10-QPeriod: Q3 FY2025

DARDEN RESTAURANTS INC Quarterly Report for Q3 Ended Feb 23, 2025

Filed April 1, 2025For Securities:DRI

Summary

Darden Restaurants, Inc. reported solid financial results for the third quarter and first nine months of fiscal year 2025, demonstrating continued growth and operational strength. Total sales saw a notable increase, driven by both new restaurant openings and a modest rise in same-restaurant sales, despite headwinds from severe weather and holiday timing shifts. The company's strategic acquisition of Chuy’s Holdings, Inc. has been integrated and contributed to overall sales growth. Profitability metrics show resilience, with operating income and net earnings from continuing operations showing year-over-year increases. Diluted EPS also grew, reflecting improved earnings performance. The company reiterated its positive outlook for the full fiscal year, projecting further sales growth and new restaurant openings. Key financial indicators suggest a healthy operational trajectory. Despite increased interest expenses related to recent acquisitions and ongoing capital expenditures for expansion and remodels, Darden maintains a strong liquidity position and access to credit. The company's strategic focus on brand strength and operational efficiency continues to drive value for shareholders.

Financial Highlights

47 data points
Beta

Revenue

$3.16B

21.3% Gross Margin

Net Income

$323.40M

10.2% Net Margin

EPS (Diluted)

$2.74

Total Assets

$12.56B

Cash & Equivalents

$224.20M

Free Cash Flow

$430.10M

Financial Statements
Beta
Revenue$3.16B
Gross Profit$673.00M
Operating Expenses$2.74B
Operating Income$418.20M
Net Income$323.40M
EPS (Basic)$2.76
EPS (Diluted)$2.74
Shares Outstanding (Basic)117.20M
Shares Outstanding (Diluted)118.00M

Key Highlights

  • 1Total sales increased by 6.2% to $3.16 billion for the third quarter and 4.4% to $8.81 billion for the first nine months of fiscal 2025, driven by new restaurant openings and a blended same-restaurant sales increase of 0.7% and 0.8%, respectively.
  • 2Diluted net earnings per share from continuing operations rose to $2.74 for the third quarter and $6.30 for the first nine months of fiscal 2025, up from $2.60 and $5.95 in the prior year.
  • 3The acquisition of Chuy’s Holdings, Inc. on October 11, 2024, contributed 103 restaurants and is integrated into the financial results, bolstering overall sales growth.
  • 4Operating income increased by 8.0% to $418.2 million for the quarter and 6.6% to $979.5 million for the nine months, indicating improved operational profitability.
  • 5Food and beverage costs decreased as a percentage of sales, driven by pricing leverage and cost savings initiatives, while restaurant labor costs remained relatively stable as a percentage of sales.
  • 6The company announced an outlook for fiscal year 2025, projecting total sales of approximately $12.1 billion, same-restaurant sales growth of approximately 1.5%, and 50 to 55 new restaurant openings.
  • 7Darden maintained a strong liquidity position, with $1.19 billion of credit available under its Revolving Credit Agreement and continued to return capital to shareholders through dividends and share repurchases.

Frequently Asked Questions

The acquisition of Chuy’s Holdings, Inc. on October 11, 2024, added 103 restaurants to Darden's portfolio and contributed to the reported increase in total sales. While the acquisition increased interest expenses and related integration costs, it is expected to drive future sales growth as outlined in the company's fiscal year 2025 outlook.

Same-restaurant sales for the third quarter and first nine months of fiscal 2025 showed modest growth. This was driven by an increase in average check size across most brands, partially offset by a decrease in guest counts in some segments. Severe weather and a shift in the timing of the Thanksgiving holiday negatively impacted results by approximately 1.0% and 0.9% for the third quarter and 0.4% for the nine months due to severe weather.

Darden has focused on managing cost pressures through various initiatives. Food and beverage costs as a percentage of sales decreased due to pricing leverage and cost savings. Restaurant labor costs remained stable as a percentage of sales due to pricing leverage and productivity improvements, though inflation presented a challenge. Marketing expenses remained flat as a percentage of sales for the quarter but increased for the nine-month period due to higher spend.

Darden projects total sales for fiscal year 2025 to be approximately $12.1 billion, with same-restaurant sales growth of about 1.5%. The company anticipates opening between 50 to 55 new restaurants and plans capital expenditures of approximately $650 million for new builds, remodels, and technology initiatives.