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A month has gone by since the last earnings report for Darden Restaurants (DRI). Shares have added about 4.1% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Darden Restaurants due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
Darden Q2 Earnings Beat, Sales Lag Estimates
In second-quarter fiscal 2020, adjusted earnings came in at $1.12 per share, which outpaced the Zacks Consensus Estimate of $1.07. The bottom line also improved 21.7% year over year. Earnings were aided by the company’s relentless efforts to augment the basic operating factors of the business — food, service and ambiance.
Total sales of $2,056.4 million lagged the consensus mark of $2,058 million. However, sales improved 4.2% from the prior-year quarter driven by the addition of 37 net restaurants and a 2% increase in blended comps.
Sales by Segments
Darden reports business under four segments — Olive Garden, LongHorn Steakhouse, Fine Dining that includes The Capital Grille and Eddie V's, and Other Business.
Sales at Olive Garden increased 2.6% year over year to $1,023.6 million. Comps grew 1.5% at the segment, lower than the prior-quarter’s comp growth of 2.2%. Traffic declined 1.2%. Pricing improved 2% and menu-mix increased 0.7%.
Sales at Fine Dining improved 5.5% to $154.8 million. Comps at The Capital Grille rose 1.8% compared with 1.5% growth in first-quarter fiscal 2020. Further, Eddie V's reported comps growth of 0.5%, lower than 1.2% improvement in the prior quarter.
Sales at Other Business grew 3.5% year over year to $430.7 million. However, comps at Seasons 52 fell 3.5% in the reported quarter compared with a comps decline of 4.2% in first-quarter fiscal 2020. Comps at Yard House inched up 0.7% compared with 1.9% decrease in the prior quarter. Meanwhile, comps slipped 3.4% at Bahama Breeze compared with a decline of 3.2% in the preceding quarter.
At LongHorn Steakhouse, sales advanced 8.4% to $447.3 million. Comps at the segment increased 6.7%, compared with comps growth of 2.6% in the year-ago quarter. Traffic improved 3.2%. Also, pricing and menu mix grew 1.9% and 1.6%, respectively.
In the reported quarter, comps at Cheddar's decreased 1.2% compared with a 5.4% decline in the prior-year quarter.
Operating Highlights & Net Income
In the fiscal second quarter, total operating costs and expenses increased 3.9% year over year to $1,896.2 million. The rise can be attributed to an overall increase in food and beverage costs, restaurant expenses, and labor costs.