Darden: No economic recovery this year

ORLANDO Fla. Darden Restaurants Inc. capped off its June-ended fiscal year with increased sales and earnings from continuing operations, mostly helped by an additional operating week and new unit openings at Olive Garden, its largest and strongest chain.

However, the Orlando-based casual-dining company, which operates about 1,700 locations under various brands, also warned that its recent string of negative same-store sales showed no signs of snapping soon.

“We certainly hope to see an improvement in macroeconomic conditions and full-service restaurant industry sales trends in our new fiscal year,” said Clarence Otis, Darden’s chairman and chief executive. “And there are reasons to believe there might be some favorable changes. However, given the current level of uncertainty, we think it’s prudent to be cautious É we’re assuming that the economic and industry weakness we’ve experienced over the past six months will continue through all of our fiscal 2010.”

Darden expects its blended year-to-year same-store sales for its three largest chains — Olive Garden, Red Lobster and LongHorn Steakhouse — to fall as much as 2 percent at worst, or to remain flat at best in its current fiscal 2010, which began this month and ends in May of next year. The company's outlook for total sales in the new fiscal year range between a 1-percent decline and 1-percent increase, and earnings per share are expected to fall as much as 2 percent or increase as much as 8 percent. Those comparisons include the additional operating week Darden booked in its fiscal 2009.

Casual-dining chains have been among the hardest hit during the economic slowdown, as consumers tighten their belts and forgo dining out. While Darden’s results have typically bucked the trends, more recently even Red Lobster and Olive Garden have reported negative year-over-year sales trends.

For the fourth quarter ended May 31, U.S. same-store sales fell 0.6 percent at both Olive Garden and Red Lobster, while LongHorn Steakhouse’s U.S. same-store sales decreased 6.5 percent. Same-store sales at The Capital Grille, Darden’s upscale steakhouse brand, fell 22.1 percent. At Bahama Breeze, same-store sales declined 4.3 percent.

Darden’s earnings from continuing operations for the quarter totaled $123.0 million, or 87 cents per share, up from year-ago fourth quarter earnings of $101.8 million, or 71 cents per share. Latest-quarter sales rose 8.2 percent to $1.98 billion, driven by the net openings of 70 new restaurants, including 38 Olive Garden locations.

 

For the full year, earnings from continuing operations totaled $371.8 million, or $2.65 per share, versus year-ago earnings of $369.5 million, or $2.55 per share. Annual sales increased 8.9 percent to $7.22 billion. The additional operating week in the latest fiscal year contributed about two percentage points to the sales increase and about 6 cents per share, the company reported.

Contact Sarah E. Lockyer at [email protected] [3].