* First-quarter EPS 86 cents excluding items tops Street
view 84 cents
* Olive Garden same-restaurant sales rise 0.3 pct
* Shares up almost 5 percent
Sept 21 Darden Restaurants Inc reported
better-than-expected quarterly profit, helped by its first rise
in sales at established Olive Garden restaurants in six
quarters, and shares were up almost 5 percent after touching an
Olive Garden generates almost half of Darden's revenue and
executives on Friday said the Italian food chain's operating
profit and margin rose in the fiscal first quarter, even as the
chain moved toward more value-oriented pricing.
Darden, traditionally a top performer among full-service
restaurant operators, was slow to adopt the promotions and other
deals that rivals DineEquity Inc's Applebee's and
Brinker International Inc's Chili's Grill & Bar
It changed strategy after rivals began chipping away at its
lead and traffic to Olive Garden flagged. Darden has been
working to fix marketing at Olive Garden for more than a year.
Olive Garden's same-restaurant sales were up 0.3 percent for
the quarter that ended Aug. 26. But the company still needs to
lure more diners to the chain, which saw visits fall in both
June and August.
"Darden remains under pressure to show that it is capable of
executing a sustained course correction" for Olive Garden,
Bernstein Research analyst Sara Senatore said in a client note.
Orlando, Florida-based Darden's net income rose 4 percent to
$110.8 million, or 85 cents per share.
Excluding costs from its August acquisition of the Yard
House bar and grill chain, Darden earned 86 cents per share -
topping analysts' average estimate by 2 cents per share,
according to Thomson Reuters I/B/E/S.
Olive Garden posted meaningful improvement in sales and
margins in the quarter, Chairman and Chief Executive Clarence
Otis said on a conference call with analysts. Darden also
benefited from a year-over-year decline in seafood costs that
helped offset a significant spike in the cost of beef, he said.
Darden's overall sales rose 4.8 percent to $2.03 billion and
were in line with the analysts' target.
Darden's "Big Three" brands - Olive Garden, Red Lobster and
LongHorn Steakhouse - saw a combined 0.3 percent decline in
sales at restaurants open at least 16 months.
Red Lobster, which accounts for about one-third of company
sales, will soon change its menu to include more items priced
Darden still expects total sales growth of 9 percent to 10
percent this year. It anticipates growth of 5 percent to 9
percent in net earnings per share from continuing operations,
including acquisition-related costs and purchase accounting
adjustments of about 7 cents to 10 cents per share.
Shares in Darden were up $2.48 to $57.20 in morning trading
on the New York Stock Exchange.