Fitch Affirms Darden's IDR at 'BBB'; Outlook Revised to Negative

CHICAGO--(Business Wire)--
Fitch Ratings has affirmed the ratings of Darden Restaurants, Inc.
(Darden) (NYSE: DRI) as follows:

--Long-term Issuer Default Rating (IDR) at 'BBB';

--Bank facility at 'BBB';

--Senior unsecured debt at 'BBB';

--Short-term IDR at 'F2';

--Commercial paper at 'F2'.

The Rating Outlook has been revised to Negative from Stable.

On August 26, 2008, Darden announced that same-restaurant sales
(SRS) performance and earnings for the first quarter ended Aug 24,
2008 were below expectations. Combined SRS declined 1.1% due to 2.4%
SRS growth at Olive Garden and a 3.7% and 4.9% decline in SRS at Red
Lobster and LongHorn Steakhouse (LongHorn), respectively. Darden
revised its full year SRS growth outlook down to approximately 0-1%
from its original guidance of 2-3%. The company expects diluted net
earnings per share growth, excluding the impact of integration costs
and purchase accounting adjustments, of 0-5% versus its original
expectation of 9-10%.

For the fiscal year ended May 25, 2008, total adjusted debt
(defined as total debt plus 8 times gross rental expense)-to-operating
earnings before interest, taxes, depreciation, amortization and gross
rental expense (EBITDAR) was 2.8 times (x). Funds from operations
(FFO) adjusted leverage was 3.0x and operating EBITDAR-to-gross
interest and rental expense was 4.9x. Darden's free cash flow margin
was 3.6%. Darden's credit statistics are currently adequate for the
ratings.

The Negative Outlook is due to Fitch's expectations that credit
measures will be modestly weaker in the near-term due to lower than
anticipated cash flow generation and the lack of debt reduction.
Darden's ratings benefit from its diversified portfolio of large,
well-established restaurant chains, the consistently strong operating
performance of Olive Garden and the proven competitive strength of
both Olive Garden and Red Lobster. However, as consumer discretionary
spending remains under pressure, the outlook incorporates the risk
that less robust SRS growth at Olive Garden may not offset
inconsistent performance at Red Lobster and negative organic growth
trends at recently acquired LongHorn. Like other restaurant companies,
Darden is experiencing above average food cost inflation. Nonetheless,
margin contraction should be partially mitigated by modest price
increases, menu management, productivity savings and acquisition
synergies.

Due to aggressive unit expansion and the potential for heightened
share repurchases, debt reduction is likely to be less of a priority
for Darden. For fiscal 2009, Darden is planning net new unit growth of
4-5%, with approximately 51% being allocated for Olive Gardens, 26%
targeted as LongHorns, and 13% planned for Red Lobsters. The company
estimates that capital expenditures will increase about 40% to $600
million. Fitch believes a more conservative use of cash flow, via
slower restaurant expansion and less share repurchases, would provide
increased financial flexibility during a challenging operating
environment. If combined SRS growth remains negative in the near-term,
the company becomes more aggressive with share repurchases and credit
statistics weaken more than anticipated, Darden's ratings could be
downgraded.

Darden Restaurants, Inc., headquartered in Orlando, FL, owns and
operates approximately 1,700 restaurants, primarily in the United
States and Canada, and generates $6.6 billion in revenue. At fiscal
2008 year end, the company's portfolio consisted of 680 Red Lobsters,
653 Olive Gardens, 305 LongHorn Steakhouses, 32 The Capital Grilles,
23 Bahama Breezes and 7 Seasons 52 restaurants.

Fitch's rating definitions and the terms of use of such ratings
are available on the agency's public site, www.fitchratings.com.
Published ratings, criteria and methodologies are available from this
site, at all times. Fitch's code of conduct, confidentiality,
conflicts of interest, affiliate firewall, compliance and other
relevant policies and procedures are also available from the 'Code of
Conduct' section of this site.

Fitch Ratings
Carla Norfleet Taylor, CFA, 312-368-3195 (Chicago)
Judi M. Rossetti, CFA/CPA, 312-368-2077 (Chicago)
Wesley E. Moultrie II, CPA, 312-368-3186 (Chicago)
Cindy Stoller, 212-908-0526 (Media Relations, New York)

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