10-QPeriod: Q3 FY2024

DARDEN RESTAURANTS INC Quarterly Report for Q3 Ended Feb 25, 2024

Filed April 2, 2024For Securities:DRI

Summary

Darden Restaurants, Inc. reported solid financial results for the third quarter and the first nine months of fiscal year 2024. Total sales increased, driven by the strategic acquisition of Ruth's Chris Steak House and organic growth from new restaurant openings. While same-restaurant sales saw a slight decrease in the third quarter, the nine-month period showed positive growth, indicating resilience in customer traffic and pricing power. Profitability remained strong, with operating income and net earnings showing year-over-year improvements. The company managed its cost structure effectively, with decreases in key expense categories as a percentage of sales for the nine-month period, despite some inflationary pressures. The integration of Ruth's Chris is progressing, contributing to overall sales figures, and the company has a clear outlook for the remainder of the fiscal year, including plans for new restaurant openings and capital expenditures.

Financial Highlights

47 data points
Beta

Revenue

$2.97B

20.6% Gross Margin

Net Income

$312.90M

10.5% Net Margin

EPS (Diluted)

$2.60

Total Assets

$11.36B

Cash & Equivalents

$243.90M

Free Cash Flow

$437.40M

Financial Statements
Beta
Revenue$2.97B
Gross Profit$613.90M
Operating Expenses$2.59B
Operating Income$387.40M
Net Income$312.90M
EPS (Basic)$2.62
EPS (Diluted)$2.60
Shares Outstanding (Basic)119.40M
Shares Outstanding (Diluted)120.40M

Key Highlights

  • 1Total sales increased by 6.8% to $2.97 billion for the third quarter and 9.2% to $8.43 billion for the first nine months of fiscal 2024.
  • 2Net earnings from continuing operations increased to $313.4 million in Q3 FY24 and $720.5 million in the first nine months of FY24.
  • 3Diluted EPS from continuing operations rose to $2.60 in Q3 FY24 and $5.95 for the first nine months of FY24.
  • 4The acquisition of Ruth's Chris Steak House contributed significantly to sales growth, adding 79 company-owned locations.
  • 5Same-restaurant sales decreased by (1.0%) in Q3 FY24 but increased by 2.2% for the nine months ended February 25, 2024.
  • 6Operating income increased by 10.7% to $387.4 million in Q3 FY24 and by 11.1% to $918.8 million for the nine months of FY24.
  • 7Darden Restaurants announced a new $1 billion share repurchase program.

Frequently Asked Questions

The acquisition of Ruth's Chris Steak House, which added 79 company-owned locations, was a significant driver of total sales growth. While its results are not yet included in same-restaurant sales calculations, it contributed substantially to the overall increase in revenue for both the third quarter and the nine-month period. Integration costs associated with the acquisition were also noted in the financial statements.

Overall sales growth was robust, primarily due to new restaurant openings and the Ruth's Chris acquisition. However, same-restaurant sales saw a slight decrease of (1.0%) in the third quarter, indicating some challenges in customer traffic at established locations, offset by pricing increases. For the first nine months, same-restaurant sales were positive at 2.2%, suggesting a more favorable trend over a longer period, excluding the recently acquired Ruth's Chris brand.

Darden demonstrated effective cost management, especially over the nine-month period. Food and beverage costs, restaurant labor, and restaurant expenses decreased as a percentage of sales, driven by pricing leverage, sales leverage, and productivity improvements, partially offset by inflation. Marketing expenses increased as a percentage of sales due to higher spend, and general and administrative expenses saw a slight increase as a percentage of sales, partly due to integration costs.

The company expects total sales for fiscal year 2024 to be approximately $11.4 billion. This projection is supported by an anticipated same-restaurant sales growth of 1.5% to 2.0% and the opening of approximately 50 to 55 new restaurants, including those from Ruth's Chris. Capital expenditures are projected to be around $600 million for new builds, remodels, and technology.