10-QPeriod: Q1 FY2011

DARDEN RESTAURANTS INC Quarterly Report for Q1 Ended Aug 29, 2010

Filed October 5, 2010For Securities:DRI

Summary

Darden Restaurants, Inc. reported its first quarter fiscal year 2011 results, ending August 29, 2010. The company demonstrated solid top-line growth, with sales increasing by 4.2% to $1.81 billion, driven by a combination of new restaurant openings (54 net new restaurants) and a 1.1% increase in same-restaurant sales across its key brands like Olive Garden, Red Lobster, and LongHorn Steakhouse. Profitability saw a significant improvement, with net earnings from continuing operations rising by 19.3% to $113.3 million, translating to a 19.4% increase in diluted EPS from continuing operations to $0.80. This was achieved through improved sales leverage, lower food and beverage costs as a percentage of sales, and more efficient restaurant labor. The company also continued its strategic capital allocation, including significant share repurchases and an increase in its quarterly dividend, signaling confidence in its financial position and future prospects.

Financial Highlights

49 data points
Beta

Revenue

$1.81B

24.4% Gross Margin

Net Income

$113.10M

6.3% Net Margin

EPS (Diluted)

$0.80

Total Assets

$5.11B

Cash & Equivalents

$77.50M

Free Cash Flow

$101.70M

Financial Statements
Beta
Revenue$1.81B
Cost of Revenue$1.37B
Gross Profit$441.30M
SG&A Expenses$180.90M
Operating Expenses$1.65B
Operating Income$113.30M
Net Income$113.10M
EPS (Basic)$0.82
EPS (Diluted)$0.80
Shares Outstanding (Basic)138.60M
Shares Outstanding (Diluted)141.70M

Key Highlights

  • 1Total sales increased by 4.2% to $1.81 billion, driven by new restaurant openings and same-restaurant sales growth.
  • 2Net earnings from continuing operations grew by 19.3% to $113.3 million.
  • 3Diluted EPS from continuing operations increased by 19.4% to $0.80.
  • 4Olive Garden and LongHorn Steakhouse showed strong sales growth, with Olive Garden up 6.8% and LongHorn Steakhouse up 6.8%.
  • 5Food and beverage costs as a percentage of sales decreased due to lower commodity costs and increased pricing.
  • 6Darden Restaurants continued to return capital to shareholders, repurchasing 2.4 million shares and increasing its quarterly dividend to $0.32 per share.
  • 7The company maintained compliance with its credit facility covenants and had significant available credit.

Frequently Asked Questions

Darden's sales growth of 4.2% was primarily driven by the addition of 54 net new restaurants and a blended same-restaurant sales increase of 1.1% across its major brands like Olive Garden, Red Lobster, and LongHorn Steakhouse.

Darden improved profitability through lower food and beverage costs as a percentage of sales, attributed to reduced commodity costs and increased pricing. Additionally, restaurant labor costs as a percentage of sales decreased due to sales leveraging and improved productivity.

Darden is actively returning capital to shareholders. During this quarter, they repurchased 2.4 million shares of common stock and increased their quarterly dividend to $0.32 per share, indicating confidence in their financial health and future performance.

Darden repaid $150 million of senior notes at maturity during the quarter. They also plan to issue unsecured debt securities upon the maturity of $75 million in notes in April 2011 to refinance both the matured notes and the upcoming maturity.