Darden Declares a Quarterly Dividend of 43 Cents Per Share

Darden Restaurants, Inc. (NYSE: DRI) today reported diluted net earnings per share and sales for the second quarter ended November 27, 2011.

Key results for the quarter include the following:

• Second quarter diluted net earnings per share from continuing operations were 41 cents, a 24% decrease from the 54 cents per diluted share in the second quarter of last year. Net earnings from continuing operations in this year's second quarter were $54.1 million and sales were $1.83 billion, which compare to net earnings from continuing operations of $75.8 million and sales of $1.73 billion in the second quarter last year. 
• As previously announced, the Company completed the purchase of certain assets of Eddie V's Restaurants, Inc. The Company also reported that, while closing costs associated with the purchase adversely affected diluted net earnings per share from continuing operations for its fiscal second quarter by approximately one cent, it expects the purchase to be neutral to diluted net earnings per share for the full fiscal year.
• Second quarter total sales from continuing operations were $1.83 billion, a 6.1% increase from the second quarter of last year. The increase reflects (1) combined same-restaurant sales growth of 1.8% for Red Lobster, Olive Garden and LongHorn Steakhouse, exceeding an estimated 0.6% increase for the Knapp-Track™ benchmark of U.S. same-restaurant sales excluding Darden; (2) same-restaurant sales growth of 3.9% for the Company's Specialty Restaurant Group; and (3) the operation of 73 net new restaurants plus the addition of 11 Eddie V's restaurants compared to the second quarter last year. In the second quarter, U.S. same-restaurant sales increased 6.8% at Red Lobster and 6.0% at LongHorn Steakhouse, and decreased 2.5% at Olive Garden.
• During the second quarter, Darden purchased 4.2 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, pressure on check averages as guests continue to be cautious about spending and unfavorable year-over-year food costs," said Clarence Otis, Chairman and Chief Executive Officer of Darden. "To rebuild its value leadership position in the industry, Olive Garden is developing new promotional and core menu offerings and new advertising and is focused on remodeling its older restaurants.  While guests will experience some of the changes relatively soon, others will take time to develop and implement.  Fortunately, with reduced cost inflation in the second half of this fiscal year, the strong momentum at our other brands enables us to anticipate solid earnings growth for the remainder of the fiscal year even as Olive Garden makes the changes needed to get back on track."

Operating Highlights

OLIVE GARDEN'S second quarter sales of $836 million were 0.9% higher than the prior year, driven by revenue from 28 net new restaurants that offset the 2.5% decline in U.S. same-restaurant sales.  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 for the quarter. 

RED LOBSTER'S second quarter sales of $602 million were 8.3% higher than the prior year, driven by its U.S. same-restaurant sales increase of 6.8% and revenue from eight net new restaurants. On a percentage of sales basis, higher food and beverage expenses and depreciation expense more than offset lower restaurant labor expenses, restaurant expenses and selling, general and administrative expenses, resulting in a decrease in operating profit for the quarter. 

LONGHORN STEAKHOUSE'S second quarter sales of $255 million were 13.7% higher than the prior year, driven by revenue from 27 net new restaurants and the U.S. same-restaurant sales increase of 6.0%. On a percentage of sales basis, higher food and beverage expenses, selling, general and administrative expenses and depreciation expenses more than offset lower restaurant labor expenses and restaurant expenses resulting in a decrease in operating profit for the quarter. 

THE SPECIALTY RESTAURANT GROUP'S second quarter sales of $137 million were 19.1% higher than the prior year, driven by same-restaurant sales increases of 5.7% at The Capital Grille, 0.5% at Bahama Breeze and 2.9% at Seasons 52.  Additionally, sales growth reflected revenue from one new restaurant at The Capital Grille, two new restaurants at Bahama Breeze, six new restaurants at Seasons 52 and the addition of 11 restaurants purchased from Eddie V's Restaurants, Inc. on November 14, 2011. 

Fiscal 2012 September, October and November U.S. Same-Restaurant Sales Results

Darden reported U.S. same-restaurant sales for the fiscal months of September, October and November as follows: 

* Note: The shift of Halloween from fiscal October last year to fiscal November this year positively affected fiscal October's same-restaurant sales results by approximately 80 basis points and adversely affected fiscal November's same-restaurant sales results by approximately 80 basis points. 

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 February 1, 2012 to shareholders of record at the close of business on January 10, 2012. 

Darden continued the buyback of its common stock, purchasing 4.2 million shares in the second quarter.  There are approximately 18.6 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 2.0% to 3.0% for Red Lobster, Olive Garden and LongHorn Steakhouse, and that it continues to expect to open approximately 80 to 90 net new restaurants (excluding the addition of 11 Eddie V's restaurants) in fiscal 2012.  As a result, the Company expects total sales growth of between 6.0% and 7.0% in fiscal 2012. The Company also affirmed it anticipates that diluted net earnings per share growth from continuing operations in fiscal 2012 will be in the range of 4% to 7%.

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