Darden Restaurants Inc.
) posted third-quarter fiscal 2013 earnings from continuing
operation of $1.02 per share, missing the Zacks Consensus
Estimate by a penny. Earnings in the quarter were also down 18%
from the year-ago level.
The company owns and operates restaurant chains such as Red
Lobster, Olive Garden, LongHorn Steakhouse and The Specialty
Total revenues grew 4.6% year over year to $2.3 billion, in
line with the Zacks Consensus Estimate. Quarterly revenues were
driven by same-store sales (comps) growth of 2.3% at Darden's
Specialty Restaurant Group, new unit openings, and higher sales
gain from the company's previously acquired Yard House
However, combined comps from the company's other three core
brands - Olive Garden, Red Lobster and LongHorn Steakhouse - were
's sales inched up 0.6% year over year to $962 million in the
third quarter, buoyed by contributions from 42 new units.
However, negative U.S. comps of 4.1% were a headwind.
decreased 6.0% to $669 million due to a 6.6% decline in U.S.
comps. However, the sales decline was partly mitigated by revenue
gains from the segment's three new units.
, sales were up 6.9% to $332 million as 42 net new restaurants
contributed to the upside. However, negative comps of 1.6%
provided a partial offset.
The Specialty Restaurant Group
jumped 61.1% to $287 million, backed by higher sales gain from 40
Yard House restaurants and newly opened units. Though the rise in
comps at The Capital Grille, Eddie V's and Seasons 52 drove sales
at The Specialty Restaurant Group, negative comps of 0.3% at
Bahama Breeze proved to be a drag on the momentum.
Darden ended the quarter with cash and cash equivalents of
$103.9 million versus $61.4 million in the previous quarter.
Long-term debt (less current portion) remained nearly flat year
over year at $2.5 billion in the third quarter.
Darden reiterated its guidance for fiscal 2013. Darden expects
that its fiscal 2013 sales will grow in the range of 6%-7% based
on a negative 1.5%-2.5% blended same-store sales growth estimate
for its three core brands, Red Lobster, Olive Garden and LongHorn
Steakhouse. However, sales in fiscal 2013 are expected to get a
boost from the company's Yard House restaurants and new unit
The company projects earnings from continuing operations in
the range of $3.06 and $3.22 per share for fiscal 2013. The
earnings guidance includes the costs associated with the
acquisition of Yard House of 9 cents.
Continuous slowdown in comps in three of Darden's restaurant
concepts during the past two quarters reflects wavering consumer
confidence in the U.S. Moreover, the performance of Olive Garden
and Red Lobster in the third quarter was weak. The Specialty
Restaurant Group however came as a relief in the
In the end, the initiatives undertaken by Darden helped in
posting positive comps. However, Darden's sustained effect is
still to be seen.
Darden currently carries a Zacks Rank #5 (Strong Sell). Other
stocks in the restaurant industry that are currently performing
Burger King Worldwide, Inc.
Jack in the Box Inc.
Cracker Barrel Old Country Store, Inc.
). All these companies carry a Zacks Rank #2 (Buy).
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