Posted: Friday, September 21st 2012 at 9:07am
Darden profit rises even as Red Lobster struggles
By The Associated Press
NEW YORK - Darden Restaurants Inc. said Friday that its fiscal first-quarter net income rose 4 percent even as it struggled to grow a key revenue figure at its flagship Olive Garden and Red Lobster chains.
Its earnings beat Wall Street expectations, and its shares rose more than 4 percent in premarket trading.
At Olive Garden, the company's biggest chain, Darden has been trying to increase sales by retooling its marketing message and updating its menu. Although traffic at established restaurants declined during the quarter, the company said a key sales figure edged up 0.3 percent on higher prices.
At Red Lobster, sales at restaurants open at least a year fell 2.6 percent as traffic declined. The sales metric is a key indicator of health because it strips out the impact of newly opened and closed locations.
The Orlando, Fla.-based company noted that its Red Lobster chain was up against a tough comparison because sales at restaurants open at least a year rose 10.7 percent in the year-ago quarter. It also noted that traffic picked up in the final month of the quarter.
Darden stood by its fiscal 2013 forecast that revenue is expected to increase 9 percent to 10 percent, mostly as a result of the addition of as many as 110 new restaurants.
Combined revenue at Olive Garden, Red Lobster and LongHorn locations open at least a year in the U.S. is anticipated to rise 1 percent to 2 percent. Darden expects earnings from continuing operations to climb 5 percent to 9 percent for the year.
For the three months ended Aug. 26, the company said it earned $110.8 million, or 85 cents per share. That's compared with $106.6 million, or 78 cents per share, a year ago. Earnings from continuing operations were 87 cents per share.
Analysts expected earnings of 83 cents per share, according to a FactSet survey.
Shares of Darden rose $2.29, or 4.2 percent, to $57.01 per share before the market open. That would take it above its 52-week high in regular trading of $55.84 set in mid-May.
Revenue rose 5 percent to $2.03 billion from $1.94 billion a year ago, meeting Wall Street's expectations. The boost was driven by new restaurant openings.
At LongHorn Steakhouse, revenue at restaurants open at least a year rose 3.6 percent.
Darden also declared a quarterly dividend of 50 cents per share. The dividend will be paid on Nov. 1 to shareholders of record on Oct. 10.
The company owns and runs more than 2,000 restaurants.
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