Darden Restaurants Q2 Profit Down; Results Miss Estimates; Cuts FY EPS View

(RTTNews) - Darden Restaurants, Inc. (DRI) reported that its second-quarter net earnings declined to $19.8 million or $0.15 per share, from $33.6 million or $0.26 per share in the same quarter last year. Analysts polled by Thomson Reuters expected the company to report earnings of $0.20 per share for the quarter. Analysts' estimates typically exclude special items.

Net earnings from continuing operations in this year's second quarter were $19.8 million, which compares to net earnings from continuing operations of $33.7 million in the second quarter last year.

The company said that net earnings per share for the second quarter were adversely affected by approximately five cents including: approximately two cents net of related benefits, due to severance and other costs associated with the support expense reduction efforts announced in September and approximately three cents due to legal, financial advisory and other costs related to the strategic review and associated actions the company announced earlier today.

Second quarter total sales from continuing operations were $2.05 billion, a 4.6% increase from the $1.96 billion generated in the second quarter of last year. The increase reflected the operation of 99 net new restaurants compared to the second quarter last year and same restaurant-sales growth of 4.1% for the Company's Specialty Restaurant Group, offset partially by a blended same-restaurant sales decline of 1.0% for Olive Garden, Red Lobster and LongHorn Steakhouse. Twenty Three analysts estimated revenues of $2.07 billion for the quarter.

In the second quarter, U.S. same-restaurant sales increased 5.0% at LongHorn Steakhouse, declined 0.6% at Olive Garden and declined 4.5% at Red Lobster. The Company estimated that a shift in the Thanksgiving holiday week favorably affected second quarter same-restaurants sales by approximately 90 basis points at its large brands. The Thanksgiving holiday week, traditionally a low sales period, was in the Company's fiscal second quarter last year but shifted to its fiscal third quarter this year.

Darden's Board declared a quarterly cash dividend of 55 cents per share on the Company's outstanding common stock. The dividend is payable on February 3, 2014 to shareholders of record at the close of business on January 10, 2014.

The company currently expects net earnings per share for fiscal year 2014 to decline between 15% and 20% compared to fiscal 2013. Analysts project annual earnings per share of $2.88. These expectations reflect the Company's projection that combined U.S. same-restaurant sales growth for Red Lobster, Olive Garden and LongHorn Steakhouse this fiscal year will be -1% to -2%. This is below the 0% to 2% the Company anticipated previously, with the change in expectations due largely to a meaningful downward adjustment in the forecast of same-restaurant sales results at Red Lobster.

While announcing the first-quarter result, the company expected net earnings per share for fiscal 2014 to decline between 3 and 5 percent compared to fiscal 2013.