Darden Declares Q1 Preliminary Results, Keeps FY15 View - Analyst Blog


Darden Restaurants, Inc. ( DRI ) announced preliminary results for first-quarter fiscal 2015, which were largely in line with expectations. The company expects to release first-quarter results on Sep 12, 2014, before the market opens.

The company expects earnings per share from continuing operations, on an adjusted basis to be within 31 to 33 cents for its fiscal first-quarter 2015 ended Aug 24, 2014.  The Zacks Consensus Estimate of 33 cents is in line with the higher end of the company's expectation.

However, net loss per share from continuing operations is expected to be approximately 13 to 15 cents. This includes certain one-time items related to the sale of Red Lobster, costs related to certain aspects of the company's strategic action plan, restaurant impairment charges and around debt breakage expenses.

The company expects U.S. comps for LongHorn Steakhouse and Specialty Restaurant Group to grow roughly 2.8% and 2.1%, respectively, in the first quarter. Specialty Restaurant Group's comps growth will mainly be driven by comps growth of roughly 3.9% for The Capital Grille, 2.5% for Eddie V's, 2.3% for Yard House and 1.1% for Bahama Breeze, partly offset by comps decline of 0.3% for Seasons 52.

However, comps are expected to decline 1.3% for Olive Garden.  

Fiscal 2015 Financial Outlook

Darden continues to expect earnings per share from continuing operations of $1.81 to $1.90 for fiscal 2015. This projection includes the costs associated with implementation of its strategic action plan and debt breakage costs, besides certain one-time items related to the sale of Red Lobster.

On an adjusted basis, the company expects earnings per share from continuing operations of $2.22 to $2.30 for 2015. The Zacks Consensus Estimate for fiscal 2015 is pegged at $2.22, at the lower end of the range.  

These expectations reflect the company's projection that comps growth for fiscal 2015 for Olive Garden will be in the range of stable to up 1%, LongHorn Steakhouse is expected to grow 1-2% and the Specialty Restaurant Group is anticipated to grow roughly 2%. The company also plans to open 37 restaurants in the fiscal year.   

Olive Garden Brand Renaissance Plan

Darden also announced progress on its Olive Garden Brand Renaissance Plan, including improvement in guest satisfaction across its restaurants. Further, the company announced the completion of three remodels that involve a new logo and new signage, menus and plates.

This has resulted in more than 10% increase in traffic, on an average, in the remodeled restaurants. The company plans to remodel another 75 restaurants in fiscal 2015. Olive Garden's take-out business has also witnessed a 13% year-over-year increase during the first quarter, due to the company-wide rollout of online ordering. The company also noted that testing of tablet technology in several restaurants has generated check growth, increased table turns and tip percentage for servers.

Darden currently carries a Zacks Rank #3 (Hold). Some better-ranked stocks worth considering in the restaurant industry include BJ's Restaurants, Inc. ( BJRI ), Chipotle Mexican Grill, Inc. ( CMG ) and Jamba, Inc. ( JMBA ). All these stocks sport a Zacks Rank #1 (Strong Buy).

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.

This article appears in: Investing , Business , Stocks

Referenced Stocks: DRI , CMG , BJRI , JMBA



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