Tuesday, restaurant chain operator Darden Restaurants, Inc. (DRI) said its first quarter profit increased, notwithstanding a 2.3% decline in sales. Earnings came in ahead of the Street estimates by a cent, though revenues fell short. Looking ahead, the company reaffirmed its financial guidance for fiscal year 2010.
The Orlando, Florida-based company reported net income for the first quarter of $94.3 million or $0.67 per share, compared to $82.1 million or $0.58 per share in the year-ago quarter.
Income from continuing operations for the first quarter was $95.0 million or $0.67 per share, compared to $82.4 million or $0.58 per share in the same quarter last year.
On average, twenty three analysts polled by Thomson Reuters expected the company to earn $0.66 per share for the quarter. Analysts' estimates typically exclude special items.
Sales for the quarter decreased 2.3% to $1.73 billion from $1.77 billion in the prior-year quarter. Twenty two analysts had a revenue consensus of $1.78 billion for the first quarter.
Combined same-restaurant sales for Olive Garden, Red Lobster and LongHorn Steakhouse were down 5.3% this quarter. U.S. same-restaurant sales decreased 2.9% at Olive Garden, 7.9% at Red Lobster and 6.2% LongHorn Steakhouse.
Commenting on the results, Clarence Otis, chairman and chief executive officer said, "We are pleased to report solid earnings growth for the quarter in such a difficult macro-economic environment. Despite the challenges, our brands once again posted meaningfully stronger sales results than our industry as measured by the Knapp-Track benchmark."
Segment wise, Olive Garden's quarterly sales rose 1.2% to $821 million from prior year driven by revenue from 33 net new restaurants, partially offset by a U.S. same-restaurant sales decline of 2.9%.
Red Lobster fourth quarter sales were $605 million, a decrease of 6.3% , due to a 7.9% decline in U.S. same-restaurant sales, partially offset by revenue from 11 net new restaurants.
Longhorn Steakhouse quarterly sales decreased 2.0% to $211 million because of a same-restaurant sales decrease of 6.2%, partially offset by revenue from 14 net new restaurants.
Capital Grille fourth quarter sales of $50 million were 8.4% below last year sales, with same-restaurant sales slipping 18.0% year-over-year, and partially offset by the addition of five net new restaurants.
Bahama Breeze's first quarter sales of $35 million were 1.5% below prior year, driven by a same-restaurant sales decrease of 6.3%, partially offset by the addition of one net new restaurant.
Darden said it was benefited by favorable food and energy costs during the quarter, while crediting its Restaurant Support platform in the face of a challenging sales environment to the higher earnings.
Darden's board declared a quarterly cash dividend of $0.25 per share, payable on November 2, 2009 to shareholders of record at the close of business on October 9, 2009.
Looking ahead to fiscal year 2010, Darden expects net earnings to be in the range of $2.59 - $2.85 per share. Analysts currently expect earnings of $2.81 per share for the year.
Darden also reaffirmed its net earnings per share from continuing operations growth target of about -2% to +8% for full year 2010.
Blended same-restaurant sales for Olive Garden, Red Lobster and LongHorn Steakhouse, is expected to be between about -3% and flat in 2010. Based on these same-restaurant results and approximately 50 to 55 net new restaurant openings, total sales change is expected to be between -2% and +1% for 2010.
Commenting on the guidance, the company's chief financial officer, Brad Richmond said, "As a result, we are reducing the lower end of the range of our blended same-restaurant sales we expect this fiscal year. At the same time, food costs were also lower in the first quarter than initially expected, and are likely to remain more muted for the balance of the year than we previously anticipated. And, we are finding additional cost management opportunities as well. The net result is that our fiscal year earnings per share outlook remains unchanged. Given industry sales trends, however, at this time the lower half of the diluted net earnings per share range we've provided is more likely than the upper half of the range."
DRI closed Tuesday's trading at $36.15, up $0.01 or 0.03%, on a volume of about 3.16 million shares. However, the stock lost $2.18 or 6.03%, and trading at $33.97 in after hours.
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