ORLANDO Fla. Darden Restaurants Inc. reported a 29.5-percent year-over-year drop in profit for the second quarter ended Nov. 25, with results weighed down by its October acquisition of Rare Hospitality International Inc., a “difficult consumer environment” and a “tougher than anticipated cost environment.”
Because of the shortfall, Darden cut its per-share earnings forecast for the fiscal year ending in May. The company now expects annual earnings per share to grow between 2 percent and 4 percent from fiscal 2007, including charges related to the acquisition of Rare. In September, Darden had said it expected year-over-year earnings growth of as much as 10 percent.
Darden posted per-share earnings of $2.53 from continuing operations in fiscal 2007, so the company’s slashed growth range implies fiscal 2008 earnings of between $2.58 and $2.63 per share. Excluding acquisition costs, Darden said per-share profit would increase between 7 percent and 9 percent in 2008.
The operator of 1,738 casual-dining restaurants said latest-quarter net earnings fell to $43.5 million, or 30 cents per share, from $61.7 million, or 41 cents a share, a year earlier. The $1.4 billion acquisition of Rare, as well as charges for a legal settlement in California, negatively affected per-share profit by 12 cents per share, Darden reported. The Rare acquisition added the LongHorn Steakhouse and The Capital Grille brands to Darden’s portfolio, which already included Red Lobster, Olive Garden, Bahama Breeze and Seasons 52. The company recently received regulatory approval to proceed with the sale of its Smokey Bones barbecue chain to an affiliate of Sun Capital Partners for about $80 million.
Darden’s revenue for the quarter ended Nov. 25 grew 17 percent from a year ago to $1.52 billion. The results reflect two months of post-acquisition sales, or an additional $163.3 million, from the LongHorn and Capital Grille chains.
While domestic same-store sales for 628-unit Olive Garden increased 3.2 percent in the second quarter, both 680-unit Red Lobster and 23-unit Bahama Breeze posted U.S. same-store sales increases of just 0.1 percent. Domestic same-store sales at the 295-unit LongHorn Steakhouse fell 2.5 percent, and increased 1.2 percent at the 30-unit Capital Grille.
For the full year, Darden reiterated that it expects combined U.S. same-store sales growth of between 2 percent and 4 percent for Red Lobster, Olive Garden and LongHorn, and that it expects to open approximately 65 net new restaurants this fiscal year.
The company said it expects total sales growth of between 19 and 20 percent in fiscal 2008, compared with sales of $5.57 billion in fiscal 2007.