Breaking News

Darden (DRI) Q4 Earnings Surpass Estimates, Revenues Lag

By Zacks Investment ResearchJun 20, 2019 08:27AM ET
Darden (DRI) Q4 Earnings Surpass Estimates, Revenues Lag
By Zacks Investment Research   |  Jun 20, 2019 08:27AM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items

Darden Restaurants, Inc. (NYSE:DRI) reported fourth-quarter fiscal 2019 results, wherein earnings surpassed the Zacks Consensus Estimate, whereas revenues lagged the same.

Adjusted earnings of $1.76 per share beat the Zacks Consensus Estimate of $1.73. Moreover, the bottom line increased 26.6% year over year on higher revenues. Results were aided by the company’s relentless efforts to improve the basic operating factors of the business — food, service and ambiance.

Total revenues of $2,229.1 million lagged the consensus mark of $2,240 million. However, revenues increased 4.5% from the prior-year quarter. The upside was driven by the addition of 39 net restaurants and a 1.6% increase in blended comps.

Despite earnings beat and growth in revenues, shares of Darden fell 4.9% in pre-market trading. This is because the company’s sales growth across every brand deteriorated sequentially. Also, sales total sales lagged the consensus mark.

Meanwhile, the company’s shares have gained 17.6% so far this year, underperforming the industry’s 21.4% rally.

Revenues by Segments

Darden reports business under four segments — Olive Garden, LongHorn Steakhouse, Fine Dining that includes The Capital Grille and Eddie V's, and Other Business.

In the fiscal fourth quarter, the company’s legacy brands posted blended comps growth of 1.6%. In the fiscal third quarter, comps increased 2.8%.

Sales at Olive Garden were up 3.7% year over year to $1,107 million. Comps grew 2.4% at the segment, lower than the prior quarter’s comp growth of 4.3%. Traffic declined 0.4%. Pricing improved 1.6% and menu-mix increased 1.2%.

Sales at Fine Dining increased 5% to $154.6 million. Comps at The Capital Grille rose 2.9% compared with growth of 4.3% in third-quarter fiscal 2019. Further, Eddie V's posted comps growth of 2%, lower than 3.7% improvement recorded in the prior quarter.

Revenues from Other Business grew 4.9% year over year to $483.1 million. However, comps at Seasons 52 fell 1.5% in the reported quarter compared with comps decline of 1.3% in third-quarter fiscal 2019. Comps at Yard House edged down 1.4% compared with 2.1% decrease in the prior quarter. Meanwhile, comps slipped 1.9% at Bahama Breeze compared with a decline of 3.7% in the preceding quarter.

At LongHorn Steakhouse, sales rose 5.7% to $484.4 million. Comps at LongHorn Steakhouse increased 3.3%, down from comps growth of 3.8% in the fiscal third quarter. Traffic increased 0.3%. Also, pricing and menu mix grew 1.8% and 1.2%, respectively.

In the reported quarter, comps at Cheddar's decreased 3.4% compared with 2.7% decline in third-quarter fiscal 2019.

Operating Highlights & Net Income

In the fiscal fourth quarter, total operating costs and expenses increased 5% year over year to $1,999.3 million. The rise was due to an overall increase in food and beverage costs, restaurant expenses, and labor costs.

Net earnings in the fiscal fourth quarter were $208 million, up 19.2% from the year-ago level.

Darden Restaurants, Inc. Price, Consensus and EPS Surprise

Balance Sheet

Cash and cash equivalents as of May 26, 2019, totaled $457.3 million, up from $146.9 million as of May 27, 2018.

Inventories totaled $207.3 million at the end of the reported quarter. Goodwill, as a percentage of total assets, was 20.1% in the quarter.

Long-term debt as of May 26, 2019, was $927.7 million, up from $926.5 million as of May 27, 2018.

During the fiscal fourth quarter, the company repurchased approximately 0.4 million shares of its common stock for roughly $42 million. It still has $304 million remaining under the current $500-million repurchase authorization.

Highlights of Fiscal 2019 Results

Adjusted earnings in fiscal 2019 were $5.82, outpacing the Zacks Consensus Estimate of $5.78. Earnings also increased 19.6% year over year.

Total sales grew 5.3% to $8.51 billion, driven by the addition of 39 net new restaurants and a blended same-restaurant sales increase of 2.5%.

Fiscal 2020 Outlook

For fiscal 2020, the company expects total revenues to increase 5.3-6.3%. This will include the 2% positive synergy from the 53rd week. Comps are projected to increase 1-2%. Darden’s earnings per share are anticipated to be $6.30-$6.45.

Meanwhile, the company expects inflation to be up 2.5% in 2020. With an effective tax rate of 10-11%, total capital spending is expected to be $450-$500 million. Darden plans to open 50 gross and 44 net new restaurants in 2020.

Zacks Rank & Stocks to Consider

Darden currently has a Zacks Rank #3 (Hold). A few better-ranked stocks in the same space include Chipotle (NYSE:CMG) , Papa John’s (NASDAQ:PZZA) and Noodles & Company (NASDAQ:NDLS) . While Noodles & Company currently sports a Zacks Rank #1 (Strong Buy), Chipotle and Papa John’s carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Noodles & Company, and Chipotle’s earnings for the current year are expected to increase 700% and 43.5%, respectively. Papa John’s earnings for 2020 are expected to grow 62.8%.

Will you retire a millionaire?

One out of every six people retires a multimillionaire. Get smart tips you can do today to become one of them in a new Special Report, “7 Things You Can Do Now to Retire a Multimillionaire.”

Click to get it free >>

Papa John's International, Inc. (PZZA): Free Stock Analysis Report

Chipotle Mexican Grill, Inc. (CMG): Free Stock Analysis Report

Darden Restaurants, Inc. (DRI): Free Stock Analysis Report

Noodles & Company (NDLS): Free Stock Analysis Report

Original post

Zacks Investment Research
Darden (DRI) Q4 Earnings Surpass Estimates, Revenues Lag
Darden (DRI) Q4 Earnings Surpass Estimates, Revenues Lag

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind: 

  • Enrich the conversation
  • Stay focused and on track. Only post material that’s relevant to the topic being discussed.
  • Be respectful. Even negative opinions can be framed positively and diplomatically.
  •  Use standard writing style. Include punctuation and upper and lower cases.
  • NOTE: Spam and/or promotional messages and links within a comment will be removed
  • Avoid profanity, slander or personal attacks directed at an author or another user.
  • Don’t Monopolize the Conversation. We appreciate passion and conviction, but we also believe strongly in giving everyone a chance to air their thoughts. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at’s discretion.

Write your thoughts here
Are you sure you want to delete this chart?
Post also to:
Replace the attached chart with a new chart ?
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
Are you sure you want to delete this chart?
Replace the attached chart with a new chart ?
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.
Continue with Google
Sign up with Email