Darden Profit Tops Estimates as Olive Garden Halts SlideCraig Giammona
Darden Restaurants Inc., which recently had its entire board replaced in a battle with an activist investor, posted second-quarter earnings that topped analysts’ estimates, helped by improving sales at the Olive Garden chain.
Excluding some items, profit amounted to 28 cents a share in the quarter ended Nov. 23, the Orlando, Florida-based company said in a statement. Analysts had projected 27 cents, according to data compiled by Bloomberg.
Darden has cut jobs, closed its private aviation department and revamped its leadership structure since investor Starboard Value took over the board in October. The company also is seeking a new chief executive officer and working to revive growth at Olive Garden, which has struggled to compete with fast-casual eateries.
“The easy part is the cost cutting -- you either do it or you don’t,” said Peter Saleh, an analyst at Telsey Advisory Group in New York who has a neutral rating on the shares. “It’s driving the top-line sales that is more challenging.”
The shares rose as much as 2.6 percent to $57.39 in late trading in New York after the results were released. Darden had gained 2.8 percent this year through the market close.
Sales at Olive Garden’s established locations rose 0.5 percent in the quarter, compared with a 1.3 percent drop in the previous period. Darden’s LongHorn Steakhouse, meanwhile, posted a 2.6 percent sales gain last quarter.
Still, Darden’s reorganization took a toll on profit last quarter. Including costs related to the job cuts and other moves, the company posted a second-quarter net loss of $32.8 million, or 26 cents a share. That compared with net income of $19.8 million or 15 cents, a year earlier.
Darden said it now expects its full-year earnings to gain 32 percent to 35 percent, reaching $2.25 to $2.30 a share. The lower end of the guidance was previously $2.22, the company said.
“Despite all the noise and potential for distractions, our restaurant teams are as focused as I’ve ever seen them,” Greg Lee, Darden’s interim CEO, said on a conference call after earnings were released.