10-QPeriod: Q1 FY2021

DARDEN RESTAURANTS INC Quarterly Report for Q1 Ended Aug 30, 2020

Filed October 6, 2020For Securities:DRI

Summary

Darden Restaurants, Inc. (DRI) reported a significant year-over-year decline in sales and earnings for the first quarter of fiscal year 2021, primarily due to the ongoing impact of the COVID-19 pandemic. Total sales decreased by 28.4% to $1.53 billion, and earnings from continuing operations fell by 78.3% to $37.3 million, resulting in diluted earnings per share of $0.28 compared to $1.38 in the prior year period. This downturn reflects reduced guest traffic and operational restrictions. Despite the challenges, Darden demonstrated resilience by adapting to the operating environment, with 97.0% of its restaurants able to open their dining rooms to some extent. The company also took steps to manage costs, including a corporate restructuring that incurred $47.8 million in charges. Management provided an outlook for the second quarter of fiscal 2021, expecting sales to be approximately 82% of the prior year's second quarter, and projected capital expenditures of $250.0 million to $300.0 million for the full year, indicating continued investment in growth.

Financial Highlights

47 data points
Beta

Revenue

$1.53B

17.8% Gross Margin

Net Income

$36.10M

2.4% Net Margin

EPS (Diluted)

$0.28

Total Assets

$9.79B

Cash & Equivalents

$654.60M

Free Cash Flow

$164.50M

Financial Statements
Beta
Revenue$1.53B
Gross Profit$272.50M
Operating Expenses$1.47B
Operating Income$56.60M
Net Income$36.10M
EPS (Basic)$0.28
EPS (Diluted)$0.28
Shares Outstanding (Basic)130.00M
Shares Outstanding (Diluted)130.90M

Key Highlights

  • 1Sales declined 28.4% year-over-year to $1.53 billion in Q1 FY2021, driven by a 29.0% decrease in same-restaurant sales across all brands due to COVID-19 impacts.
  • 2Net earnings from continuing operations significantly decreased by 78.3% to $37.3 million, with diluted EPS falling to $0.28 from $1.38 in the prior year.
  • 3The company incurred $47.8 million in charges related to a corporate restructuring aimed at reducing costs and aligning expenses with current sales levels.
  • 4Despite sales challenges, Darden opened 14 net new company-owned restaurants since Q1 FY2020, contributing to sales offset.
  • 5The company successfully repaid its $270.0 million 364-day term loan prior to maturity, showcasing improved liquidity.
  • 6Darden's Board of Directors reinstated a quarterly dividend of $0.30 per share, signaling confidence in its financial position.
  • 7The company anticipates opening 35-40 net new restaurants in FY2021 and projects capital expenditures between $250.0 million and $300.0 million.

Frequently Asked Questions

The primary driver was the ongoing impact of the COVID-19 pandemic, which led to reduced guest traffic, operational restrictions such as limited dining room capacities, and changes in consumer behavior. This resulted in a substantial year-over-year decline in sales and net earnings.

Darden has implemented several cost-management strategies. These include operational efficiencies, productivity improvements, reduced marketing spending, and a strategic corporate restructuring that incurred $47.8 million in charges. They are also focusing on cost savings initiatives in food and beverage and labor.

For the second quarter of fiscal 2021, Darden expects sales to be approximately 82% of the prior year's second quarter. For the full year, the company plans to open 35-40 net new restaurants and anticipates capital expenditures to be between $250.0 million and $300.0 million, indicating continued investment in strategic growth despite the current economic conditions.

Darden's liquidity has improved, allowing it to fully repay its $270.0 million 364-day term loan before maturity. The company maintains a $750.0 million Revolving Credit Agreement and was in compliance with all covenants as of the reporting date. Its long-term debt consists of several senior notes with varying interest rates and maturity dates.