8-KOther Events

DARDEN RESTAURANTS INC 8-K Report (Jun 19, 2003)

Filed June 19, 2003For Securities:DRI

Summary

This 8-K filing from Darden Restaurants, Inc., dated June 19, 2003, announces the company's annual and fourth-quarter earnings for the fiscal year ended May 25, 2003. Overall, the company reported a slight increase in full-year diluted earnings per share to $1.31 from $1.30 in the prior year, alongside a 6.6% increase in total sales to $4.7 billion. However, the fourth quarter showed a decline in diluted earnings per share to $0.35 from $0.40 a year ago, despite a 5.6% increase in quarterly sales. While key brands like Olive Garden and Red Lobster continued to report comparable-restaurant sales growth, albeit modest for Olive Garden, the company acknowledged a disappointing performance for the year. CEO Joe Lee expressed a need to better respond to competitive and macroeconomic challenges, emphasizing a focus on operational basics and brand building. The filing also details expansion efforts in newer concepts like Bahama Breeze and Smokey Bones, the introduction of a new test restaurant (Seasons 52), and a significant share repurchase program. Investors should note the mixed financial results, with overall sales growth but a weaker fourth quarter. The company's outlook for fiscal 2004 anticipates continued moderate same-restaurant sales growth for its core brands and aggressive new unit expansion, particularly for Smokey Bones. However, projected earnings per diluted share growth for fiscal 2004 is presented as a range that is below the company's long-term target, contingent on economic conditions and investments in business strengthening.

Key Highlights

  • 1Full fiscal year 2003 diluted earnings per share (EPS) increased slightly to $1.31 from $1.30 in fiscal year 2002. Fiscal 2002 EPS included $1.6 million in restructuring credits.
  • 2Full fiscal year 2003 total sales grew 6.6% to $4.7 billion.
  • 3Fourth quarter fiscal 2003 diluted EPS decreased to $0.35 from $0.40 in the prior year's fourth quarter, on a 5.6% increase in sales to $1.2 billion.
  • 4Olive Garden achieved its 35th consecutive quarter of comparable-restaurant sales growth in Q4 FY03 (0.1%), with full-year growth at 2.2%.
  • 5Red Lobster achieved its 22nd consecutive quarter of comparable-restaurant sales growth in Q4 FY03 (0.9%), with full-year growth at 2.7%.
  • 6Smokey Bones BBQ more than doubled in size in FY03, ending the year with 39 restaurants, and plans significant further expansion in FY04.
  • 7Darden repurchased 5.8 million shares in Q4 FY03, totaling 10.7 million shares for the full year, as part of an ongoing share buyback program.

Frequently Asked Questions

The decline in fourth-quarter diluted EPS to $0.35 from $0.40 was primarily due to increased restaurant labor costs, restaurant expenses, selling, general, and administrative expenses, and depreciation as a percentage of sales, particularly impacting Red Lobster's operating profit despite sales growth. Management noted that certain actions taken did not produce the desired results, and challenging year-over-year comparisons also played a role.

For fiscal year 2004, Darden expects combined same-restaurant sales growth of 1% to 3% for Red Lobster and Olive Garden, which is below its long-term target of 3% to 5%. Diluted earnings per share growth is projected between 8% and 12%. The company anticipates opening at least 60 new restaurants in FY04, aligning with its long-term new unit growth range. While acknowledging a 53-week fiscal year might add 5-6 cents to EPS, Darden expects investments to offset much of this benefit.

Smokey Bones BBQ is undergoing rapid expansion, more than doubling its restaurant count to 39 in fiscal year 2003 and planning to open 25 to 30 new locations in fiscal year 2004. Bahama Breeze also continues to grow, expecting to open four new restaurants in fiscal year 2004.

Yes, Darden continued its share repurchase program, buying back 5.8 million shares of its common stock in the fourth quarter of fiscal year 2003. This brought the total for the full year to 10.7 million shares repurchased.