10-QPeriod: Q3 FY2021

DARDEN RESTAURANTS INC Quarterly Report for Q3 Ended Feb 28, 2021

Filed April 6, 2021For Securities:DRI

Summary

Darden Restaurants, Inc. reported a significant decrease in sales and net earnings for the third quarter and the first nine months of fiscal year 2021 compared to the prior year, primarily due to the ongoing impact of the COVID-19 pandemic. Sales for the third quarter declined by 26.1% and for the nine-month period by 24.8%. This was largely driven by substantial decreases in same-restaurant sales across all segments, reflecting reduced guest traffic due to pandemic-related restrictions and changes in consumer behavior. Despite the revenue decline, the company has focused on cost management and operational efficiencies. Marketing expenses saw a significant reduction, and while restaurant labor and expenses increased as a percentage of sales due to deleverage, productivity improvements and cost savings initiatives partially offset these impacts. The company also undertook a corporate restructuring, incurring significant one-time charges. Darden maintained a solid cash position and repaid its $270 million term loan, demonstrating financial resilience.

Financial Highlights

48 data points
Beta

Revenue

$1.73B

18.4% Gross Margin

Net Income

$128.70M

7.4% Net Margin

EPS (Diluted)

$0.98

Total Assets

$10.10B

Cash & Equivalents

$993.90M

Free Cash Flow

$248.30M

Financial Statements
Beta
Revenue$1.73B
Gross Profit$318.20M
Operating Expenses$1.58B
Operating Income$148.00M
Net Income$128.70M
EPS (Basic)$0.99
EPS (Diluted)$0.98
Shares Outstanding (Basic)130.50M
Shares Outstanding (Diluted)132.00M

Key Highlights

  • 1Sales decreased significantly in Q3 FY21 (-26.1%) and YTD FY21 (-24.8%) due to the COVID-19 pandemic's impact on guest traffic.
  • 2Same-restaurant sales decreased across all segments, with the largest drops in Fine Dining (-45.2% in Q3) and Other Business (-36.9% in Q3).
  • 3Net earnings from continuing operations for Q3 FY21 were $129.2 million, down from $233.3 million in Q3 FY20. Diluted EPS from continuing operations was $0.98, down from $1.90.
  • 4Marketing expenses were substantially reduced (-73.2% in Q3, -67.7% YTD) as a strategic response to lower sales volumes.
  • 5The company repaid its $270 million term loan and ended the period with a strong cash and cash equivalents balance of $993.9 million.
  • 6A corporate restructuring incurred $47.8 million in employee termination and related costs, impacting the nine-month results.
  • 7Darden announced a new $500 million share repurchase program, signaling confidence in future performance.

Frequently Asked Questions

The primary driver of the decrease in sales and earnings was the ongoing impact of the COVID-19 pandemic. This led to significant reductions in guest traffic due to restrictions on dine-in operations, capacity limits, and changes in consumer behavior.

Darden implemented several cost management strategies, including a substantial reduction in marketing expenses, focusing on productivity improvements in restaurant labor through operational simplification, and pursuing cost-saving initiatives in various operational areas. They also undertook a corporate restructuring to better align expenses with sales levels.

Darden maintained a strong liquidity position, with cash and cash equivalents increasing to $993.9 million at the end of the period. The company repaid its $270 million term loan prior to maturity, demonstrating its ability to manage its debt obligations effectively and maintain financial flexibility.

For the full fiscal year 2021, Darden expects to open 33 net new restaurants. Capital expenditures for the full year are projected to be between $285 million and $295 million, covering new restaurant construction, remodels, maintenance, and technology initiatives.