Darden CEO Tells CNBC He's Looking for A Deal Post-Smokey Bones Sale
Darden Restaurants dumped Smokey Bones from its lineup, but the restaurant operator may be looking for an acquisition, the company’s chief executive told CNBC Wednesday.
"We don't talk about specific names,” Darden Chief Executive Clarence Otis said on CNBC’s “Squawk Box.”
Darden shares were recently trading lower, following the release of weak fiscal fourth-quarter results late Tuesday. Darden swung to a fourth-quarter loss of $55.1 million, or 38 cents a share, from earnings of $92.3 million, or 60 cents a share, a year ago. Revenue rose to $1.46 billion from $1.41 billion.
Earnings from continuing operations were 67 cents a share, while analysts polled by Thomson Financial had forecast, on average, earnings of 70 cents a share.
“I will tell you that as you look at our business today, the operating companies we have (generate) 5% to 7% top line sales growth on an annual basis," Otis said. "We'd like that to be a point or two higher in terms of a growth rate, and we have certainly positioned the company so we can be opportunistic if something strong comes along. I think what we're looking for is something that's proven in the market place. So, it's been operating for some time, we understand how guests use it -- that's the key factor for us."
According to Otis, sales at the company's Red Lobster restaurants were weaker than expected May, a tough month for the industry as consumers were pinched by higher gas prices. The company also operates Olive Garden.
“In June, we're seeing things go in the other direction and Red Lobster is off to a very strong start,” Otis said. “We feel good about our outlook for fiscal year 2008."
The loss in Darden's fourth quarter was mostly the result of a $245 million charge related to the closure of 65 Smokey Bones restaurants.
In May, Darden shuttered 54 Smokey Bones restaurants and announced plans to sell the 73 remaining restaurants.
The company also said it expects fiscal 2008 earnings growth in a range of 10% to 12%, compared with analysts' current forecast of 13%.