8-KOther Events

DARDEN RESTAURANTS INC 8-K Report (Sep 24, 2003)

Filed September 24, 2003For Securities:DRI

Summary

Darden Restaurants, Inc. reported first-quarter fiscal year 2004 earnings per diluted share of $0.40 on sales of $1.26 billion, matching the prior year's earnings per share on increased sales. While total sales saw a 7.2% increase year-over-year, driven by system-wide expansion and positive same-restaurant sales growth at its core brands, the company faced challenges. Olive Garden demonstrated robust performance with its 36th consecutive quarter of same-restaurant sales growth, achieving record quarterly profit. However, Red Lobster's results were impacted by rising crab costs and lower-than-expected sales, leading to a decline in operating profit despite its 23rd consecutive quarter of same-restaurant sales growth. Management also cautioned that second-quarter earnings per diluted share are now expected to fall short of the prior year's results due to weaker-than-anticipated September sales trends. Significant leadership changes were announced, with Dick Rivera, President and COO, taking on additional responsibility as President of Red Lobster to drive its turnaround. The company continued its share repurchase program, buying back 1.4 million shares during the quarter. Darden reiterated its full-year diluted earnings per share growth expectation of 8% to 12%. Investors should monitor the execution of the Red Lobster turnaround plan and the impact of rising food costs on profitability.

Key Highlights

  • 1Reported Q1 FY2004 diluted EPS of $0.40 on $1.26 billion in sales, a 7.2% increase in total sales year-over-year.
  • 2Olive Garden achieved its 36th consecutive quarter of same-restaurant sales growth (3.9%) and reported record quarterly profit.
  • 3Red Lobster reported its 23rd consecutive quarter of same-restaurant sales growth (1.1%) but experienced a decline in operating profit due to higher crab costs.
  • 4Company anticipates Q2 FY2004 diluted EPS will be lower than the prior year due to weaker-than-expected September sales trends.
  • 5Dick Rivera, President and COO, assumed additional role as President of Red Lobster to lead its revitalization.
  • 6Darden continued its share repurchase program, buying back 1.4 million shares during the quarter.
  • 7Reiterated full-year diluted EPS growth expectations of 8% to 12%.

Frequently Asked Questions

The company reported a 7.2% increase in total sales to $1.26 billion. This growth was primarily driven by revenue from new restaurant openings and positive same-restaurant sales growth, particularly at Olive Garden, which achieved its 36th consecutive quarter of same-restaurant sales growth.

Red Lobster's performance was impacted by significant increases in crab costs and other developments, which offset some of the gains from Olive Garden and led to a decline in Red Lobster's operating profit. The company also noted that unfavorable holiday shifts and a power outage affected same-restaurant sales by approximately 0.5%.

Darden management expressed concern over sales trends thus far in fiscal September and now expects second-quarter diluted earnings per share to fall short of the prior year's results, projecting them to be in the range of 15 to 18 cents.

Yes, Dick Rivera, Darden's President and Chief Operating Officer, has taken on additional responsibilities as the President of Red Lobster, effective immediately. This move is aimed at improving Red Lobster's financial performance and growth.