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Darden posts 2nd-Q profit jump, but lowers full-year outlook

ORLANDO Fla. Darden Restaurants Inc., parent to the Red Lobster, Olive Garden and LongHorn Steakhouse chains, said Thursday that second-quarter net earnings rose 37.2 percent from a year earlier, but that the expectation of a more challenging second half of the year led to lowered annual outlook.

For the quarter ended Nov. 23, earnings rose to $59.7 million, or 43 cents per share, from year-ago earnings of $43.5 million, or 30 cents per share.

Excluding costs related to the October 2007 acquisition of Rare Hospitality, per-share earnings would have totaled 44 cents per share in the latest quarter, Darden reported.

Second-quarter sales for the company that operates all 1,700 systemwide restaurants rose 9.7 percent from a year ago to $1.7 billion and was driven by sales from the acquired brands and new unit openings within the Olive Garden chain.

Same-store sales for the quarter rose 0.8 percent and 0.3 percent at Olive Garden and Red Lobster, respectively, but fell 5.7 percent at LongHorn Steakhouse, 8.7 percent at The Capital Grille and 8 percent at Bahama Breeze.

Clarence Otis, Darden's chairman and chief executive, described the company's second-quarter results as a "solid financial performance given the challenging economic environment." However, he said that the country's current recession had caused Darden to revise its financial outlook for full year, which ends in May.

The company said it now expects per-share earnings from continuing operations to fall between 1 percent and 6 percent from a year earlier, compared with an earlier forecast for growth of between 5 percent and 10 percent.

Darden also said it expects blended same-stores sales for Olive Garden, Red Lobster and LongHorn to fall between 1.25 percent and 2.25 percent. The company had earlier predicted that same-store sales for those chains would be flat versus the year earlier or up 1 percent.

"Given the challenging economic environment and rising unemployment, we think it's prudent to plan for appreciably softer same-restaurant sales results at Olive Garden, Red Lobster and LongHorn Steakhouse," Otis said.

Darden said it planned to open 70 net new restaurants in fiscal 2009, which should lead to a total sales growth of between 8 percent and 9 percent for the year.

At the end of the quarter, Darden operated 684 Red Lobsters, 670 Olive Gardens, 314 LongHorn Steakhouses, 34 Capital Grilles, 23 Bahama Breezes, seven Seasons 52 units and two other individual restaurants.

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