Darden Restaurants Q1 Total Sales Up 7.5%

Darden Restaurants, Inc. (NYSE: DRI) today reported diluted net earnings per share and sales for the first quarter ended August 28, 2011.

Highlights for the quarter include the following:

• First quarter diluted net earnings per share from continuing operations were 78 cents, a 3% decrease from the 80 cents per diluted share in the first quarter of last year. Net earnings from continuing operations in this year's first quarter were $106.8 million and sales were $1.94 billion, which compare to net earnings from continuing operations of $113.3 million and sales of $1.81 billion in the first quarter last year. The Company estimated that Hurricane Irene adversely affected diluted net earnings per share for the first quarter this year by approximately two cents.
• First quarter total sales from continuing operations of $1.94 billion were a 7.5% increase from the prior year. The increase reflects (1) combined same-restaurant sales growth of 2.8% for Olive Garden, Red Lobster and LongHorn Steakhouse, exceeding an estimated 1.0% increase for the Knapp-Track™ benchmark of U.S. same-restaurant sales excluding Darden; (2) same-restaurant sales growth of 5.1% for the Company's Specialty Restaurant Group; and (3) the operation of 71 net new restaurants compared to the first quarter last year. In the first quarter, U.S. same-restaurant sales increased 10.7% at Red Lobster and 4.8% at LongHorn Steakhouse, and decreased 2.9% at Olive Garden.
• During the first quarter, Darden purchased 1.9 million shares of its common stock.
• Darden's Board of Directors declared a quarterly dividend of 43 cents per share.

"As we previously announced, strong sales growth this quarter at Red Lobster, LongHorn Steakhouse and our Specialty Restaurant Group was offset by below expectation sales results at Olive Garden, unfavorable year-over-year commodity costs and the adverse impact of Hurricane Irene," said Clarence Otis, Chairman and Chief Executive Officer of Darden. "Olive Garden remains one of the strongest brands in the full-service restaurant industry and we are working to improve its sales performance during the balance of the year.  With improvement at Olive Garden, continued sales momentum at the other brands, more neutral commodity cost comparisons in the second half of the year and a meaningful increase in the number of shares we will repurchase, we anticipate diluted net earnings per share growth of 12% to 15% this fiscal year - though we have higher confidence at this point in the year in the low end of the range."

Operating Highlights

OLIVE GARDEN'S first quarter sales of $884 million were 0.8% higher than the prior year, driven by revenue from 30 net new restaurants that offset the 2.9% decline in U.S. same-restaurant sales.  For the quarter, on a percentage of sales basis, higher food and beverage expenses, restaurant labor expenses, restaurant expenses, selling, general and administrative expenses and depreciation expense resulted in a decrease in operating profit and operating profit as a percentage of sales for the quarter.  

RED LOBSTER'S first quarter sales of $674 million were 12.3% higher than the prior year, driven by its U.S. same-restaurant sales increase of 10.7% and revenue from five net new restaurants. For the quarter, on a percentage of sales basis, higher food and beverage expenses, offset partially by lower restaurant labor expenses, restaurant expenses, selling, general and administrative expenses and depreciation expenses, resulted in a decrease in operating profit and operating profit as a percentage of sales for the quarter. These results reflect strong same-restaurant traffic growth that was supported by an investment in maintaining guest affordability.

LONGHORN STEAKHOUSE'S first quarter sales of $253 million were 12.1% higher than the prior year, driven by revenue from 23 net new restaurants and the U.S. same-restaurant sales increase of 4.8%. For the quarter, on a percentage of sales basis, higher food and beverage expenses and depreciation expenses, offset partially by lower restaurant labor expenses, restaurant expenses, and selling, general and administrative expenses, resulted in a decrease in operating profit and operating profit as a percentage of sales for the quarter. These results reflect strong same-restaurant traffic growth that was supported by an investment in maintaining guest affordability.

THE SPECIALTY RESTAURANT GROUP'S first quarter sales of $129 million were 20.7% higher than prior year, driven by same-restaurant sales increases of 7.0% at The Capital Grille, 2.9% at Bahama Breeze and 2.5% at Seasons 52.  Additionally, sales growth reflected revenue from four new restaurants at The Capital Grille, one new restaurant at Bahama Breeze and seven new restaurants at Seasons 52.

Fiscal 2012 June, July and August U.S. Same-Restaurant Sales Results

Darden reported U.S. same-restaurant sales for the fiscal months of June, July and August as follows:

* Note: Same-restaurant sales results in August were adversely affected by approximately 80 basis points due to Hurricane Irene which caused 151 days of restaurant closures.  

Other Actions

Darden's Board of Directors declared a quarterly cash dividend of 43 cents per share on the Company's outstanding common stock. The dividend is payable on November 1, 2011 to shareholders of record at the close of business on October 11, 2011.

Darden continued the buyback of its common stock, purchasing 1.9 million shares in the first quarter.  There are approximately 22.8 million shares remaining in the current repurchase authorization.

Fiscal 2012 Financial Outlook

Darden affirmed that it expects combined full-year U.S. same-restaurant sales growth in fiscal 2012 of approximately +3% for Red Lobster, Olive Garden and LongHorn Steakhouse, and that it continues to expect to open approximately 80 to 90 net new restaurants in fiscal 2012.  As a result, the Company expects total sales growth of between 6.5% and 7.5% in fiscal 2012. The Company also affirmed it anticipates that diluted net earnings per share growth from continuing operations in fiscal 2012 will be towards the lower end of its previously announced range of 12% and 15%.

Darden Restaurants, Inc., (NYSE: DRI) headquartered in Orlando, Fla., is the world's largest company-owned and operated full-service restaurant company with over $7.5 billion in annual sales and approximately 180,000 employees. Darden is recognized for a culture that rewards caring for and responding to people. Our restaurant brands — Red Lobster, Olive Garden, LongHorn Steakhouse, The Capital Grille, Bahama Breeze and Seasons 52 — reflect the rich diversity of those who dine with us. Our brands are built on deep insights into what our guests want. 

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