Darden Restaurants Inc. (DRI) is slated to release its first-quarter earnings results after the market's close Tuesday. On average, 23 analysts surveyed by Thomson Reuters expect the company to post earnings of $0.66 per share for the quarter, with estimates ranging between $0.54 and $0.76 per share. Analysts' estimates typically exclude special items. Revenues for the quarter are estimated to be $1.78 billion, representing a 0.6% growth from last year.
While announcing the fourth-quarter results back in June, Clarence Otis, the Company's Chairman and Chief Executive Officer stated, "We certainly hope to see an improvement in macroeconomic conditions and full-service restaurant industry sales trends in our new fiscal year. And there are reasons to believe there might be some favorable changes. However, given the current level of uncertainty, we think it's prudent to be cautious in developing our plans for the year. As a result, we're assuming that the economic and industry weakness we've experienced over the past six months will continue through all of our fiscal 2010."
The ongoing instability in the economy has forced customers to chose 'eat-at-home' than opting for restaurants.
In the prior year's first quarter, the Orlando, Florida-based restaurant chain operator had reported net earnings of $82.1 million or $0.58 per share, lower than the previous year, impacted by integration costs and purchase accounting adjustments related to the October 2007 acquisition of RARE Hospitality International, Inc. On an adjusted basis, earnings per share were $0.61. First-quarter 2009 sales were $1.77 billion, up 21% from the previous year. Otis then had noted that the economic and consumer dynamics were much weaker than the company anticipated, and it fell short of sales and earnings targets.
For the year 2010, Darden Restaurants expects blended same-restaurant sales for its three large casual dining brands, Olive Garden, Red Lobster and LongHorn Steakhouse, to be between a decline of 2% and flat. Based on the same-restaurant results and approximately 50 to 55 net new restaurant openings, total sales change is expected to be between a decline of 1% and growth of 1% and net earnings per share are expected to range from a drop of 2% to increase of 8% for fiscal 2010.
Excluding the extra week in 2009, fiscal 2010 same-restaurant sales assumptions and plans for net new restaurant openings are expected to drive total sales growth of 1% to 3% and net earnings per share growth in the range of flat to 10% growth. Analysts currently estimate earnings of $2.81 per share on sales of $7.25 billion for the year.
The company also had pointed out earlier that going forward, it would no longer report results and prior period comparisons that exclude integration costs and purchase accounting adjustments.
Darden Restaurants, which was founded in 1968, and operates independently of General Mills Inc. as of May 28, 1995, is the world's largest company-owned and operated full-service restaurant company with over $7.2 billion in annual sales and about 180,000 employees. The company operates full-service restaurants primarily in the United States and Canada, mainly under under Red Lobster, Olive Garden, LongHorn Steakhouse, The Capital Grille, Bahama Breeze, and Seasons 52 names. It also operates two specialty restaurants, Hemenway's Seafood Grille and Oyster Bar, and The Old Grist Mill Tavern. As of May 31, 2009, the company owned and operated about 1,773 restaurants.
In its preceding fourth quarter, Darden Restaurants had reported higher earnings of $123.0 million or $0.87 per share than prior year's $103.3 million or $0.72 per share, driven by an 8% growth in sales to $1.976 billion. On an adjusted basis, net earnings from continuing operations were $0.90 per share, higher than last year's $0.78 per share. Combined same-restaurant sales for Olive Garden, Red Lobster and LongHorn Steakhouse were down 1.4%, and U.S. same-restaurant sales decreased 0.6% at both Olive Garden and Red Lobster while LongHorn Steakhouse's U.S. same-restaurant sales dipped 6.5%. Segment wise, Olive Garden's quarterly sales rose 11.5%, Red Lobster sales increased 6.8% and Longhorn Steakhouse sales grew 6.5%, while sales from Capital Grille fell 9.9%.
Otis then stated, "In a challenging economic environment where consumers have reduced their dining out frequency and there was a significant amount of competitive discounting, our brands performed much better than the industry. This is most evident in our blended same-restaurant sales results, which continued to outpace the industry as measured by the Knapp-Track benchmark. We're building on these great strengths by taking steps to further elevate our restaurant operating, brand management and support capabilities. As a result, we're confident we'll emerge from today's challenging environment an even stronger company."
Among others in the field, restaurant chain operator Brinker International, Inc. (EAT) in early August reported a fourth-quarter net income of $42.15 million or $0.41 per share, compared to last year's loss of $1.54 million or $0.02 per share, benefiting primarily from lower one-time items. On an adjusted basis, net income was $53.5 or $0.52 per share, higher than last year's $51.5 million or $0.50 per share. Meanwhile, total revenues for the quarter declined 22.7% to $0.83 billion. The company experienced a 9% decrease in comparable restaurant sales due to decreases across all brands. Revenues were also negatively impacted by a net decline in capacity of 18.2% due to 55 restaurant closures and the sale of 198 restaurants since the fourth quarter of fiscal 2008.
DineEquity Inc. (DIN), the parent company of Applebee's Neighborhood Grill & Bar and IHOP Restaurants, in late July reported a second-quarter net income of $18.8 million or $1.09 per share, compared to a loss of $23.7 million or $1.42 per share in the prior year, due to the absence of impairment and closure charges. The Glendale, California-based company's adjusted net income grew to $12.9 million or $0.74 per share from $0.4 million or $0.02 per share in the year-ago quarter. Second-quarter revenues, however, declined to $349.65 million from $424.13 million last year, and IHOP's system-wide domestic same-store sales dropped 0.6%, while Applebee's system-wide domestic same-store sales decreased 4.3%.
In a September 25 research note, brokerage Bernstein initiated coverage on Darden Restaurants with an 'Outperform' rating.
DRI closed Monday's regular trading session at $36.14, up $0.54 or 1.52%, on a volume of 3.84 million shares. In the past 52 weeks, shares have been trading between $13.21 and $41.21, with a 3-month average volume of 2.54 million shares.
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