Darden CEO Sees More Cautious Consumer Spending
Darden RestaurantsCEO Clarence Otis said Wednesday that consumers are being more careful with their spending, but the restaurant chain was still able to top earnings estimates in the latest quarter.
"People are certainly being more careful about their spending," Otis told CNBC. "Our experience has been, when that's the case, they really go to brands that they trust...that's true of our three big brands...Olive Garden, Red Lobster, (and) Longhorn are all doing a great job."
Late Tuesday, Dardensaid profit in thefiscal fourth quarter from continuing operations rose to $103.3 million, or 72 cents per share, from $98.5 million, or 67 cents per share, a year earlier.
Excluding estimated integration costs and purchase accounting adjustments, earnings from continuing operations were 78 cents per share, above the 75 cents, on average, expected by analysts, according to Reuters Estimates.
On a net basis, Darden posted earnings of 71 cents, compared with a year-ago net loss of 38 cents per share, which included results from discontinued operations.
The company sold its Smokey Bones Barbeque & Grille chain in January.
Revenue from continuing operations rose 25 percent in the quarter to $1.83 billion, slightly above the $1.82 billion, expected by Wall Street, according to Reuters Estimates.
Darden's revenue in the quarter included some $290 million of sales from LongHorn Steakhouse and The Capital Grille, which the company acquired through its roughly $1.2 billion acquisition of RARE Hospitality International. That deal was completed in the fiscal second quarter.
U.S. same-store sales, a key gauge of restaurant performance, rose 5.8 percent at Olive Garden during the quarter. They fell 0.2 percent at Red Lobster, however, and fell 3.1 percent at LongHorn Steakhouse, the company said.
Looking ahead, Darden expects fiscal 2009 earnings growth from continuing operations of 14 percent to 15 percent.
Excluding integration costs and purchase accounting adjustments, fiscal 2009 earnings growth is to rise 9 percent to 10 percent, including a 53rd week in the year, the company said.
Several full-service restaurants have struggled over the past year as consumers cut back on meals outside the home amid higher food and fuel costs and a weak housing market.
Higher prices on commodities like milk and wheat have also hit restaurant companies, but Darden actually reported lower costs at its Red Lobster unit.
"On a percentage-of-sales basis, they went down," Otis explained. "We have a really diverse basket of goods that we buy. Seafood is a big part of our purchase...and seafood prices have been very well contained, and we appreciate that, because we've seen some pressure on some of the other costs."
Darden planned to buy back about $200 million to $225 million of its common stock in fiscal 2009.
Darden shares closed up 3 percent on the New York Stock Exchange at $31.60 and fell less than 1 percent to $31.47 in after-hours trading.
--Reuters contributed to this story.