8-KOther Events

DARDEN RESTAURANTS INC 8-K Report (Dec 17, 2001)

Filed December 17, 2001For Securities:DRI

Summary

Darden Restaurants, Inc. reported record second-quarter earnings, driven by strong same-restaurant sales growth at its core brands, Red Lobster and Olive Garden. The company announced diluted earnings per share of $0.30, representing a 25% increase year-over-year, with adjusted earnings of $0.29 per share (a 21% increase). Total sales reached $1.0 billion, up 8.8% from the prior year, reflecting an 8-week reporting period that ended November 25, 2001. Despite a challenging economic environment exacerbated by post-September 11th events, Darden's management highlighted the effective execution by their teams in delivering exceptional service and value, leading to sales figures that surpassed industry averages. In addition to robust financial performance, Darden also announced the election of David Hughes, Chairman & CEO of Hughes Supply, to its Board of Directors. The company continues to expand its emerging brands, Bahama Breeze and Smokey Bones BBQ Sports Bar, and demonstrated commitment to shareholder value through ongoing share repurchases. Overall, the report signals a resilient business model capable of delivering growth even amidst economic headwinds.

Key Highlights

  • 1Record second quarter earnings per diluted share of $0.30 (25% increase year-over-year), or $0.29 excluding a one-time restructuring credit (21% increase).
  • 2Total sales increased by 8.8% to $1.0 billion for the quarter ending November 25, 2001.
  • 3Strong same-restaurant sales growth reported: Red Lobster (+6.1%) and Olive Garden (+5.9%), exceeding industry averages.
  • 4Red Lobster achieved its 16th consecutive quarter of same-restaurant sales gains, while Olive Garden marked its 29th consecutive quarter.
  • 5Expansion of emerging concepts: Bahama Breeze opened 2 new restaurants (4 YTD), and Smokey Bones BBQ Sports Bar opened 2 new restaurants (3 YTD).
  • 6David Hughes, Chairman & CEO of Hughes Supply, was elected to the Darden Restaurants Board of Directors.
  • 7Company repurchased over 400,000 shares of common stock during the quarter.

Frequently Asked Questions

The primary drivers were strong same-restaurant sales growth at Red Lobster (6.1%) and Olive Garden (5.9%), which outperformed the casual dining industry average. This growth, coupled with effective cost management (lower food and marketing expenses as a percentage of sales) and operational efficiencies, led to increased profitability.

Management acknowledged that these events reduced consumer confidence and accelerated economic weakness. Darden's response focused on enhancing guest service and value across all restaurants. The company also made a $1.5 million pre-tax contribution to the Red Cross Disaster Relief Fund as part of the 'Dine Out for America' initiative.

Both brands continue to show strong progress. Bahama Breeze opened two new restaurants during the quarter, bringing its total to 25, with plans for 8-10 openings in the full fiscal year. Smokey Bones BBQ Sports Bar also opened two new locations, reaching 12 restaurants in operation, with a similar expansion plan of 8-10 new openings for the full year.

The report notes an unusual item of $1.4 million after tax, which is a restructuring credit. This credit resulted from the reversal of a portion of the company's fiscal 1997 restructuring reserve, primarily due to favorable lease terminations. Excluding this credit, adjusted earnings per diluted share were $0.29.