Darden Restaurants Inc. raised its outlook for the year based on new cost projections, but said severe weather was hurting sales in the third quarter.
The company said Monday that 2011 earnings from continuing operations are now expected to increase 17 percent to 18 percent from 2010 earnings of $2.86 per share. Darden had earlier projected earnings growth between 14 percent and 17 percent.
The earnings outlook is based on projections of a blended same-store sales increase between 1.5 percent and 2 percent at Red Lobster, Olive Garden and LongHorn Steakhouse, and unit growth of 70 to 75 net new restaurants for the year, Darden said.
"As we expected, the economic environment continues to improve, and our brands continue to achieve competitively strong results," said Clarence Otis, chairman and chief executive of Orlando, Fla.-based Darden. "In addition, we have more clarity on our costs for the balance of the fiscal year. So, we are revising upward our outlook for earnings per share for the fiscal year.”
The company had earlier estimated a 2-percent increase in blended same-stores sales for year, but said wintery weather had hurt sales in the current third quarter.
For the Feb. 27-ending quarter, Darden said it expects a 1-percent increase in blended same-stores at its three largest chains. Same-store sales for the quarter are projected to rise 1.5 percent at Olive Garden and 4.5 percent at LongHorn Steakhouse, but fall 1 percent at Red Lobster.
In addition to the impact of severe winter weather, Darden said the shift of the Lenten season to the fourth quarter also would hurt third-quarter sales, particularly at Red Lobster.
Third-quarter earnings from continuing operations are expected to range between $1.04 and $1.06 per share, compared with 95 cents per share a year ago, Darden said.
At the end of its second quarter, Darden operated 1,852 restaurants, including 693 Red Lobsters, 735 Olive Gardens and 340 LongHorn Steakhouses. The company also owns 44 Capital Grille restaurants, 25 Bahama Breeze units and 15 Seasons 52 locations.
Contact Molly Gise at [email protected].