Darden reports strong 1st-Q results

ORLANDO Fla. Darden Restaurants Inc., operator of 1,404 casual-dining restaurants, posted a 20-percent year-over-year surge in its first-quarter profit on revenue that increased 7.9 percent from a year ago to $1.47 billion.

The company’s “strong operating results” despite a “challenging environment” were attributed to increased same-stores sales at its two flagship brands, Red Lobster and Olive Garden, as well as new unit development, Darden said.

The company earned $105.9 million, or 72 cents per share, for the fiscal 2008 first quarter ended Aug. 26, compared with a profit of $88.5 million, or 59 cents per share, a year ago. Earnings from continuing operations — which exclude losses from more than 50 now-closed Smokey Bones restaurants and the pending sale of an additional 73 Smokey Bones locations — rose to $106.6 million, or 73 cents per share, from $93.3 million, or 62 cents per share.

Red Lobster’s first-quarter sales of $669.5 million were 6.3 percent above the prior year, driven by a U.S. same-store sales increase of 7 percent. The chain boasts 680 units. At the 621-unit Olive Garden, first-quarter sales rose 9.6 percent to $749.9 million, aided by 37 net new openings. U.S. same-store sales increased 4.8 percent.

Results weren’t as positive at Bahama Breeze, a growing concept that Darden has tried to remodel into a “broadly appealing” brand. Darden closed nine underperforming Bahama Breeze units since this time last year. First-quarter sales at the now 23-unit chain decreased 1.4 percent to $37.2 million. Same-store sales fell 1.3 percent.

Darden said it continued to expect annual U.S. same-store sales growth to rise between 2 percent and 4 percent at the combined Red Lobster and Olive Garden. It expects to open about 40 net new restaurants. Annual growth in per-share profit is expected to total between 10 percent and 12 percent, which would equate to a range between $2.78 per share and $2.83 per share based on the company’s fiscal 2007 per-share profit of $2.53.

The company’s annual profit projection does not include one-time costs related to Darden’s pending purchase of Rare Hospitality International Inc., parent of the LongHorn Steakhouse and The Capital Grille brands. That deal has been valued at $1.4 billion and is expected to close in October. Darden said that if the deal closes it would provide updated guidance in its second quarter report to be released in December.