Darden Restaurants Inc.
) posted fourth-quarter fiscal 2013 earnings from continuing
operations of $1.01 per share, missing the Zacks Consensus
Estimate by nearly 2%. Quarterly earnings were also down 12% from
the year-ago level. Higher operating costs pressurized the
earnings during the quarter.
In fiscal 2013, earnings per share from continuing operations
were $3.14 which missed the Zacks Consensus Estimate by roughly
0.6% and the comparable year-ago level by 12%.
Total revenues grew 11.3% year over year to $2.3 billion, in
line with the Zacks Consensus Estimate. Quarterly revenues were
driven by higher same-store sales (comps) growth, new unit
openings and higher sales gain from the company's previously
acquired Yard House restaurants.
In fiscal 2013, revenues increased 6.9% year over year to $8.6
billion which was ahead of the Zacks Consensus Estimate by
The company owns and operates restaurant chains such as Red
Lobster, Olive Garden, LongHorn Steakhouse and The Specialty
Combined comps at the company's three core brands - Olive
Garden, Red Lobster and LongHorn Steakhouse - were up 2.2% while
that of Darden's Specialty Restaurant Group were up 2.3%, driven
by higher traffic.
Olive Garden's sales were up 5.3% year over year to $952
million in the fourth quarter, buoyed by contributions from 36
new units and a 1.1% increase in U.S. comps.
Sales at Red Lobster increased 3.3% to $703 million due to a
3.2% increase in U.S. comps and revenue gains from the segment's
one new unit.
At LongHorn Steakhouse, sales were up 14.0% to $339 million as
44 net new restaurants contributed to the upside. A 3.5% increase
in the U.S. comps also helped the segment's sales growth.
Sales at The Specialty Restaurant Group jumped 64.7% to $295
million, backed by a more significant sales gain from 40 Yard
House restaurants, four newly opened units and higher comps at
The Capital Grille, Eddie V's and Seasons 52 restaurants.
However, negative comps of 1.7% at Bahama Breeze proved to be a
The company also announced a 10.7% hike in its quarterly cash
dividend rate. The company will now pay a quarterly dividend of
55 cents per share, a nickel above the prior-quarter dividend of
50 cents per share. The increased dividend will be paid on Aug 1,
2013 to stockholders of record on Jul 10.
Darden ended the quarter with cash and cash equivalents of
$88.2 million versus $103.9 million in the previous quarter.
Long-term debt (less current portion) remained nearly flat
year-over-year at $2.5 billion in the fourth quarter.
Darden expects the business environment for fiscal 2014 to be
as sluggish as fiscal 2013. According to the company, consumers
have become extremely value-sensitive. The payroll tax increase
and the spike in gasoline prices have compelled the cash-strapped
consumers to dine out less.
Orlando, Fla.-based Darden foresees its sales growth for
fiscal 2014 in the range of 6% - 8% (inclusive of the additional
quarter of sales from Yard House) based on a flat to up 2%
blended same-store sales growth for its three core brands. Sales
in fiscal 2014 are expected to get a boost from the company's
Yard House restaurants and new unit openings.
In fiscal 2014, the company intends to open 80 restaurants,
24% lower than the year-ago period owing to the decline in the
number of new Olive Garden restaurant openings.
Finally, the company expects its earnings per share to
decrease by 3% - 5% from the prior year due to the tough
year-over-year comparison, higher cost incurred due to the
implementation of Affordable Care Act, partly offset by the lower
costs associated with the Yard House acquisition.
Although Darden's earnings missed estimates during the
quarter, it seems the company is back on track with higher
revenues, unit expansion and positive comps growth at all of its
restaurants. The company's Red Lobster brand is also gaining
traction after a few weak quarters. However, macroeconomic
tension, adverse impact from the Affordable Care Act and
faltering consumer confidence are expected to be headwinds for
fiscal 2014. Moreover, although Darden took a set of initiatives
to improve its business, its sustained effect is yet to be
Darden currently carries a Zacks Rank #3 (Hold). Other stocks
in the restaurant industry that are currently performing well
CEC Entertainment Inc.
AFC Enterprises Inc.
Bloomin' Brands, Inc.
). While CEC Entertainment carries a Zacks Rank #1 (Strong Buy),
AFC Enterprises and Bloomin' Brands both carry a Zacks Rank #2
AFC ENTERPRISES (AFCE): Free Stock Analysis
BLOOMIN BRANDS (BLMN): Free Stock Analysis
CEC ENTERTANMNT (CEC): Free Stock Analysis
DARDEN RESTRNT (DRI): Free Stock Analysis
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