10-QPeriod: Q2 FY2003

DARDEN RESTAURANTS INC Quarterly Report for Q2 Ended Nov 24, 2002

Filed January 8, 2003For Securities:DRI

Summary

Darden Restaurants, Inc. reported its second-quarter fiscal year 2003 results, demonstrating steady growth and strategic expansion. Total sales increased by 6.4% year-over-year to $1.07 billion, driven by comparable restaurant sales growth at Red Lobster and Olive Garden, along with the addition of 54 new company-owned restaurants. The company continues to focus on expanding its brands, with a significant number of new restaurant openings planned across Olive Garden and particularly Smokey Bones BBQ. While overall costs as a percentage of sales saw a slight increase, management highlighted efforts to control food and beverage costs and manage labor and operational expenses. Net earnings for the quarter rose to $37.5 million, or $0.21 per diluted share, up from $36.5 million, or $0.20 per diluted share, in the prior year. The company also reaffirmed its commitment to shareholder value through its ongoing stock repurchase program and provided an optimistic outlook, anticipating sufficient liquidity to fund capital expenditures and operational needs for the remainder of fiscal year 2003.

Key Highlights

  • 1Total sales increased by 6.4% to $1.07 billion for the second quarter of fiscal year 2003 compared to the prior year.
  • 2Comparable restaurant sales grew at Red Lobster (2.3%) and Olive Garden (3.5%) in the US, driven by increases in average check size.
  • 3The company opened a net of 54 new company-owned restaurants since the second quarter of fiscal year 2002, with significant expansion planned for Smokey Bones.
  • 4Net earnings increased to $37.5 million ($0.21 per diluted share) from $36.5 million ($0.20 per diluted share) in the prior year's quarter.
  • 5Food and beverage costs as a percentage of sales decreased due to lower product costs and pricing changes.
  • 6The company repurchased 1.2 million shares of common stock for $26.0 million during the quarter.
  • 7Darden is exploring a new restaurant concept called Seasons 52, a casually sophisticated fresh grill and wine bar.

Frequently Asked Questions

Sales growth was primarily driven by an increase in same-restaurant sales at Red Lobster and Olive Garden in the U.S., supported by a rise in average check size. Additionally, the net increase of 54 company-owned restaurants since the prior year's second quarter contributed to the overall sales increase.

Darden focused on controlling food and beverage costs, which decreased as a percentage of sales due to lower product costs and pricing adjustments. While restaurant labor and expenses saw some increases, these were partially offset by higher sales volumes and efforts to manage wage rates and benefit costs.

Darden generates substantial cash flow from operations and has access to a $300 million credit facility. The company believes its internal cash generation, available credit, and potential for issuing unsecured debt will be sufficient to fund its capital expenditures, stock repurchase program, and other operating needs through fiscal year 2003.

Darden is testing a new casual dining concept called Seasons 52, which focuses on a fresh grill and wine bar with seasonally inspired, nutritionally balanced, and lower-calorie entrees. The first Seasons 52 is scheduled to open in Orlando, Florida, in the fiscal third quarter.