Darden Restaurants Reports Third Quarter Diluted Net Earnings Per Share

Darden Restaurants, Inc. (NYSE:DRI) today reported sales and diluted net earnings per share for the third quarter ended February 22, 2009. In the third quarter, diluted net earnings per share from continuing operations were 78 cents, a decrease of 2.5%, versus 80 cents in the prior year. The Company estimates that integration costs and purchase accounting adjustments related to the October 2007 acquisition of RARE Hospitality International, Inc. (RARE) reduced diluted net earnings per share by approximately two cents in the third quarter of the current fiscal year. Excluding the estimated integration costs and purchase accounting adjustments of approximately two cents, net earnings from continuing operations were 80 cents per diluted share in the third quarter. This compares to net earnings from continuing operations of 85 cents per diluted share in the third quarter of last year excluding estimated integration costs and purchase accounting adjustments of approximately five cents.

Third quarter sales from continuing operations were $1.80 billion, compared to $1.81 billion in the third quarter last year, a 0.7% decrease. Combined same-restaurant sales for Olive Garden, Red Lobster and LongHorn Steakhouse were down 3.2% this quarter, which compares to an estimated 6.5% decline in the Knapp-Track(TM) casual dining benchmark (excluding Darden) for the quarter.

"We're pleased with our sales and earnings performance this quarter given what was clearly a period of considerable macroeconomic weakness and consumer uncertainty," said Clarence Otis, Chairman and Chief Executive Officer of Darden. "As many consumers respond to the current environment by reducing dining out frequency, having strong brands matters more than ever. And, our competitively superior same-restaurant sales results are the clearest indication that Darden has proven brands with broad appeal and strong guest loyalty. We also have talented and dedicated teams in our restaurants who are providing guests with outstanding experiences by executing at a high level. They are supported by colleagues who are creating compelling food offerings, introducing them through ever improving advertising and local marketing and managing costs exceptionally well - enabling us to provide guests with solid value while protecting profitability. Finally, in addition to meeting the current economic challenges, we are taking steps to further enhance our restaurant operating, brand management and support capabilities so that we emerge from this period as an even higher performing company."

Highlights for the quarter ended February 22, 2009 include the following:

  1. Net earnings from continuing operations for the third quarter were

     $108.1 million, or 78 cents per diluted share on sales of $1.80

     billion.  Excluding estimated integration costs and purchase accounting

     adjustments of approximately two cents per diluted share, net earnings

     from continuing operations were 80 cents per diluted share for the

     third quarter.  In last year's third quarter, net earnings from

     continuing operations were $115.6 million, or 80 cents per diluted

     share, on sales of $1.81 billion.  Excluding estimated integration

     costs and purchase accounting adjustments of approximately five cents

     per diluted share, net earnings from continuing operations were 85

     cents per diluted share for the third quarter last year.

  2. Total third quarter sales from continuing operations of $1.80 billion

     represent a 0.7% decrease from the prior year.

  3. In the third quarter, Olive Garden's U.S. same-restaurant sales

     decreased 1.4%, Red Lobster's U.S. same-restaurant sales decreased 4.6%

     and LongHorn Steakhouse's same-restaurant sales decreased 5.4%.  The

     Company estimates that the shift of the Thanksgiving holiday week into

     the fiscal third quarter of this year adversely affected the quarter's

     same-restaurants sales results by approximately 70 basis points.  More

     severe winter weather than prior year also adversely affected the

     quarter's same-restaurant sales results at Olive Garden and LongHorn

     Steakhouse by approximately 30 basis points.  Because of its geographic

     footprint, Red Lobster's same-restaurant sales were favorably affected

     by approximately 60 basis points due to less severe winter weather but

     this was fully offset by the later Lenten season this year, which

     adversely affected same-restaurant sales for the quarter by

     approximately 60 basis points.

  4. The Company purchased 0.2 million shares of its common stock during the

     third quarter.

  5. The Company's Board of Directors declared a quarterly dividend of 20

     cents per share.

Operating Highlights


OLIVE GARDEN'S third quarter sales of $827 million were 3.0% above prior year, driven by revenue from 36 net new restaurants offset partially by a U.S. same-restaurant sales decrease of 1.4%. For the quarter, on a percentage of sales basis, the company's restaurant labor expenses, restaurant expenses and selling, general and administrative expenses decreased and were offset partially by higher food and beverage expenses and depreciation expenses. Operating profit increased for the quarter because of sales leverage and cost controls.

RED LOBSTER'S third quarter sales of $643 million were 4.3% below prior year, and U.S. same-restaurant sales decreased 4.6%. For the quarter, on a percentage of sales basis, lower food and beverage expenses were offset by the company's increased restaurant labor expenses, restaurant expenses, selling, general, and administrative expenses and depreciation expenses, resulting in a slight decrease in operating profit. Operating profit as a percent of sales, however, was essentially unchanged from prior year.

LONGHORN STEAKHOUSE'S third quarter sales of $227 million were 1.4% above the same period last year, driven by revenue from 19 net new restaurants, offset partially by a same-restaurant sales decrease of 5.4%. For the quarter, on a percentage of sales basis, the company reported increased food and beverage expenses, labor expenses, restaurant expenses and depreciation expenses that were offset partially by lower selling, general, and administrative expenses. This resulted in a decrease in operating profit for the quarter.

THE CAPITAL GRILLE'S third quarter sales of $61 million were 10.0% below the same period last year, driven by a same-restaurant sales decrease of 19.0% and offset partially by the addition of four net new restaurants.

BAHAMA BREEZE'S third quarter sales of $28 million were 9.1% below the prior year's sales from continuing operations, driven by a same-restaurant sales decrease of 8.8%.

Other Actions

Darden's Board of Directors declared a quarterly cash dividend of 20 cents per share on the Company's outstanding common stock. The dividend is payable on May 1, 2009 to shareholders of record at the close of business on April 10, 2009.

Darden continued the buyback of its common stock, purchasing 0.2 million shares in the third quarter and anticipates that it may repurchase up to an aggregate of $200 million of its common stock in fiscal 2009.

Fiscal 2009 December, January and February U.S. Same-Restaurant Sales Results

  Darden's U.S. same-restaurant sales for the fiscal months of December,

  January and February were as follows:



  Olive Garden              December *      January      February

                           ------------   ----------    -----------

  Same-Restaurant Sales      -4% to -5%       -1%         1% to 2%

  Same-Restaurant Traffic    -6% to -7%   -3% to -4%       Flat

  Pricing                      2% to 3%     2% to 3%      2% to 3%

  Menu-mix                    0% to -1%       Flat       0% to -1%





  Red Lobster               December *      January     February **

                           ------------   ----------    -----------

  Same-Restaurant Sales    -14% to -15%        5%        -2% to -3%

  Same-Restaurant Traffic  -16% to -17%     2% to 3%     -5% to -6%

  Pricing                        3%            3%          2% to 3%

  Menu-mix                      -1%        0% to -1%       0% to 1%





  LongHorn Steakhouse       December *      January      February

                           ------------   ----------    -----------

  Same-Restaurant Sales    -10% to -11%       -2%        -2% to -3%

  Same-Restaurant Traffic  -11% to -12%       -4%           -4%

  Pricing                        3%            3%            3%

  Menu-mix                       -2%      -1% to -2%     -1% to -2%





  * Fiscal December same-restaurant sales results were adversely affected

  by an estimated 180 basis points due to Thanksgiving week shifting into

  fiscal December this year.

  ** Red Lobster's February same-restaurant sales were adversely affected

  by an estimated 90 basis points due to two factors, the negative impact

  of the later Lenten season this year, which was offset partially by less

  severe winter weather compared to prior year.

Fiscal 2009 Financial Outlook


Darden announced that it now expects a combined U.S. same-restaurant sales decline in fiscal 2009 of approximately 1.25% to 1.75% for Red Lobster, Olive Garden and LongHorn Steakhouse. This is favorable to the Company's prior guidance by approximately 50 basis points and reflects anticipated same-restaurant sales of approximately flat to down 2.5% in the last quarter of the fiscal year. The Company also announced that it continues to expect to open approximately 70 net new restaurants in fiscal 2009. As a result, the Company expects total sales growth of between 9.0% and 9.5% in fiscal 2009, compared to reported sales from continuing operations of $6.63 billion in fiscal 2008. This total sales growth includes the approximate two percentage point impact of a 53rd week in fiscal 2009, excluding the 53rd week, the expected total sales growth would be approximately 7.0% to 7.5%.

The Company also announced that it now anticipates reported diluted net earnings per share from continuing operations to increase between 1% to 4% in fiscal 2009, which includes the impact of the 53rd week. This is favorable to the Company's prior guidance by approximately five percentage points. This compares to reported diluted net earnings per share from continuing operations of $2.55 in fiscal 2008. The additional week is expected to contribute approximately two percentage points, or $0.06 per diluted share, of growth in fiscal 2009. Excluding the estimated integration costs and purchase accounting adjustments of approximately 19 cents in fiscal 2008, net earnings from continuing operations were $2.74 per diluted share. In fiscal 2009, these costs and adjustments are estimated to be approximately ten cents per diluted share. Excluding the impact of these costs and adjustments for both fiscal 2008 and fiscal 2009, the Company expects diluted net earnings per share to be between flat and down 3% on a 53-week basis (which is favorable to prior guidance of a decline of 5% to 10%).

Darden Restaurants, Inc. (NYSE:DRI) , headquartered in Orlando, Fla., is the world's largest company-owned and operated full-service restaurant company with almost $6.7 billion in annual sales and approximately 180,000 employees. The Company owns and operates over 1,700 restaurants including Red Lobster, Olive Garden, LongHorn Steakhouse, The Capital Grille, Bahama Breeze and Seasons 52.

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