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Darden Restaurants Inc. Reports Operating Results (10-Q)

January 02, 2013 | About:
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10qk

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Darden Restaurants Inc. (DRI) filed Quarterly Report for the period ended 2012-11-25.

Darden Restaurants Inc has a market cap of $5.8 billion; its shares were traded at around $45.22 with a P/E ratio of 12.8 and P/S ratio of 0.8. The dividend yield of Darden Restaurants Inc stocks is 4.3%. Darden Restaurants Inc had an annual average earning growth of 11.1% over the past 10 years. GuruFocus rated Darden Restaurants Inc the business predictability rank of 4.5-star.

Highlight of Business Operations:

Our sales from continuing operations were $1.96 billion and $3.99 billion for the second quarter and first six months of fiscal 2013, respectively, compared to $1.83 billion and $3.77 billion for the second quarter and first six months of fiscal 2012, respectively. The increases of 7.0 percent and 5.9 percent in sales for the second quarter and first six months of fiscal 2013, respectively, were driven primarily by the operation of 99 net new company-owned restaurants plus the addition of 40 Yard House acquired restaurants since the second quarter of fiscal 2012, partially offset by blended U.S. same-restaurant sales decreases for Olive Garden, Red Lobster and LongHorn Steakhouse of 2.7 percent and 1.4 percent for the second quarter and first six months of fiscal 2013, respectively. For the second quarter of fiscal 2013, our net earnings from continuing operations were $33.7 million compared to $54.1 million for the second quarter of fiscal 2012, a 37.7 percent decrease, and our diluted net earnings per share from continuing operations were $0.26 for the second quarter of fiscal 2013 compared to $0.41 for the second quarter of fiscal 2012, a 36.6 percent decrease. For the first six months of fiscal 2013, our net earnings from continuing operations were $144.8 million compared to $160.8 million for the first six months of fiscal 2012, a 10.0 percent decrease, and our diluted net earnings per share from continuing operations were $1.10 for the first six months of fiscal 2013 compared to $1.19 for the first six months of fiscal 2012, a 7.6 percent decrease. The decreases in net earnings from continuing operations and diluted net earnings per share from continuing operations for the second quarter and the first six months of fiscal 2013 compared to the second quarter and the first six months of fiscal 2012 were primarily due to higher restaurant expenses, selling, general and administrative expenses, depreciation and amortization expenses and net interest expense as a percent of sales, partially offset by increased sales, lower food and beverage costs as a percent of sales, and a lower effective income tax rate. Costs associated with the Yard House acquisition adversely affected diluted net earnings per share from continuing operations by approximately $0.05 and $0.06 for the second quarter and first six months of fiscal 2013, respectively.

Sales from continuing operations were $1.96 billion and $1.83 billion for the quarters ended November 25, 2012 and November 27, 2011, respectively. The 7.0 percent increase in sales for the second quarter of fiscal 2013 was driven by the operation of 99 net new company-owned restaurants plus the addition of 40 Yard House acquired restaurants since the second quarter of fiscal 2012 partially offset by a 2.7 percent blended U.S. same-restaurant sales decrease for Olive Garden, Red Lobster and LongHorn Steakhouse. Olive Garden s sales of $848.6 million for the second quarter of fiscal 2013 were 1.5 percent above last year s second fiscal quarter, driven by revenue from 46 net new restaurants partially offset by a U.S. same-restaurant sales decrease of 3.2 percent. The decrease in U.S. same-restaurant sales resulted from a 6.9 percent decrease in same-restaurant guest counts partially offset by a 3.7 percent increase in average check. Red Lobster s sales of $589.5 million for the second quarter of fiscal 2013 were 2.1 percent below last fiscal year s second quarter, driven by a 2.7 percent decrease in U.S. same-restaurant sales, partially offset by revenue from five net new restaurants. The decrease in U.S. same-restaurant sales resulted from a 2.2 percent decrease in same-restaurant guest counts, combined with a 0.5 percent decrease in average check. LongHorn Steakhouse s sales of $274.9 million for the second quarter of fiscal 2013 were 7.8 percent above last fiscal year s second quarter, driven by revenue from 32 net new restaurants, partially offset by a 0.8 percent decrease in same-restaurant sales. The decrease in same-restaurant sales resulted from a 0.4 percent decrease in same-restaurant guest counts combined with a 0.4 percent decrease in average check. In total, The Capital Grille, Bahama Breeze, Seasons 52, Eddie V's and Yard House generated sales of $241.3 million for the second quarter of fiscal 2013, which were 76.4 percent above last fiscal year s second quarter, primarily driven by the Yard House acquisition and incremental sales from the 11 Eddie V's restaurants acquired on November 14, 2011. Additionally, Bahama Breeze added five new restaurants, Seasons 52 added four new restaurants, The Capital Grille added three new restaurants and Yard House added one new restaurant. Sales growth also reflected same-restaurant sales increases of 0.8 percent at The Capital Grille and 1.9 percent at Bahama Breeze a 1.0 percent decrease at Seasons 52 and a 2.5 percent decrease at Eddie V's.

Sales from continuing operations were $3.99 billion and $3.77 billion for the six months ended November 25, 2012 and November 27, 2011, respectively. The 5.9 percent increase in sales for the first six months of fiscal 2013 was driven by the operation of 99 net new company-owned restaurants plus the addition of 40 Yard House acquired restaurants since the second quarter of fiscal 2012, partially offset by a 1.4 percent blended U.S. same-restaurant sales decrease for Olive Garden, Red Lobster and LongHorn Steakhouse. Olive Garden s sales of $1.77 billion for the first six months of fiscal 2013 were 3.0 percent above the same period last fiscal year, driven by revenue from 46 net new restaurants, partially offset by a U.S. same-restaurant sales decrease of 1.4 percent. The decrease in U.S. same-restaurant sales resulted from a 4.8 percent decrease in same-restaurant guest counts, partially offset by a 3.4 percent increase in average check. Red Lobster s sales of $1.25 billion for the first six months of fiscal 2013 were 2.1 percent below the same period last fiscal year, driven by a 2.6 percent decrease in U.S. same-restaurant sales, partially offset by revenue from five net new restaurants. The decrease in U.S. same-restaurant sales resulted from a 3.5 percent decrease in same-restaurant guest counts, partially offset by a 0.9 percent increase in average check. LongHorn Steakhouse s sales of $559.9 million for the first six months of fiscal 2013 were 10.2 percent above the same period last fiscal year, driven by revenue from 32 net new restaurants and a 1.5 percent increase in same-restaurant sales. The increase in same-restaurant sales resulted from a 1.5 percent increase in same-restaurant guest counts. In total, The Capital Grille, Bahama Breeze, Seasons 52, Eddie V's and Yard House generated sales of $404.3 million for the first six months of fiscal 2013, which were 52.1 percent above the same period last fiscal year, primarily driven by the Yard House acquisition and incremental sales from the 11 Eddie V's restaurants acquired on November 14, 2011. Additionally, Bahama Breeze added five new restaurants, Seasons 52 added four new restaurants, The Capital Grille added three new restaurants and Yard House added one new restaurant. Sales growth also reflected same-restaurant sales increases of 2.3 percent at The Capital Grille, 1.5 percent at Bahama Breeze and 0.7 percent at Seasons 52, and a 1.7 percent same-restaurant sales decrease at Eddie V's.

Food and beverage costs were $607.5 million in the second quarter of fiscal 2013, an increase of $34.2 million, or 6.0 percent, from food and beverage costs of $573.3 million in the second quarter of fiscal 2012. As a percent of sales, food and beverage costs decreased for the second quarter of fiscal 2013 compared to the second quarter of fiscal 2012, primarily as a result of pricing leverage and lower seafood costs, partially offset by higher beef costs and unfavorable menu-mix. Restaurant labor costs were $635.7 million in the second quarter of fiscal 2013, an increase of $41.5 million, or 7.0 percent, from

Food and beverage costs were $1.23 billion for the first six months of fiscal 2013, an increase of $59.6 million, or 5.1 percent, from food and beverage costs of $1.17 billion for the first six months of fiscal 2012. As a percent of sales, food and beverage costs decreased for the first six months of fiscal 2013 compared to the first six months of fiscal 2012, primarily as a result of pricing leverage and lower seafood costs, partially offset by higher beef costs and unfavorable menu-mix. Restaurant labor costs were $1.26 billion for the first six months of fiscal 2013, an increase of $55.2 million, or 4.6 percent, from restaurant labor costs of $1.21 billion for the first six months of fiscal 2012. Restaurant labor costs as a percent of sales decreased primarily as a result of lower manager incentive compensation, sales leveraging, increased employee productivity and lower employee insurance claims costs, partially offset by wage-rate inflation. Restaurant expenses (which include utilities, repairs and maintenance, credit card, lease, property tax, workers compensation, new restaurant pre-opening and other restaurant-level operating expenses) were $629.7 million for the first six months of fiscal 2013, an increase of $36.7 million, or 6.2 percent, from restaurant expenses of $593.0 million for the first six months of fiscal 2012. As a percent of sales, restaurant expenses increased for the first six months of fiscal 2013 compared to the first six months of fiscal 2012, primarily as a result of Yard House's higher restaurant expenses as a percentage of sales compared to our consolidated average prior to the acquisition and lost sales leverage partially offset by lower credit card fees.

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