Darden Restaurants Inc. reported a 13-percent increase in net income for the third quarter and raised its full-year guidance for earnings growth, based on positive same-store sales as well as optimism in an improving economy.
For the third quarter ended Feb. 27, Darden generated net income of $151.2 million, or $1.08 per share, compared with earnings of $134.3 million, or 94 cents per share, for the year-ago quarter. Revenue rose 6 percent to $1.98 billion.
Blended same-store sales for its Red Lobster, Olive Garden and LongHorn Steakhouse chains rose 0.9 percent. Same-store sales increased 8.4 percent at The Capital Grille, 3.4 percent at Bahama Breeze and 4.2 percent at Seasons 52.
“The casual-dining industry’s same-restaurant sales results this quarter, despite severe winter weather for much of the period, is further evidence that economic conditions continue to improve,” said Clarence Otis, chief executive of Orlando, Fla.-based Darden.
“Even with the economic improvement we’re seeing, it’s important to have product news that’s highly relevant given today’s still more fragile than normal emotional and financial circumstances,” he said. “Looking ahead, we’re confident in our promotional and other strategies, and that we’re well-positioned to continue to grow market share and deliver competitively superior earnings growth.”
Darden also raised its earnings per share outlook, to a growth target of 19 percent for the year ending in June, slightly higher than its previously stated guidance of growth between 17 percent and 18 percent. The company’s earnings per share in 2010 totaled $2.86, so its new earnings target for 2011 would total about $3.40 per share.
Otis added that Olive Garden’s February promotion schedule did not drive as much traffic as Darden had hoped, while Red Lobster and LongHorn’s offerings were more effective than anticipated.
All three chains took slight price increases each month of the quarter.
Compared with the third quarter of 2010, Darden had four more Capital Grille units, one more Bahama Breeze restaurant and six new Seasons 52 locations. It operated a total of 1,802 restaurants at the end of the quarter.
LongHorn Steakhouse traffic improved in each subsequent month of the quarter, progressing from a 0.9-percent increase in December to gains of 5.4 percent in January and 7.6 percent in February. The traffic increases helped drive a 6.1-percent increase in same-store sales. LongHorn took price increases of 1.9 percent, 2 percent and 1.9 percent in December, January and February, respectively.
Olive Garden same-store sales were flat, and traffic losses narrowed from a 2.4-percent decrease in December to declines of 0.2 percent in January and 0.9 percent in February. Olive Garden opened 33 net additional units compared with a year earlier. It raised menu prices 1.6 percent in December and 1.7 percent in both January and February.
Red Lobster’s 0.1-percent same-store sales increase resulted in part from taking a 1.3-percent menu price increase all three months of the quarter. Its same-store traffic losses went from 0.6-percent declines in December and January to a 2.5-percent drop in February, due in part to a later start to Lent, when observant Christians tend to eat more seafood. Red Lobster had two more locations in operation compared with a year earlier.
Contact Mark Brandau at [email protected].