Earnings Preview: Darden Restaurants to report 3Q

Olive Garden, Red Lobster parent company Darden Restaurants to report fiscal 3rd-qtr results

Associated Press

NEW YORK (AP) -- Darden Restaurants Inc. reports its third-quarter results on Friday, which should provide more details on the company's efforts to boost sales at its struggling Olive Garden and Red Lobster chains.

WHAT TO WATCH FOR: The Orlando, Fla.-based company already warned last month that revenue at Olive Garden, Red Lobster and LongHorn Steakhouse locations open at least a year would fall 4.5 percent for the period ended Feb. 24. The metric is a key indicator of the health of a restaurant chain because it strips out the impact of locations that have recently opened or closed.

It also has said it expects net income from continuing operations to be $1 to $1.02 per share, which was below Wall Street expectations at the time of $1.12 per share.

THE BIG PICTURE: Darden has been trying to revitalize its brands with new menus, ad campaigns and even uniforms. But the efforts have yet to pay off, with sales continuing to slump. Earlier this year, the company ousted the head of Olive Garden after a new marketing campaign fell flat.

More broadly, the company is dealing with changing eating habits as people increasingly head to chains such as Chipotle, which are seen as more convenient and less expensive. Darden executives have noted that the higher prices of casual dining chains are getting harder to justify as quick-service chains step up their offerings. Since 2008, the company has said that customer traffic to its restaurants has declined nearly 8 percent.

CEO Clarence Otis has said higher payroll taxes and gas prices, along with winter weather, also hurt results in February.

WHAT'S EXPECTED: Analysts on average expect $1.01 per share on revenue of $2.27 billion, according to FactSet.

LAST YEAR'S QUARTER: The company earned $164.1 million, or $1.25 per share. Revenue was $2.16 billion.

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