Darden's profit climbs, but outlook disappoints

ORLANDO, Fla. – Darden reported a higher quarterly profit on Thursday, but the parent company of Olive Garden and other restaurant chains issued an outlook that fell short of Wall Street expectations.

Its shares were down 4.5 per cent to $63.01 in morning trading.

For the quarter ended May 29, the company said Olive Garden’s sales rose 1.6 per cent at established locations, boosted by higher prices and a more favourable menu mix. Darden has been trying to revitalize the Italian restaurant chain’s image, while pursuing options like table-top ordering tablets and online ordering that offer customers convenience and help improve restaurant efficiency.

Darden CEO Gene Lee said the company is looking at other ways of improving the customer experience at Olive Garden, such as reducing wait times, and expanding mid-tier dishes priced at between $10 and $15, above the $9.99 option for people looking to limit their spending.

To improve labour costs, Lee also said the company is looking at simplifying kitchen procedures and ensuring restaurants have the optimal number of employees in stores at all time.

Total revenue for the period fell 5 per cent to $1.79 billion, reflecting one less week in this year’s quarter. Analysts surveyed by Zacks expected sales of $1.81 billion.

Profit for the quarter was $139.6 million, or $1.09 per share. Earnings, adjusted to account for discontinued operations, were $1.10 per share, above the $1.08 per share analysts expected.

For its fiscal 2016, the company reported profit of $375 million, or $2.90 per share. Total revenue was $6.93 billion.

Darden Restaurants expects full-year earnings for its fiscal 2017 to be $3.80 to $3.90 per share. That was short of the $3.99 per share analysts expect, according to FactSet.

The company said sales at established locations, including its other chains such as LongHorn Steakhouse and The Capital Grille, are expected to rise 1 to 2 per cent. Analysts expected growth of 2.4 per cent, according to FactSet.

Darden Restaurants shares have climbed nearly 4 per cent since the beginning of the year, while the Standard & Poor’s 500 index has increased slightly more than 1 per cent.


Keywords: Darden Restaurants, Earnings Report