Olive Garden Helps Boost Darden Restaurants Top Earnings Beat

Shares of Darden Restaurants saw a nice jump, Thursday, when the company improved its outlook and posted earnings, with new revenue forecast that beat earlier estimates from Wall Street. Owner of the Olive Garden chain—among others, of course—Darden reported its third-quarter profit of $223.6 million. This bested Wall Street’s expectations, as well as the $217.8 million in profits reported for the same period last year. 

Olive Garden CEO Gene Lee took over his position in 2014 when activist investor Starboard pushed for the company to make some big changes.  As such, he said, in a press release, “Our strong top-line results exceeded the industry this quarter resulting in significant market share gains.  This sales performance, couple with strong operating profit growth, is a testament to our strategy and the outstanding focus and execution by our restaurant teams who create exceptional dining experiences for our guests every day.”

And under his guidance, the company has adopted a simple and refined, back-to-basics approach to management.  The new direction with more emphasis on classic Italian dishes while adding new—pricier—wine options with exclusive cocktails and a revitalized focus on service.  

Looking at the numbers, same-restaurant sales for Olive Garden (as well as Darden sister brand LongHorn Steakhouse—which, combined, make up 80 percent of the company’s properties) grew 4.3 percent and 3.8 percent, respectively, in Q3.  This metric is a solid indicator of the restaurant’s definite strength moving forward, not including locations open (or closed) at least one year. 

In summary, earnings for Darden Restaurants grew $1.80 per share on revenue—up 6 percent—of $2.25 billion.  Also, same store sales increased by 2.8 percent in all (accounting for Olive Garden’s 4.8 percent and LongHorn Steakhouse’s 3.8 percent).  At the same time, comps fell 2.7 percent at Cheddar’s and another 2.1 percent at Yard House properties.  

At the end of the day, though, things are looking up for Darden Restaurants.  2019 targets are still up, with December forecasts raised from the $5.60 – $5.70 range to $5.76 – $5.80 per share. They also expect sales to climb 5.5 percent and comps to climb, in line with expectations, at 2.5 percent or more. 

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