10-QPeriod: Q1 FY2022

DARDEN RESTAURANTS INC Quarterly Report for Q1 Ended Aug 29, 2021

Filed October 5, 2021For Securities:DRI

Summary

Darden Restaurants, Inc. (DRI) reported strong performance for the fiscal first quarter ended August 29, 2021, with significant year-over-year increases in sales and earnings. Total sales grew by 51% to $2.31 billion, driven by a 47.5% increase in same-restaurant sales across its brands and the addition of new company-owned restaurants. This robust sales growth translated into a substantial improvement in profitability, with net earnings surging to $230.9 million, up from $36.1 million in the prior year's comparable quarter, and diluted EPS reaching $1.75 compared to $0.28. The company benefited from the easing of COVID-19 restrictions, allowing all restaurants to operate with minimal capacity limitations. This, coupled with effective cost management, including sales leverage that offset inflationary pressures in food and labor, led to a significant expansion in operating income and segment profit margins across all reported segments. Darden also demonstrated a strong commitment to returning capital to shareholders, with significant dividend payments and share repurchases during the quarter, complemented by the establishment of a new $1 billion revolving credit facility to support ongoing operations and growth initiatives.

Financial Highlights

45 data points
Beta

Revenue

$2.31B

20.9% Gross Margin

Net Income

$230.90M

10.0% Net Margin

EPS (Diluted)

$1.75

Total Assets

$10.54B

Cash & Equivalents

$947.80M

Free Cash Flow

$97.60M

Financial Statements
Beta
Revenue$2.31B
Gross Profit$482.60M
Operating Expenses$2.03B
Operating Income$280.60M
Net Income$230.90M
EPS (Basic)$1.77
EPS (Diluted)$1.75
Shares Outstanding (Basic)130.30M
Shares Outstanding (Diluted)131.70M

Key Highlights

  • 1Sales increased 51.0% to $2.31 billion, driven by a 47.5% same-restaurant sales increase and new restaurant openings.
  • 2Net earnings more than six-fold to $230.9 million ($1.75 diluted EPS), a significant improvement from $36.1 million ($0.28 diluted EPS) in the prior year.
  • 3Operating income surged to $280.8 million from $56.6 million, reflecting strong sales leverage and cost control.
  • 4All major segments (Olive Garden, LongHorn Steakhouse, Fine Dining, Other Business) experienced substantial increases in sales and segment profit margins.
  • 5The company repurchased $186.3 million in common stock and paid $143.5 million in dividends, demonstrating a commitment to shareholder returns.
  • 6Darden entered into a new $1 billion revolving credit agreement, enhancing its financial flexibility.

Frequently Asked Questions

Darden Restaurants reported a significant 51.0% increase in sales for the first quarter of fiscal 2022, reaching $2.31 billion. This growth was fueled by a robust 47.5% increase in same-restaurant sales across its brands and the addition of 34 net new company-owned restaurants compared to the previous year.

The company benefited from the easing of COVID-19 restrictions, with all restaurants able to open their dining rooms with minimal capacity limitations. While some minor restrictions remained, the overall operating environment was significantly improved compared to the prior year, enabling a strong rebound in sales and traffic.

Darden effectively managed costs by leveraging its increased sales volume. While there were inflationary pressures on food and labor, sales leverage and improved productivity led to a decrease in restaurant labor and restaurant expenses as a percentage of sales. Marketing and general & administrative expenses also decreased as a percentage of sales, partly due to restructuring costs in the prior year and sales leverage.

For fiscal year 2022, Darden expects total sales to be between $9.4 billion and $9.6 billion. This outlook is supported by an anticipated same-restaurant sales growth of 27% to 30% and plans to open 35 to 40 net new restaurants. Capital expenditures are projected to be between $375 million and $425 million.