Darden Restaurants Beats Expectations On Sales And Earnings

Darden Restaurants Inc. (NYSE:DRI) reported a healthy jump in sales and earnings that topped forecasts in its most recent quarter. Adjusted earnings came to $1.18 per share for the quarter ended May 28, 3 cents better than Wall Street expected. Total revenue rose 8 percent to $1.93 billion, also higher than analyst projections.

Olive Garden’s same-store sales grew 4.4 percent last quarter, beating the average analyst estimate of 2.8 percent growth. The Italian eatery was Darden’s fastest-growing brand and is its largest chain. Olive Garden accounts for more than half of Darden’s overall sales. This was the fourth straight quarter of better-than-expected gains at Olive Garden.

In recent years, Olive Garden has returned to a basic menu, rolled out healthier options, and overhauled its kitchen operations. Olive Garden has also been testing new ways to reach a broader group of customers, including advertising its to-go business and experimenting with delivery.

Six out of seven of Darden’s restaurant brands grew same-stores sales in the fourth quarter, with the exception being Seasons 52. LongHorn Steakhouse, another one of Darden’s major chains, reported a same-store sales gain of 3.5 percent for the quarter. Analysts had predicted a 1.8 percent increase. The company sold the Red Lobster chain a few years ago and recently acquired the Cheddar’s chain.

The CEO says that Darden’s success is rooted in simplifying business, adding quality menu items, and boosting customer satisfaction rates. About 30 percent of Darden’s customers are from the millennial generation. Millennials make up about 24 percent of the total population in the U.S., meaning that these younger diners account for a disproportionately large proportion of Darden Restaurants’ customers.

The results helped send Darden on its biggest rally in three months. Shares of Darden rose as much as 4.8 percent after the earnings announcement. Darden expects adjusted earnings of $4.38 to $4.50 a share this year, higher than the $4.42 predicted by analysts. The company also boosted its quarterly dividend to 63 cents from 56 cents.

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