Darden Zooms Past Earnings Estimates

Restaurant operator reports positive same-restaurant sales for all its brands

Source: Company's Website
Source: Company’s Website

Darden Restaurants Inc. (NYSE: DRI) announced its Q4 FY16 and full-year FY16 financial results on June 30th, 2016. Headquartered in Orlando, Florida, Darden is a full service restaurant company that owns and operates more than 1,500 restaurants. The Company’s restaurant brands include Olive Garden, LongHorn Steakhouse, Bahama Breeze, Seasons 52, The Capital Grille, Eddie V’s Prime Seafood, Wildfish Seafood Grill, and Yard House. Through subsidiaries, the Company owns and operates all its restaurants in the U.S. and Canada, except for three jointly owned restaurants each in Florida and California, and managed by the Company, seven franchised restaurants in Puerto Rico and one in Atlanta. Read more about the Darden’s financial results below.

Q4 FY16 financial highlights

Darden’s Q4 FY16 revenue declined 4.7% to $1.79 billion, missing estimates of $1.81 billion, due to the impact of the extra week of operations included in Q4 FY15. Excluding the impact of the extra week, revenue was up 2.1% during the quarter. Comparable restaurant sales increased 2.6% for the quarter, with same-restaurant sales rising 2.4% at Olive Garden, 2.2% at LongHorn Steakhouse, 3.7% for The Capital Grille, and 2.7% at Eddie V’s.

As a result of lower costs, the Company reported a 32.6% jump in Q4 FY16 net income to $139.6 million, or $1.09 per share, from $105.3 million, or $0.82 per share, in the year-ago quarter. Reported diluted net EPS from continuing operations jumped 19.6% to $1.10 per share and increased 8.9% from the year-ago period’s adjusted diluted net EPS.

Full year FY16 financial highlights

For the full year FY16, Darden’s revenue grew 2.5% to $6.93 billion, due to the impact of the extra week of operations included in Q4 FY15. Excluding the impact of the extra week, revenue was up 4.4% during the quarter. Comparable restaurant sales increased 3.3% for the year, with same-restaurant sales rising 3.1% at Olive Garden, 3.5% at LongHorn Steakhouse, 3.9% for The Capital Grille, 1.8% at Eddie V’s, 2.3% for Yard House, 4.7% for Seasons 52, and 4.8% for Bahama Breeze.

The Company’s diluted net EPS from continuing operations jumped 84.1% to $2.78 during FY16. Adjusted diluted net EPS from continuing operations shot up 37.9% to $3.53 versus FY15.

Share repurchase

During the quarter, the Company repurchased approximately 0.7 million shares of its common stock for about $45 million. This leaves approximately $315 million remaining under the current $500 million authorized repurchase program. During FY16, Darden repurchased approximately $185 million of its outstanding common stock.

Guidance for FY17

Going forward for FY17, the restaurant operator issued lower-than-expected earnings guidance of $3.80-$3.90 per share and same-restaurant sales uptick of 1% to 2%. Darden also sees new unit openings of 24-28 restaurants, with total capital spending forecast of $310-$350 million. The EPS outlook reflects approximately 128.5 million diluted average common shares outstanding for the year.

Stock Performance

D2Darden’s stock stood at $62.07, down 0.24%, at the close on Thursday, July 7th, 2016, having vacillated between an intraday high of $62.46 and a low of $61.68 during the session. The stock’s trading volume was at 2,174,647 for the day. The Company’s market cap was at $7.91 billion as of Thursday’s close.

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