Darden Restaurants Reports Fiscal 2023 Second Quarter Results
Declares Quarterly Dividend; And Updates Fiscal 2023 Financial Outlook
Darden Restaurants, Inc. (NYSE:DRI) today reported its financial results for the second quarter ended November 27, 2022.
Second Quarter 2023 Financial Highlights
- Total sales increased 9.4% to $2.49 billion driven by a blended same-restaurant sales increase of 7.3% and sales from 35 net new restaurants
- Same-restaurant sales:
| Consolidated Darden | 7.3 % | |
| Olive Garden | 7.6 % | |
| LongHorn Steakhouse | 7.3 % | |
| Fine Dining | 5.9 % | |
| Other Business | 7.1 % | |
- Reported diluted net earnings per share increased 2.7% to $1.52 as compared to last year's reported diluted net earnings per share
- The Company repurchased $100 million of its outstanding common stock
"I am pleased with our results this quarter," said Darden President & CEO Rick Cardenas. "All of our brands performed at a high level by remaining focused on our Back-to-Basics Operating Philosophy anchored in food, service and atmosphere. I am proud of the focus and commitment our teams continue to display. Their disciplined approach in executing our strategy is what enables us to succeed, evidenced by the fact that, just last week, we surpassed $10 billion in sales on a trailing 52-week basis for the first time in Darden's history."
Segment Performance
Segment profit represents sales, less costs for food and beverage, restaurant labor, restaurant expenses and marketing expenses. Segment profit excludes non-cash real estate related expenses.
| Q2 Sales | Q2 Segment Profit | |||||||
| ($ in millions) | 2023 | 2022 | 2023 | 2022 | ||||
| Consolidated Darden | $2,486.5 | $2,272.2 | ||||||
| Olive Garden | $1,176.7 | $1,077.2 | $218.9 | $235.1 | ||||
| LongHorn Steakhouse | $600.5 | $547.2 | $85.6 | $83.6 | ||||
| Fine Dining | $202.0 | $188.7 | $38.9 | $39.7 | ||||
| Other Business | $507.3 | $459.1 | $59.0 | $62.3 | ||||
| YTD Sales | YTD Segment Profit | |||||||
| ($ in millions) | 2023 | 2022 | 2023 | 2022 | ||||
| Consolidated Darden | $4,932.6 | $4,578.2 | ||||||
| Olive Garden | $2,307.4 | $2,167.6 | $435.0 | $488.4 | ||||
| LongHorn Steakhouse | $1,205.1 | $1,114.3 | $177.6 | $191.1 | ||||
| Fine Dining | $385.4 | $357.5 | $68.9 | $73.2 | ||||
| Other Business | $1,034.7 | $938.8 | $131.3 | $147.1 | ||||
Average weekly sales by segment compared to fiscal 2020 due to impact of pandemic on fiscal 2022 and 2021:
| Q2 Average Weekly Sales | ||
| 2023 | 2020 | |
| Consolidated Darden | $101,092 | $88,055 |
| Olive Garden | $101,570 | $90,871 |
| LongHorn Steakhouse | $83,859 | $66,867 |
| Fine Dining | $172,401 | $147,668 |
| Other Business | $108,656 | $99,653 |
Dividend Declared
Darden's Board of Directors declared a quarterly cash dividend of $1.21 per share on the Company's outstanding common stock. The dividend is payable on February 1, 2023 to shareholders of record at the close of business on January 10, 2023.
Share Repurchase Program
During the quarter, the Company repurchased approximately 0.76 million shares of its common stock for a total cost of approximately $100 million. As of the end of the fiscal second quarter, the Company had approximately $811 million remaining under the current $1 billion repurchase authorization.
Fiscal 2023 Financial Outlook
The Company updated its financial outlook:
- Total sales of $10.3 to $10.45 billion
- Same-restaurant sales growth of 5% to 6.5%
- New restaurant openings of 55 to 60
- Total capital spending of $525 to $575 million
- Total inflation of approximately 7%
- An effective tax rate of approximately 13%
- Diluted net earnings per share from continuing operations of $7.60 to $8.00
- Approximately 123 million weighted average diluted shares outstanding
About Darden
Darden is a restaurant company featuring a portfolio of differentiated brands that include Olive Garden, LongHorn Steakhouse, Cheddar's Scratch Kitchen, Yard House, The Capital Grille, Seasons 52, Bahama Breeze and Eddie V's.
| DARDEN RESTAURANTS, INC. | ||
| 11/27/22 | 11/28/21 | |
| Olive Garden | 890 | 879 |
| LongHorn Steakhouse | 553 | 539 |
| Cheddar's Scratch Kitchen | 179 | 172 |
| Yard House | 85 | 85 |
| The Capital Grille | 61 | 61 |
| Seasons 52 | 45 | 44 |
| Bahama Breeze | 42 | 42 |
| Eddie V's | 29 | 27 |
| The Capital Burger | 3 | 3 |
| Darden Continuing Operations | 1,887 | 1,852 |
| DARDEN RESTAURANTS, INC. | |||||||
| Three Months Ended | Six Months Ended | ||||||
| 11/27/2022 | 11/28/2021 | 11/27/2022 | 11/28/2021 | ||||
| Sales | $ 2,486.5 | $ 2,272.2 | $ 4,932.6 | $ 4,578.2 | |||
| Costs and expenses: | |||||||
| Food and beverage | 818.3 | 694.1 | 1,613.6 | 1,379.5 | |||
| Restaurant labor | 808.5 | 744.8 | 1,602.3 | 1,480.8 | |||
| Restaurant expenses | 417.0 | 385.0 | 820.5 | 763.1 | |||
| Marketing expenses | 31.1 | 21.9 | 61.4 | 45.8 | |||
| General and administrative expenses | 90.4 | 91.7 | 178.7 | 204.7 | |||
| Depreciation and amortization | 96.8 | 92.1 | 192.4 | 181.1 | |||
| Impairments and disposal of assets, net | (8.8) | — | (13.7) | — | |||
| Total operating costs and expenses | $ 2,253.3 | $ 2,029.6 | $ 4,455.2 | $ 4,055.0 | |||
| Operating income | 233.2 | 242.6 | 477.4 | 523.2 | |||
| Interest, net | 19.8 | 16.7 | 39.6 | 32.3 | |||
| Earnings before income taxes | 213.4 | 225.9 | 437.8 | 490.9 | |||
| Income tax expense | 25.9 | 32.5 | 56.7 | 65.8 | |||
| Earnings from continuing operations | $ 187.5 | $ 193.4 | $ 381.1 | $ 425.1 | |||
| Losses from discontinued operations, net of tax benefit of $0.3, $0.0, $0.3 and $0.5, respectively | (0.3) | (0.2) | (0.9) | (1.0) | |||
| Net earnings | $ 187.2 | $ 193.2 | $ 380.2 | $ 424.1 | |||
| Basic net earnings per share: | |||||||
| Earnings from continuing operations | $ 1.54 | $ 1.50 | $ 3.11 | $ 3.28 | |||
| Losses from discontinued operations | (0.01) | — | (0.01) | (0.01) | |||
| Net earnings | $ 1.53 | $ 1.50 | $ 3.10 | $ 3.27 | |||
| Diluted net earnings per share: | |||||||
| Earnings from continuing operations | $ 1.52 | $ 1.48 | $ 3.09 | $ 3.24 | |||
| Losses from discontinued operations | — | — | (0.01) | (0.01) | |||
| Net earnings | $ 1.52 | $ 1.48 | $ 3.08 | $ 3.23 | |||
| Average number of common shares outstanding: | |||||||
| Basic | 122.1 | 129.2 | 122.5 | 129.8 | |||
| Diluted | 123.1 | 130.5 | 123.5 | 131.1 | |||
| DARDEN RESTAURANTS, INC. | |||
| 11/27/2022 | 5/29/2022 | ||
| (Unaudited) | |||
| ASSETS | |||
| Current assets: | |||
| Cash and cash equivalents | $ 240.7 | $ 420.6 | |
| Receivables, net | 71.6 | 72.0 | |
| Inventories | 296.1 | 270.6 | |
| Prepaid income taxes | 115.6 | 274.8 | |
| Prepaid expenses and other current assets | 168.1 | 141.4 | |
| Total current assets | $ 892.1 | $ 1,179.4 | |
| Land, buildings and equipment, net | 3,558.7 | 3,356.0 | |
| Operating lease right-of-use assets | 3,434.8 | 3,465.1 | |
| Goodwill | 1,037.4 | 1,037.4 | |
| Trademarks | 806.3 | 806.3 | |
| Other assets | 296.0 | 291.6 | |
| Total assets | $ 10,025.3 | $ 10,135.8 | |
| LIABILITIES AND STOCKHOLDERS' EQUITY | |||
| Current liabilities: | |||
| Accounts payable | $ 435.3 | $ 366.9 | |
| Short-term debt | 58.0 | — | |
| Accrued payroll | 137.1 | 181.5 | |
| Accrued income taxes | 18.9 | 32.1 | |
| Other accrued taxes | 68.3 | 64.5 | |
| Unearned revenues | 463.8 | 498.0 | |
| Other current liabilities | 725.0 | 704.5 | |
| Total current liabilities | $ 1,906.4 | $ 1,847.5 | |
| Long-term debt | 885.8 | 901.0 | |
| Deferred income taxes | 177.5 | 201.1 | |
| Operating lease liabilities - non-current | 3,730.5 | 3,755.8 | |
| Other liabilities | 1,304.2 | 1,232.2 | |
| Total liabilities | $ 8,004.4 | $ 7,937.6 | |
| Stockholders' equity: | |||
| Common stock and surplus | $ 2,214.6 | $ 2,226.0 | |
| Retained earnings (deficit) | (199.7) | (25.9) | |
| Accumulated other comprehensive income (loss) | 6.0 | (1.9) | |
| Total stockholders' equity | $ 2,020.9 | $ 2,198.2 | |
| Total liabilities and stockholders' equity | $ 10,025.3 | $ 10,135.8 | |
| DARDEN RESTAURANTS, INC. | |||
| Six Months Ended | |||
| 11/27/2022 | 11/28/2021 | ||
| Cash flows—operating activities | |||
| Net earnings | $ 380.2 | $ 424.1 | |
| Losses from discontinued operations, net of tax | 0.9 | 1.0 | |
| Adjustments to reconcile net earnings from continuing operations to cash flows: | |||
| Depreciation and amortization | 192.4 | 181.1 | |
| Impairments and disposal of assets, net | (13.7) | — | |
| Stock-based compensation expense | 38.4 | 38.1 | |
| Change in current assets and liabilities and other, net | 37.4 | (162.8) | |
| Net cash provided by operating activities of continuing operations | $ 635.6 | $ 481.5 | |
| Cash flows—investing activities | |||
| Purchases of land, buildings and equipment | (280.3) | (173.3) | |
| Proceeds from disposal of land, buildings and equipment | 21.1 | 6.0 | |
| Purchases of capitalized software and changes in other assets, net | (14.2) | (10.5) | |
| Net cash used in investing activities of continuing operations | $ (273.4) | $ (177.8) | |
| Cash flows—financing activities | |||
| Net proceeds from issuance of common stock | 11.7 | 25.7 | |
| Dividends paid | (296.5) | (286.1) | |
| Repurchases of common stock | (299.2) | (452.3) | |
| Proceeds from short-term debt, net | 58.0 | — | |
| Principal payments on finance leases | (8.8) | (5.6) | |
| Payments of debt issuance costs | — | (2.7) | |
| Other, net | (0.1) | — | |
| Net cash used in financing activities of continuing operations | $ (534.9) | $ (721.0) | |
| Cash flows—discontinued operations | |||
| Net cash provided by operating activities of discontinued operations | 0.9 | 0.4 | |
| Net cash provided by discontinued operations | $ 0.9 | $ 0.4 | |
| Decrease in cash, cash equivalents, and restricted cash | (171.8) | (416.9) | |
| Cash, cash equivalents, and restricted cash - beginning of period | 472.1 | 1,214.7 | |
| Cash, cash equivalents, and restricted cash - end of period | $ 300.3 | $ 797.8 | |
| Reconciliation of cash, cash equivalents, and restricted cash: | 11/27/2022 | 11/28/2021 | |
| Cash and cash equivalents | $ 240.7 | $ 746.3 | |
| Restricted cash included in prepaid expenses and other current assets | 59.6 | 51.5 | |
| Total cash, cash equivalents, and restricted cash shown in the statement of cash flows | $ 300.3 | $ 797.8 |
SOURCE Darden Restaurants, Inc.: Financial