Post Earnings Coverage as Darden Restaurants Beat Earnings Expectations

LONDON, UK / ACCESSWIRE / July 1, 2016 / Active Wall St. announces its post-earnings coverage on Darden Restaurants Inc. (NYSE: DRI). The company announced its Q4 FY 2016 financial results on Thursday, June 30, 2016, reporting a 32.6% profit jump, thus beating market expectation for the seventh consecutive quarter, despite a decline in revenue. The owner of the Olive Garden chain of restaurant also raised its quarterly dividend by 12%. However, the company offered lower than expected earnings guidance for the FY 2017. Register with us now for your free membership and see our complete earnings coverage on this equity at:

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Today, AWS is promoting its earnings coverage on DRI. Get all of our free coverage by signing up to http://www.activewallst.com/registration-3/?symbol=DRI.

Earnings Reviewed

For the period ending on May 29, 2016, Darden reported earnings of $139.6 million, or $1.09 per share, as compared to earnings of $105.3 million, or $0.82 per share, in the year ago period. Analysts' consensus estimate was for earnings of $1.08 per share. Revenue declined 4.7% on y-o-y basis to $1.79 billion. Darden attributed the decline in revenue on an extra week of sales in the year ago period, excluding that, revenue increased 2.1% as compared with Q4 FY15. Analysts had expected $1.81 billion.

Olive Garden Comps Grow But Sales Decline

For Q4 FY16 Darden's overall same-store sales grew 1.7% on y-o-y basis. Darden transitioned from a 53-week to a 52-week fiscal year, offsetting quarter comparisons by one week. Adjusted for the calendar change, same-store sales grew 2.6%.

Olive Garden continued to show strength in its turnaround, as same store sales increased 2.4% during Q4 FY16 on comparable calendar basis. Investment firm Starboard Value L.P. had pushed for changes at the Italian theme based dining chain after changing the whole board in October 2014. While Olive Garden has been improving under Starboard Value, the latest results suggest that the turnaround is not meeting expectations as same Store sales grew at a lower rate for Olive Garden and Long Horn than earlier projected.

Revenue for Olive Garden declined 5.4% on y-o-y basis to $981.8 million, while margin also dropped to 19.3% from 20.3% in the year ago period. Sales at Fine Dining decreased 4.1% to $131.6 million. Revenues from Other Business declined 0.8% y-o-y to $263.6 million. At LongHorn Steakhouse, sales declined 5.7% to $413.2 million. However, Longhorn posted a 1.8% increase in pricing and 2.5% gain on menu mix.

Getting the Price Right

Olive Garden and other sit-down restaurants are facing increased competition from fast-food rivals, which lure diners with steep discounts. To counter that, Darden plans to increase its offerings in the mid-price range of $10 to $15. The Italian eatery also has a $6.99 lunch.

Dividend

The board of directors authorised a 12% increase in the quarterly dividend from $0.50 to $0.56 per share. Dividend would be payable to shareholders on record as of July 11, 2016 on August 01, 2016. This adds up to an annual dividend of $2.00, representing a dividend yield of over 3.16%.

Outlook

Darden has adjusted its same-store sales growth outlook for FY17 to 1% to 2%, from its usual 1% to 3% outlook, citing softness in demand. The company also said it expects earnings to be in the range of $3.80 and $3.90 per share for FY 2017, while analysts forecasted earnings of $3.99 per share. The company also plans to open new units of 24 to 28 restaurants in FY 2017.

Stock Performance

Darden's stock declined 3.97% finishing the trading session at $63.34, post its earning release. The company's share fell as low as $62.53 during the trading session, its biggest intraday drop in 10 months. Darden's stock has gained 1.09% since the beginning of the year as compared to the S&P 500 which has gained 3.82% during the same time frame.

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