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Earnings: Darden Restaurants tops fourth-quarter revenue estimates, Rite Aid raises guidance

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Yahoo Finance Live anchors discuss quarterly earnings for Darden Restaurants and Rite Aid.

Video Transcript

[MUSIC PLAYING]

JULIE HYMAN: Darden Restaurants, we're watching those shares following that company's earnings. You can see coming out ahead of analyst estimates. Shares up about 2 and 1/2%. And the CFO noting the company ended the year with significantly better margins than pre-COVID, despite higher inflation, which is an impressive feat, indeed, in this market. Overall, comparable sales, which is one of the main metrics we look at for these types of companies, up 11.7%. And that was better than estimated by analysts.

BRAD SMITH: You can't pick your favorite children at Darden, but they would probably say it's Olive Garden. I mean, they've continued to put the team on their back here. And for the total revenue that we see come in or the sales that came in for consolidated Darden came in at $9.6 bil. Olive Garden accounting for $4 and 1/2 billion worth of that. Now you do have some of the other segments, of course. Longhorn Steakhouse, you like to see that coming back and beating some of those pre-COVID levels.

And actually, across the board for this quarter, they beat on pre-COVID levels, where you saw Olive Garden beat on the $4.3 or $4.4 billion that they had pre-COVID. Fine dining also topped that as well. And so all of these things considered, I think it really does come down to the costs that they're going to be continuing to navigate. Of course, they have to consider some of the restaurant expenses, the marketing expenses as well. We know that those are significant in times of an economic, or, at least, pre-recessionary, pullback that companies may be trying to read through.

There is that marketing pullback. And so we'll see exactly where those expenses continue to move forward because they want to engage with the consumer over the extended period of an economic pullback, where they might see a decrease in some of those fine dining experiences, but perhaps you see more leaning into the endless salad and breadsticks.

JULIE HYMAN: Maybe, and they're also making some other tweaks because we've heard a lot of companies that have been raising their prices. That's one way to deal with inflation. The CEO, Rick Cardenas, also saying the company is simplifying its operations.

It's slimming down some of its menus-- menu size to shorten preparation times and make kitchens easier to staff, which is something that would seem to make sense also from a raw material perspective. If you're simplifying the menu, you don't need to source as many different ingredient items. So it'll be interesting to see, as we head through this period, what different companies do exactly to deal with inflation. How do they get creative? How do they go back to their 2008 playbooks--

BRAD SMITH: Right.

JULIE HYMAN: --to try to slim things down?

BRAD SMITH: My question to you-- can menu consolidation be a form of menu innovation at the same time?

JULIE HYMAN: No.

BRAD SMITH: No.

JULIE HYMAN: That's my--

BRAD SMITH: I tried it. I tried it.

JULIE HYMAN: I don't know if I'm right.

BRAD SMITH: I tried to give them some credit.

JULIE HYMAN: Yeah, I don't know.