March 18, 2009 / 3:14 PM / 10 years ago

Darden Restaurants cites improved cost controls

* Improvement in commodity costs cited

* Acquisition cost savings

* Shares up 17 pct

ATLANTA, March 18 (Reuters) - Darden Restaurants Inc (DRI.N) said on Wednesday it expects declining commodity costs and savings from its acquisition of RARE Hospitality to aid results in the current year, and its shares were up more than 15 percent.

The company posted better-than-expected third quarter profit and raised its fiscal 2009 sales growth and earnings forecast on Tuesday. It also said consumers grappling with the recession returned to its restaurants in January and February after sales slumped in December.

“We believe Darden appears best positioned among its peers to weather the difficult operating environment with its stronger than peer operating margins, considerable marketing muscle, operating economies of scale and its well-controlled commodity costs,” Morgan Keegan analyst Robert M. Derrington said in a research note.

During a conference call on Wednesday, the company said it had ramped up value offerings and marketing spending for its Olive Garden, Red Lobster and LongHorn Steakhouse brands in response to the recession.

It also said it was benefiting from better cost management in areas such as food waste and labor scheduling, and noted that it was realizing cost savings from its 2007 purchase of RARE sooner than it expected. It also cited improving commodity costs.

“This is an environment where value is increasingly important to consumers and as a result we’ve really elevated our efforts to find lasting structural cost improvement opportunities that can reduce the need for us to take pricing,” Chief Financial Officer Brad Richmond said during a conference call.

On Tuesday, Darden expects 2009 per-share profit to be flat to 3 percent down from the year before, excluding special items. That compares with a previous forecast calling for 2009 earnings per share to slide 5 percent to 10 percent.

Full-year revenue growth is expected in the 9 percent to 9.5 percent range for this year, compared with a prior forecast for an increase of 8 to 9 percent.

Darden shares were up $5.07, or 17 percent, to $34.97 in morning New York Stock Exchange trading. Shares of rival Brinker International Inc (EAT.N) were up 5.9 percent, while DineEquity Inc (DIN.N) advanced 2 percent. (Reporting by Karen Jacobs; Editing by Derek Caney)

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