Thursday, multi-brand restaurant chain operator Darden Restaurants, Inc. (DRI) reported a slightly higher second-quarter profit that topped estimates, helped by lower income tax expenses though revenues declined. Looking ahead, the company adjusted and narrowed its fiscal year 2010 earnings view range.
The Orlando, Florida-based company's second-quarter net income increased to $60.3 million from $59.7 million a year ago. On a per share basis, earnings decreased to $0.43 per share from $0.44 per share reported in the corresponding quarter a year ago.
On average, 25 analysts polled by Thomson Reuters estimated earnings of $0.42 per share for the quarter. Analysts' estimates typically exclude special items.
Net earnings from continuing operations increased marginally in the second quarter to $61.2 million or $0.43 per share from $58.5 million or $0.42 per share in the prior-year quarter, as the company benefited from a lower income tax expense of $19.5 million, compared to $24.0 million in the similar quarter of 2008.
Revenues for the second quarter declined 1.6% to $1.64 billion from $1.67 billion in the comparable quarter last year. Analysts, on a consensus, expected revenues of $1.65 billion for the quarter.
Olive Garden, Red Lobster and LongHorn Steakhouse, the most known brands of Darden, witnessed blended same-restaurant sales drop of 4.7% in the second quarter. Excluding the impact of the Thanksgiving holiday week, which was in the second quarter this year but in the third quarter last year, blended same-restaurant sales were down 3.9%. Darden said the decline compares with an estimated decline of 5.9% Knapp-Track benchmark of U.S. same-restaurant sales.
Brand wise, same-restaurant sales at Olive Garden decreased 1.4% while sales at Red Lobster and LongHorn Steakhouse dropped by 8.4% and 6.2%, respectively. Excluding the effect of the shift in Thanksgiving holiday shift, same-restaurant sales decreased 0.7% at Olive Garden, 7.6% at Red Lobster, and 5.0% at LongHorn Steakhouse.
Olive Garden's second-quarter sales increased 2.8% to $783 million, helped by revenue from 32 new restaurants, partially offset by the 1.4% decline in U.S. same-restaurant sales. Red Lobster's sales dropped 6.5% to $562 million due to the 8.4% lower same-restaurant sales, partially offset by revenue from seven new restaurants. Sales at LongHorn Steakhouse declined 3.2% to $200 million, hurt by the 6.2% decrease in same-restaurant sales, partially offset by revenue from nine new restaurants.
Among Darden's other restaurant brands, The Capital Grille's second-quarter sales decreased 3% to $59 million while Bahama Breeze's sales dropped 2% to $27 million.
The company's quarterly results include pre-tax expenses of $2 million of asset impairments, primarily related to the closure of a LongHorn Steakhouse restaurant due to fire. Darden expects to re-build and re-open the restaurant at the same location in fiscal 2011.
Clarence Otis, chief executive officer of Darden said, "We're pleased that our same-restaurant sales results remain stronger than the average for our industry as measured by the Knapp-Track benchmark, and that we're achieving these results without heavy discounting."
For the six-month period, net earnings increased to $154.6 million or $1.09 per share from $141.7 million or $1.00 per share in the similar period last year. Revenue for the period declined to $3.38 billion from $3.44 billion last year.
Looking ahead to fiscal year 2010, Darden expects earnings per share growth from continuing operations of flat to +4%, compared to reported earnings per share from continuing operations of $2.65 in fiscal 2009.
Darden said it estimates fiscal year 2010 earnings to range between $2.65 and $2.76 per share on a 52-week basis. Analysts currently have a consensus earnings estimate of $2.75 per share for fiscal 2010. While reporting its first quarter results, Darden had said it expects net earnings in the range of $2.59 - $2.85 per share for 2010.
Brad Richmond, chief financial officer said, "Cost trends have been more favorable than we expected. So, while we are bringing down the range of blended same-restaurant sales we expect this fiscal year, our annual earnings per share expectations remain on track with where they were in September."
Darden declared a quarterly cash dividend of 25 cents per share, payable on February 1, 2010 to shareholders of record at the close of business on January 8, 2010.
Amongst peers, Brinker International, Inc. (EAT) reported a decrease in first-quarter net profit, hurt mainly by a 21% decline in revenues. The Dallas, Texas-based company's net earnings were $15.77 million or $0.15 per share compared to $23.78 million or $0.23 per share in the prior-year period. Revenues for the quarter slumped to $778.08 million from $984.41 million a year ago.
DRI closed Thursday's regular trading at $32.75, down $0.61 or 1.83%, on a volume of 2.25 million shares on the New York Stock Exchange.
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