Darden Eating places (DRI) Q2 2022 earnings beat estimates

Darden Eating places on Friday reported quarterly earnings and income that topped analysts’ expectations, main the corporate to boost its gross sales and earnings forecast for the remainder of fiscal 2022.

The Olive Backyard guardian additionally introduced that CEO Gene Lee will retire Might 29. The board elected Chief Working Officer Rick Cardenas as its subsequent chief govt. Cardenas, who beforehand served as chief monetary officer, will be a part of the board on Might 30. Lee will stick round as govt chairman till the following shareholder vote, when he’s anticipated to be reelected as non-executive chairman.

Lee has served as CEO since February 2015. He joined Darden in 2007 as a part of the corporate’s acquisition of Uncommon Hospitality Worldwide. Cardenas has labored for Darden even longer, beginning in 1984 as an hourly employee earlier than changing into an auditor for the corporate and dealing his approach up.

Shares of the corporate fell greater than 3% in morning buying and selling.

This is what the corporate reported in contrast with what Wall Avenue was anticipating, primarily based on a survey of analysts by Refinitiv:

• Earnings per share: $1.48 vs. $1.43 anticipated
• Income: $2.27 billion vs. $2.23 billion anticipated

Darden reported fiscal second-quarter web revenue of $193.2 million, or $1.48 per share, up from $96 million, or 73 cents per share, a yr earlier. Analysts surveyed by Refinitiv have been anticipated earnings per share of $1.43.

Internet gross sales rose 37% to $2.27 billion, topping expectations of $2.23 billion. Throughout the corporate, same-store gross sales surged 34.4%, rebounding from final yr’s weak efficiency.

Olive Backyard, which accounts for practically half of Darden’s income, noticed its same-store gross sales climb 29.3%. LongHorn SteakHouse’s same-store gross sales elevated by 31.2%. The 2 chains have been Darden’s high performers all through the pandemic, boosted by their wholesome to-go enterprise.

The corporate’s fine-dining section, which incorporates The Capital Grille, reported same-store gross sales development of 61.6%. The class was hardest hit by the pandemic as shoppers opted for takeout or supply from extra informal eating places and stopped going out for celebratory dinners. Lee advised analysts on the convention name that advantageous eating continues to be weaker in cities, with its three Manhattan areas down by 40%, however suburban markets have seen a surge of consumers.

As its eating enterprise bounces again from the well being disaster, Darden seems to be affected by the identical labor crunch as the remainder of the broader restaurant business. The corporate is accelerating its plans to hike wages. Beginning Jan. 1, Darden’s wage flooring will likely be $12 an hour, together with ideas. The corporate expects that employees will earn $20 an hour on common. This spring, it mentioned it could elevate its hourly minimal wage to $11 in January and $12 in January 2022.

“Now there might not be sufficient service employees on the workers of each restaurant in America, however there’s sufficient service employees on the market to workers Darden’s eating places, and that is what we’re targeted on,” Lee mentioned.

Executives mentioned that staffing is about 90% of pre-Covid ranges, though slimmer menus imply that its eating places do not want as many employees. The most important drag on staffing is Covid-19, which has led to employees calling out as a result of they’re sick or have been uncovered, in accordance with Lee.

Darden raised its fiscal 2022 forecast, anticipating greater gross sales and earnings than initially forecast. The corporate now expects whole gross sales of $9.55 billion to $9.7 billion, up from its prior outlook of $9.4 billion to $9.6 billion. Wall Avenue was anticipating web gross sales of $9.33 billion to $9.74 billion.

The corporate can be forecasting diluted web earnings per share from persevering with operations of $7.35 to $7.60, greater than final quarter’s prediction of $7.25 to $7.60. Analysts have been anticipating earnings per share within the vary of $7.39 to $8.04.