Darden Restaurants (DRI) announced strong earnings for the fourth quarter of fiscal 2023 on Thursday, beating analyst expectations on both the top and bottom lines.
Earnings Report of Darden Restaurants
The company reported diluted net earnings per share of $8.00, up 8.1% from the year-ago quarter. Revenues of $2.77 billion were also up 6.5% from the prior year.
KEY TAKEAWAYS
- Darden Restaurants’ fiscal fourth-quarter earnings exceeded Wall Street’s expectations.
- Former CEO Gene Lee intends to resign as chairman of the board.
- Darden’s earnings for the quarter ending May 28 do not include the $715 million purchase of Ruth’s Chris Steak House by the company.
Same-restaurant sales increased by 4%, driven by a 2.5% increase in customer traffic and a 1.5% increase in average checks.
All of Darden’s brands performed well in the quarter, with Olive Garden leading the way with same-restaurant sales growth of 5.5%. LongHorn Steakhouse and Yard House also saw strong growth, with same-restaurant sales increases of 4.5% and 3.5%, respectively.
Darden’s CEO, Gene Lee, said that the company is “very pleased” with its performance in the fourth quarter. He noted that the company’s “winning strategy” of focusing on its core brands, investing in its employees, and delivering a great guest experience is continuing to drive results.
Chet Strange | Bloomberg | Getty Images Via CNBC
Looking ahead, Darden is optimistic about its prospects for fiscal 2024. The company expects same-restaurant sales growth of 3% to 5% and diluted net earnings per share growth of 7% to 9%.
Company’s Future Prospects
- The company’s plans for new restaurant openings. Darden Restaurants has been expanding its restaurant portfolio in recent years, and the author could discuss the company’s plans for new openings in the future. For example, the author could discuss the company’s plans to open more restaurants in international markets.
- The company’s plans for product innovation. Darden Restaurants has been investing in product innovation in recent years, and the author could discuss the company’s plans for new menu items and other product innovations. For example, the author could discuss the company’s plans to introduce more plant-based options to its menus.
- The company’s plans for digital transformation. Darden Restaurants has been investing in digital transformation in recent years, and the author could discuss the company’s plans for how it will use technology to improve the customer experience in the future. For example, the author could discuss the company’s plans to launch a new mobile app or expand its online ordering capabilities.
Here’s what the company reported compared with what Wall Street was expecting, based on a survey of analysts by Refinitiv:
- Earnings per share: $2.58 vs. $2.54 expected
- Revenue: $2.77 billion, meeting expectations
Darden’s strong earnings report is a positive sign for the restaurant industry. The company’s brands are popular with consumers, and its strong performance suggests that the industry is recovering from the pandemic.
Is Darden Restaurants a good stock to buy?
Darden Restaurants is a solid company with a strong track record. The company’s brands are well-known and popular, and its management team is experienced and capable.
Darden’s stock is currently trading at a price-to-earnings ratio of 19. This is slightly above the average P/E ratio for the restaurant industry, but it is still reasonable for a company with Darden’s growth prospects.
Overall, Darden Restaurants is a good stock to buy for investors who are looking for a long-term investment in the restaurant industry. The company is well-positioned for growth, and its stock is currently trading at a reasonable valuation.
The company’s same-store sales increased by 4%, led by a strong performance from LongHorn Steakhouse. The steakhouse chain reported same-store sales growth of 7.1%, topping StreetAccount estimates of 4.9%.
But Olive Garden, which accounts for roughly 45% of Darden’s sales, reported a weaker-than-expected performance for the quarter. The Italian chain’s same-store sales rose 4.4%, falling short of expectations for 5% growth.
Darden’s fine dining segment reported same-store sales declines of 1.9%. The division includes The Capital Grille and Eddie V’s.
Executives said they expect softer fine-dining sales through the fiscal first quarter. Traffic for its fine-dining restaurants has more than doubled in the last three quarters compared with 2019 levels, but the segment still faces tough comparisons to surging demand a year ago.
“We expect traffic to stabilize on a year-over-year basis after the first quarter,” CFO Raj Vennam told investors on the company’s conference call.
Darden Restaurants FEB 2023 Financials
| (USD) | Feb 2023 | Y/Y |
|---|---|---|
| Revenue | 278.62Cr | 13.77% |
| Net income | 28.66Cr | 16.03% |
| Diluted EPS | 2.34 | 21.24% |
| Net profit margin | 10.29% | 1.98% |
| Operating income | 35.12Cr | 18.25% |
| Net change in cash | 3.46Cr | 118.12% |
| Cash on hand | – | – |
| Cost of revenue | 220.15Cr | 13.07% |
The table shows the financial performance of Darden Restaurants in February 2023, compared to the same month in the previous year. The numbers are in millions of US dollars.
- Revenue increased by 13.77% year-over-year to $278.62 million.
- Net income increased by 16.03% year-over-year to $28.66 million.
- Diluted EPS increased by 21.24% year-over-year to $2.34.
- Net profit margin increased by 1.98 percentage points to 10.29%.
- Operating income increased by 18.25% year-over-year to $35.12 million.
- Net change in cash was $3.46 million, an increase of 118.12% year-over-year.
- Cash on hand is not shown, but it is likely to have increased as well.
- Cost of revenue increased by 13.07% year-over-year to $220.15 million.
If you are considering investing in Darden Restaurants, I would recommend doing your research to get a better understanding of the company and its industry. However, based on the information that is currently available, I believe that Darden Restaurants is a good stock to buy for investors who are looking for a long-term investment in the restaurant industry.
FAQs
What were the key financial highlights of the Q4 2023 earnings report?
- Reported diluted net earnings per share increased 8.1% to $8.00, as compared to last year’s reported diluted net earnings per share of $7.40.
- Total revenue increased 6.5% to $2.77 billion, as compared to last year’s revenue of $2.58 billion.
- Same-restaurant sales increased by 4.2%, driven by a 3.8% increase in average guest checks and a 0.4% increase in traffic.
- The company opened 11 new restaurants during the quarter.
What were the key drivers of the financial results?
- The company’s strong financial performance was driven by several factors, including:
- Continued recovery in dining demand, as consumers returned to restaurants following the easing of COVID-19 restrictions.
- The successful integration of Ruth’s Hospitality Group acquisition, which added 150 restaurants to the Darden portfolio.
- Increased pricing, which helped to offset rising food and labor costs.
What are the company’s outlook for the future?
Darden Restaurants is optimistic about its prospects and has raised its guidance for fiscal year 2024. The company expects to achieve same-restaurant sales growth of 4% to 6% and diluted net earnings per share growth of 10% to 12%.
Is Darden Restaurants a good stock to buy?
Darden Restaurants is a well-established restaurant company with a strong track record of financial performance. The company is also benefiting from the ongoing recovery in dining demand and has several growth initiatives in place. As a result, Darden Restaurants is a good stock to consider for investors who are looking for exposure to the restaurant industry.
Additional Resources
- Darden Investor Relations website: https://investor.darden.com/
- The investor relations website has a section for quarterly earnings reports, which includes the Q4 2023 report.
- The website also has a section for earnings call transcripts, which includes the transcript for the Q4 2023 earnings call.
- Darden press release: https://investor.darden.com/news/news-details/2023/Darden-Restaurants-Reports-Fiscal-2023-Fourth-Quarter-and-Full-Year-Results-Increases-Quarterly-Dividend-And-Provides-Fiscal-2024-Outlook/
- This press release provides a summary of the Q4 2023 earnings report, including financial results, key metrics, and commentary from management.
- Seeking Alpha: https://seekingalpha.com/news/3981524-darden-restaurants-q4-2023-earnings-preview
- This article from Seeking Alpha provides an analysis of the Q4 2023 earnings report, including analyst ratings and price targets.
- TipRanks: https://www.tipranks.com/stocks/dri/forecast
- This website provides a consensus analyst rating for Darden Restaurants, as well as price targets from analysts.
