Visitors wearing protective masks wait outside the Olive Garden Restaurant in Thornton, Colorado, Friday, March 19, 2021.
Chet Strange | Bloomberg | Getty Images
Darden Restaurants on Friday posted quarterly earnings and revenue that exceeded analyst expectations, prompting the company to raise its sales and earnings forecast for the rest of its fiscal 2022.
Parent company Olive Garden also announced that CEO Jin Lee will retire on May 29. The Board has elected COO Rick Cardenas as its next CEO. Cardenas, who previously served as CFO, will join the board on May 30. Lee will remain as executive chairman until the next shareholder vote, when he is expected to be re-elected as non-executive chairman.
Lee has served as CEO since February 2015. He joined Darden in 2007 through the acquisition of Rare Hospitality International. Cardenas worked for Darden even longer, starting in 1984 as an hourly worker, before becoming the company’s auditor and moving up.
The company’s shares fell more than 3% in the premarket.
Here’s what the company said, compared to Wall Street’s expectations, based on a survey by Refinitiv analysts:
- Earnings per share: $ 1.48 vs. $ 1.43 expected.
- Revenue: $ 2.27 billion vs. $ 2.23 billion expected
Darden reported fiscal second quarter net income of $ 193.2 million, or $ 1.48 a share, up from $ 96 million, or 73 cents a share, a year earlier. Analysts surveyed by Refinitiv had expected earnings per share of $ 1.43.
Net sales rose 37% to $ 2.27 billion, beating expectations of $ 2.23 billion. For the company as a whole, sales in the same stores rose 34.4%, recovering from last year’s weak performance.
Olive Garden sales, which account for nearly half of Darden’s revenue, rose 29.3%. LongHorn SteakHouse retail revenue increased 31.2%. The two chains have been Darden’s leaders throughout the pandemic, fueled by their healthy takeout business.
The company’s fine dining segment, which includes The Capital Grille, saw sales in the same store grow 61.6%. This category has been hit hardest by the pandemic as consumers opted for take-out or delivery from simpler restaurants and stopped going out for holiday dinners.
As his restaurant business bounces back from the health crisis, Darden appears to be suffering from the same labor shortages as the rest of the restaurant industry as a whole. The company is accelerating plans to raise wages. Starting January 1, Darden’s minimum wage will be $ 12 an hour, including tips. The company expects workers to earn $ 20 an hour on average. This spring, the company announced it would raise the minimum hourly wage to $ 11 in January and to $ 12 in January 2022.
Darden raised its forecast for fiscal 2022, expecting higher sales and profits than originally forecast. The company currently expects total sales of $ 9.55 billion to $ 9.7 billion, up from a previous forecast of $ 9.4 billion to $ 9.6 billion. Wall Street had expected net sales of $ 9.33 billion to $ 9.74 billion.
The company also forecasts diluted earnings per share from continuing operations of $ 7.35 to $ 7.60, higher than last quarter’s forecast of $ 7.25 to $ 7.60. Analysts had expected earnings per share to be in the range of $ 7.39 to $ 8.04.