Summary
Darden Restaurants, Inc. (DRI) reported its financial results for the third quarter and first nine months ended February 22, 2009. For the quarter, sales saw a slight decrease of 0.7% to $1.8 billion, primarily due to a 3.2% same-restaurant sales decline across its core brands (Olive Garden, Red Lobster, LongHorn Steakhouse), partially offset by new restaurant openings. Net earnings from continuing operations decreased by 6.4% to $108.1 million, resulting in diluted EPS from continuing operations of $0.78, down from $0.80 in the prior year quarter. For the nine-month period, sales increased by 9.2% to $5.24 billion, significantly boosted by the prior year acquisition of RARE Hospitality International, Inc. However, net earnings from continuing operations declined by 6.4% to $249.1 million, with diluted EPS from continuing operations at $1.78, compared to $1.83 in the prior year period. This decline was attributed to lower blended same-restaurant sales, increased food and beverage costs, and higher interest expenses, only partially offset by cost-saving measures and new restaurant growth. The company highlighted continued expansion, with a net increase of 69 restaurants since the prior year's third quarter. Despite challenging macroeconomic conditions impacting consumer spending, Darden is managing its cost structure, with initiatives to offset inflationary pressures. The company also noted its solid liquidity position and compliance with debt covenants, though it cautioned about potential future impairment charges related to goodwill and other intangible assets if market conditions deteriorate further.
Financial Highlights
30 data points| Revenue | $1.80B |
| Cost of Revenue | $1.39B |
| Gross Profit | $404.90M |
| SG&A Expenses | $159.70M |
| Operating Expenses | $1.65B |
| Operating Income | $249.10M |
| Net Income | $107.50M |
| EPS (Basic) | $0.79 |
| EPS (Diluted) | $0.78 |
| Shares Outstanding (Basic) | 136.10M |
| Shares Outstanding (Diluted) | 138.60M |
Key Highlights
- 1For the third quarter, total sales were $1.8 billion, a 0.7% decrease year-over-year, impacted by a 3.2% same-restaurant sales decline across key brands.
- 2Net earnings from continuing operations for the quarter decreased 6.4% to $108.1 million, leading to diluted EPS of $0.78 ($0.80 in prior year).
- 3Nine-month sales grew 9.2% to $5.24 billion, largely driven by the RARE acquisition, but net earnings from continuing operations fell 6.4% to $249.1 million ($1.78 EPS vs. $1.83 in prior year).
- 4The company added 69 net new restaurants since the prior year's third quarter, contributing to sales growth.
- 5Food and beverage costs as a percentage of sales saw a slight decrease in the quarter but increased over the nine-month period due to commodity cost inflation and the RARE acquisition's impact.
- 6Restaurant labor costs increased year-over-year, both in absolute terms and as a percentage of sales for the quarter, due to wage rate increases.
- 7The company maintained compliance with its debt covenants and had $329.5 million of availability under its revolving credit facility at the end of the quarter, despite a portion being unfunded due to Lehman Brothers' bankruptcy.
- 8Potential impairment charges for goodwill and indefinite-lived intangible assets were noted as a risk, with sensitivity analysis indicating vulnerability in specific reporting units (LongHorn Steakhouse, The Capital Grille) to increases in weighted-average cost of capital or discount rates.