dividend of $0.75 per share declared in June 2018, representing a 19% increase.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2018, Darden Restaurants Inc kept $0.07.
- Revenue$8.08B100.0%
- Cost of revenue−$6.59B81.5%
- Gross profit$1.49B18.5%
- Operating costs−$726.3M9.0%
- Operating income$766.8M9.5%
- Interest, other & tax−$170.8M2.1%
- Net income$596.0M7.4%
Where FY2018 revenue went
$8.08B- Cost of revenue: $6.59B, 82% of revenue
- Net income: $596.0M, 7.4% of revenue
- Operating costs: $726.3M, 9.0% of revenue
- Interest, other & tax: $170.8M, 2.1% of revenue
Kept 7.4% as net incomeNet income $596.0M · 7.4%
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2018filed July 20, 2018Financial Statements
FY2018 against FY2017
| Line item | FY2018FY2017 | Change |
|---|---|---|
| Revenue | $8.08B$7.17B | +12.7% |
| Gross Profit | $1.49B$1.33B | +12.3% |
| Operating Expenses | $7.31B$6.49B | +12.6% |
| Operating Income | $766.80M$677.50M | +13.2% |
| Interest Expense | $152.40M$34.40M | +343.0% |
| Net Income | $596.00M$479.10M | +24.4% |
| EPS (Basic) | $4.81$3.85 | +24.9% |
| EPS (Diluted) | $4.73$3.80 | +24.5% |
| Shares Outstanding (Basic) | 124.00M124.30M | −0.2% |
| Shares Outstanding (Diluted) | 126.00M126.00M | 0.0% |
05—Questions
Frequently Asked Questions
What were the main drivers of Darden's sales growth in fiscal year 2018?
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.
How did the Tax Cuts and Jobs Act impact Darden's financial results?
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.
What is Darden's strategy for future growth?
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.
How is Darden returning value to shareholders?
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.
06—Continue