September 16, 2008 / 9:08 PM / in 9 years

UPDATE 1-Darden quarterly profit falls on weak traffic

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LOS ANGELES, Sept 16 (Reuters) - Darden Restaurants Inc (DRI.N) on Tuesday posted a sharply lower quarterly profit as customer traffic to its Red Lobster, Olive Garden, LongHorn Steakhouse and other chains missed company targets amid a weak U.S. economy.

Fiscal first-quarter profit from continuing operations was $82.4 million, or 58 cents per share, down from $106.6 million, or 73 cents per share, a year earlier.

Excluding charges related to integration costs and purchasing accounting adjustments, earnings from continuing operations were 61 cents per share, matching analysts’ consensus estimate compiled by Reuters Estimates.

Revenue from continuing operations rose 21 percent in the quarter to $1.77 billion, including $270 million of sales from LongHorn Steakhouse and The Capital Grille, which Darden acquired last fiscal year through its roughly $1.2 billion purchase of Rare Hospitality International Inc.

Sales at restaurants open at least 16 months fell 1 percent, led by a 4.9 percent drop at LongHorn Steakhouse and a 3.7 percent decline at Red Lobster. Sales at Olive Garden rose 2.4 percent.

Casual dining restaurants -- the moderately priced, sit-down chains run by Darden and rivals like Brinker International Inc (EAT.N) and DineEquity Inc (DIN.N) -- have been hammered by the housing market downturn, and soaring gasoline prices have forced many consumers to cut back on meals outside the home. Darden is broadly viewed as one of the group’s top performers.

    Darden issued a profit warning on Aug. 26, when it also lowered financial outlooks for the full year.

    The company on Tuesday reiterated its lowered forecast for 2009 same-restaurant sales to be flat to up 1 percent for Red Lobster, Olive Garden and LongHorn Steakhouse combined.

    It also repeated its forecast for a 5 percent to 10 percent per-share increase in earnings from continuing operations, including costs related to the Rare acquisition.

    Excluding integration costs and purchase accounting adjustments, said it still expects per-share earnings to be flat to up 5 percent from the $2.74 it posted in fiscal 2008.

    Shares of Darden rose 37 cents to close at $29.89 on the New York Stock Exchange. (Reporting by Lisa Baertlein, editing by Richard Chang)

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