Photographer: Daniel Acker/Bloomberg

More Breadsticks? Olive Garden’s Comeback Lifts Darden's Stock

  • Darden raises annual profit forecast range, topping estimates
  • Company looks to extend strong run since activist shake-up

Darden Restaurants Inc. advanced in early trading after posting first-quarter profit that topped analysts’ estimates, helped by rising sales at its Olive Garden Italian chain.

Profit increased to 88 cents a share, excluding some items, in the quarter through Aug. 28, the Orlando, Florida-based company said Tuesday in a statement. Analysts estimated 82 cents, on average.

The results fueled optimism that Darden, which also owns LongHorn Steakhouse and Capital Grille, can extend a strong sales run at Olive Garden, its largest unit. Since a board shake-up led by activist investor Starboard Value two years ago, the Italian restaurant chain has rolled out a back-to-basics menu, revamped its kitchen operations and ramped up its carryout business, which saw sales rise 20 percent last quarter. The changes have spurred eight straight quarters of rising same-store sales, including a 2 percent gain in the most recent period.

“Olive Garden’s emphasis on to-go, family discounts, and weekday lunch likely resonated with consumers during the quarter,” David Palmer, an analyst at RBC Capital Markets, said in a note on Tuesday.

Forecast Increase

Darden signaled that it expects that strength to continue by boosting its forecast for profit this year to $3.87 to $3.97 a share. That’s up from a previous range of $3.80 to $3.90 and tops analysts’ $3.86 average projection.

The shares rose as much as 5.9 percent to $65 in early trading in New York. Darden had slipped 3.6 percent this year through Monday.

Darden also announced a new $500 million share-buyback authorization. The program replaces its previously existing authorization and doesn’t have an expiration date.

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