September 26, 2017 / 4:30 PM / 2 years ago

Darden expects business hit from Hurricane Irma to double Harvey's

LOS ANGELES (Reuters) - Olive Garden parent Darden Restaurants Inc (DRI.N) said on Tuesday it expects the negative effects on sales and earnings per share from Hurricane Irma to be about double that of Hurricane Harvey.

Harvey slammed into the U.S. Gulf Coast in the final days of Darden’s fiscal first quarter ended Aug. 27, while Irma first hit the United States on Sept. 10.

Harvey reduced Darden’s first-quarter same-store sales by about 30 basis points and its earnings per share by 1.5 cents versus what was expected before that storm, Darden Chief Financial Officer Rick Cardenas said on a conference call with analysts.

Cardenas said he expected the financial hit from Hurricane Irma, which struck just weeks later, to be roughly twice that of Harvey.

Darden reiterated its full-year EPS forecast of $4.38 to $4.50, saying cost cuts and other factors would offset the impact from the storms.

Orlando-based Darden, which also owns the Yard House, Capital Grille, LongHorn Steakhouse and Cheddar’s Scratch Kitchen chains, was the first major restaurant company to report on financial damage from Harvey, which lashed Texas and Louisiana, and Irma, which battered Puerto Rico and the southeastern United States.

Analysts estimated that 15 percent or more of Darden’s 1,700-plus restaurants had their business interrupted by the hurricanes.

Brinker International Inc (EAT.N) and Darden had the highest exposure to the storms, while Starbucks Corp (SBUX.O) had the lowest, Bernstein analyst Sara Senatore said in a recent client note.

The devastating hurricanes pose a significant threat to already weak restaurant trends, consulting firm Pentallect said in a recent report.

Bonnie Riggs, a restaurant analyst with The NPD Group’s foodservice division, was more bullish, saying pent-up demand helps restaurant operators quickly recoup losses.

Shares in Darden fell 6.1 percent to $78.09 as it also reported lower-than-estimated sales for Olive Garden, which accounts for just over one-half of total sales.

First-quarter sales at established Olive Garden restaurants were up 1.9 percent compared with a year earlier after higher prices helped offset a 0.3 percent traffic decline. Analysts, on average, expected an increase of 2.7 percent, according to research firm Consensus Metrix.

Overall same-restaurant sales were up 1.7 percent, excluding results from recently acquired Cheddar’s, missing analysts’ average estimate for 2.2 percent gain.

Adjusted quarterly earnings were up 12.5 percent to 99 cents per share, excluding a 4 cent charge from integrating Cheddar’s.

Total sales increased 12.9 percent to $1.94 billion.

Earnings and revenues were roughly in line with Wall Street expectations.

Editing by W Simon and JS Benkoe

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