Darden Restaurants Earnings: Margins Shrink on Rising Costs, Net Income Falls

S&P 500 (NYSE:SPY) component Darden Restaurants, Inc. (NYSE:DRI) reported its results for the first quarter. Darden Restaurants operates a full-service dining restaurant industry in the United States.

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Darden Restaurants Earnings Cheat Sheet for the First Quarter

Results: Net income for the restaurant fell to $106.6 million (78 cents per share) vs. $113.1 million (80 cents per share) a year earlier. This is a decline of 5.7% from the year earlier quarter.

Revenue: Rose 7.5% to $1.94 billion from the year earlier quarter.

Actual vs. Wall St. Expectations: DRI fell in line with the mean analyst estimate of 78 cents per share. Analysts were expecting revenue of $1.93 billion.

Quoting Management: “As we previously announced, strong sales growth this quarter at Red Lobster, LongHorn Steakhouse and our Specialty Restaurant Group was offset by below expectation sales results at Olive Garden, unfavorable year-over-year commodity costs and the adverse impact of Hurricane Irene,” said Clarence Otis, Chairman and Chief Executive Officer of Darden. “Olive Garden remains one of the strongest brands in the full-service restaurant industry and we are working to improve its sales performance during the balance of the year. With improvement at Olive Garden, continued sales momentum at the other brands, more neutral commodity cost comparisons in the second half of the year and a meaningful increase in the number of shares we will repurchase, we anticipate diluted net earnings per share growth of 12% to 15% this fiscal year – though we have higher confidence at this point in the year in the low end of the range.”

Key Stats:

Last quarter’s profit decrease breaks a streak of four consecutive quarters of year-over-year profit increases. In the fourth quarter of the last fiscal year, net income rose 18.9% from the year earlier, while the figure increased 12.6% in the third quarter of the last fiscal year, 23.5% in the second quarter of the last fiscal year and 19.9% in the first quarter of the last fiscal year.

Gross margin shrank two percentage points to 22.4%. The contraction appeared to be driven by increased costs, which rose 10.3% from the year earlier quarter while revenue rose 7.5%.

Revenue has risen the past four quarters. Revenue increased 6.8% to $1.99 billion in the fourth quarter of the last fiscal year. The figure rose 5.5% in the third quarter of the last fiscal year from the year earlier and climbed 5.2% in the second quarter of the last fiscal year from the year-ago quarter.

The company has now fallen in line with estimates for the past two quarters. It reported net income of $1 in the fourth quarter of the last fiscal year.

Competitors to Watch: Grill Concepts, Inc. (GLLC), Landry’s Restaurants, Inc (LNY), Ruth’s Hospitality Group, Inc. (NASDAQ:RUTH), Bravo Brio Restaurant Group, Inc. (NASDAQ:BBRG), Granite City Food & Brewery Ltd. (NASDAQ:GCFB), O’Charley’s Inc. (NASDAQ:CHUX), Ark Restaurants Corp. (NASDAQ:ARKR), Morton’s Restaurant Group, Inc. (NYSE:MRT), Red Robin Gourmet Burgers, Inc. (NASDAQ:RRGB), and McCormick & Schmick’s Seafood Restaurant (NASDAQ:MSSR).

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(Source: Xignite Financials)

 

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