Darden (DRI) Q2 Earnings Beat Estimates, Revenues Lag, Rise Y/Y
Darden Restaurants, Inc. DRI reported mixed second-quarter fiscal 2024 results, with earnings beating the Zacks Consensus Estimate and revenues missing the same. The metrics increased on a year-over-year basis.
Earnings & Revenues
During the fiscal second quarter, Darden reported adjusted earnings per share (EPS) of $1.84, beating the Zacks Consensus Estimate of $1.71. In the prior-year quarter, DRI reported an adjusted EPS of $1.52.
Darden Restaurants, Inc. Price, Consensus and EPS Surprise
Darden Restaurants, Inc. price-consensus-eps-surprise-chart | Darden Restaurants, Inc. Quote
Total sales during the quarter came in at $2,727.3 million, missing the consensus mark of $2,738 million. Sales increased 9.7% from the prior-year quarter’s level on solid blended same-restaurant sales of 2.8%. The opening of 78 company-owned Ruth's Chris Steak House restaurants and 45 other net new restaurants added to the positives.
Sales by Segments
Darden reports business under four segments — Olive Garden, LongHorn Steakhouse, Fine Dining, including The Capital Grille and Eddie V's and Other Business.
During the fiscal second quarter, sales at Olive Garden increased 6.3% year over year to $1,251.4 million. Our estimate for the metric was $1,150.5 million. Comps in the segment rose 4.1% year over year compared with 7.6% growth reported in the previous quarter.
At LongHorn Steakhouse, sales were up 7.1% year over year to $643 million. Our estimate for the metric was $622.2 million. Comps in the segment rose 4.9% year over year compared with a 7.3% growth reported in the previous quarter.
Sales in Fine Dining increased 57.4% year over year to $318 million. Our estimate for the metric was $412 million. Comps in the segment dropped 1.7% year over year against a 5.9% rise reported in the previous quarter.
Sales at Other Business rose 1.5% year over year to $514.9 million. Our estimate for the metric was $542.6 million. Comps in the Other Business declined 1.1% year over year against a 7.1% increase reported in the previous quarter.
Operating Highlights
In the fiscal second quarter, total operating costs and expenses increased 8.7% year over year to $2,448.8 million. The upside was primarily due to increased food and beverage costs, restaurant expenses and labor costs.
Balance Sheet
As of Nov 26, 2023, cash and cash equivalents came in at $195.7 million compared with $192.1 million as of Aug 27, 2023.
During the fiscal second quarter, inventories came in at $310.6 million compared with $287 million reported in the previous quarter. As of Nov 26, 2023, long-term debt was $1,368.4 million compared with $1,477.1 million as of Aug 27, 2023.
During the fiscal second quarter, Darden’s board of directors repurchased approximately 1.2 million shares of its common stock, worth approximately $181 million. As of Nov 26, the company stated the availability of approximately $328 million under the $1-billion repurchase program.
Darden declared a quarterly cash dividend of $1.31 per share. The dividend will be payable on Feb 1, 2024, to shareholders of record as of Jan 10, 2024.
Updated Fiscal 2024 Outlook
For fiscal 2024, the company expects total sales to be approximately $11.5 billion. Same-restaurant sales in fiscal 2024 are anticipated to be 2.5-3%. EPS from continuing operations are anticipated in the band of $8.75-$8.90 compared with the previous guidance of $8.55-$8.85.
The company expects to open 50-55 net new restaurants and projects a total capital spending of $600 million in fiscal 2024.
Zacks Rank & Key Picks
Darden currently carries a Zacks Rank #3 (Hold).
Some better-ranked stocks from the Zacks Retail-Wholesale sector are:
Brinker International, Inc. EAT currently sports a Zacks Rank #1 (Strong Buy). It has a trailing four-quarter earnings surprise of 223.6%, on average. The stock has gained 19.5% in the past year. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for EAT’s 2024 sales and EPS suggests a rise of 5.1% and 26.2%, respectively, from the year-ago period’s levels.
Abercrombie & Fitch Co. ANF flaunts a Zacks Rank #1 at present. It has a trailing four-quarter earnings surprise of 713%, on average. Shares of ANF have surged 284.8% in the past year.
The Zacks Consensus Estimate for ANF’s 2023 sales and EPS suggests increases of 13.3% and 2,196%, respectively, from the year-ago period’s levels.
Beacon Roofing Supply, Inc. BECN carries a Zacks Rank #2 (Buy). It has a trailing four-quarter earnings surprise of 11.1%, on average. Shares of BECN have risen 53.9% in the past year.
The Zacks Consensus Estimate for BECN’s 2023 sales and EPS indicates 7.2% and 9% growth, respectively, from the year-ago period’s levels.
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