Darden Restaurants (DRI) Q4 2023 Quarterly Earnings

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Longhorn Steakhouse restaurant in Thornton, Colorado, USA, on Friday, March 19, 2021. Darden Restaurants Inc. to release employment figures on March 25.

Chet Strange | Bloomberg | Getty Images

Darden Restaurants on Thursday reported quarterly earnings that topped Wall Street expectations, boosted by strong sales of LongHorn Steakhouse.

But investors were disappointed by the company’s forecast for fiscal 2024. Darden expects adjusted earnings per share from continuing operations of $8.55 to $8.85, while analysts polled by Refinitiv were expecting earnings of $8.79 per share for the fiscal year.

The company’s shares fell more than 3% in morning trading. Prior to its earnings report, the stock had been approaching an all-time high of $168.98, set on June 15th.

Here’s how the company compared to Wall Street expectations, based on a survey of analysts by Refinitiv:

  • Earnings per share: $2.58 vs $2.54 expected
  • Revenue: $2.77 billion, meeting expectations

Darden reported fiscal fourth-quarter net income of $315.1 million, or $2.58 per share, up from $281.7 million, or $2.24 per share, a year earlier.

Net sales increased by 6.4% to $2.77 billion.

The company’s same-store sales increased 4%, driven by a strong performance from LongHorn Steakhouse. The steakhouse chain reported same-store sales growth of 7.1%, topping StreetAccount estimates of 4.9%.

But Olive Garden, which accounts for about 45% of Darden’s sales, reported a weaker-than-expected performance for the quarter. Same-store sales at the Italian chain rose 4.4%, falling short of expectations for 5% growth.

Darden’s fine foods division said same-store sales declined 1.9%. The division includes The Capital Grille and Eddie V’s.

Executives said they expect softer food sales during the first fiscal quarter. Traffic for its fine dining restaurants has more than doubled in the last three quarters compared to 2019 levels, but the sector still has a difficult comparison to high demand a year ago.

“We expect traffic to be flat on a year-over-year basis after the first quarter,” CFO Raj Vennam told investors on the company’s conference call.

Next quarter, the company’s fine dining options will also include Ruth’s Chris Steak House, which the company purchased for $715 million. Darden’s results for the quarter, which ended May 28, do not include its latest addition because the company completed the acquisition on June 14.

Looking ahead to fiscal 2024, Darden forecasts net sales of $11.5 billion to $11.6 billion, same-store sales growth of 2.5% to 3.5%, and adjusted earnings per share from continuing operations of $8.55 to $8.85.

Its earnings outlook excludes about 34 cents per share, after tax, of costs related to the Ruth’s Chris integration. The rest of his fiscal 2024 forecast includes Chris’ Ruth’s operating results.

The restaurant company also expects capital spending of $550 million to $600 million and overall inflation of 3% to 4%. The company expects to increase menu prices by 3.5% to 4% in response to rising costs, particularly for labor.

The company also announced that former CEO Gene Lee plans to step down as chairman of the board. Lee stepped down a little more than a year ago as chief executive. He will not stand for re-election at the company’s annual meeting of shareholders, which is scheduled for September 20.

“I am proud of what we have accomplished and believe that Darden is well positioned to continue to grow and succeed for years to come,” Lee said in a statement.

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