Darden Restaurants 3Q profit falls but tops Wall Street's view; revenue meets expectations

NEW YORK, N.Y. – Darden Restaurants’ third-quarter net income dropped 18 per cent, as it dealt with soft sales at Red Lobster but the performance still beat Wall Street’s expectations.

The Orlando, Fla., company said Friday that sales at its Olive Garden, Red Lobster and LongHorn Steakhouse restaurants open at least a year fell a combined 4.6 per cent.

This figure is a key gauge of a restaurant operator’s performance because it excludes results at store recently opened or closed.

Darden Restaurants Inc. has been struggling to make its brands relevant again as diners increasingly head to chains like Chipotle and Panera, where they feel they’re getting restaurant-quality food without paying as much. As it looks for ways to catch up to shifting trends, Red Lobster this week started testing a “pay-at-the-counter” concept at two location near the its headquarters.

For the three months ended Feb. 24, Darden earned $134.4 million, or $1.02 per share. That’s down from $164.1 million, or $1.25 per share, a year earlier.

Analysts polled by FactSet expected earnings of $1.01 per share.

Revenue rose 5 per cent to $2.26 billion from $2.16 billion, matching Wall Street’s view.

Revenue for the specialty restaurant group surged 61 per cent, buoyed by the addition of some Yard House restaurants, as well as new restaurants for The Capital Grille, Bahama Breeze and Seasons 52.

Revenue at Red Lobster dropped 6 per cent as it contended with higher expenses and weaker sales at its locations in the U.S. open at least a year. Olive Garden revenue edged up slightly and revenue for LongHorn Steakhouse climbed 6.9 per cent as both chains took in money from new restaurants.

Darden said that bad winter weather hurt sales at some of its restaurants. Sales at Red Lobster restaurants open in the U.S. at least a year declined 6.6 per cent in the quarter. The figure fell 4.1 per cent for Olive Garden locations in the U.S. and dropped 1.6 per cent for LongHorn Steakhouse.

The company reaffirmed its fiscal 2013 earnings forecast of $3.06 to $3.22 per share. Analysts predict earnings of $3.17 per share.

It still anticipates revenue will climb 6 per cent to 7 per cent. Based on the prior year’s revenue of $8 billion, this implies about $8.48 billion to $8.56 billion.

Wall Street expects revenue of $8.52 billion.

Darden’s board also declared a quarterly dividend of 50 cents per share. The dividend will be paid on May 1 to shareholders of record on April 10.

Darden Restaurants shares rose 54 cents, or 1.1 per cent, to $49.50 in midday trading Friday. They have traded in a 52-week range of $44.11 to $57.93.