Global Technology Report

Darden swings back to Q2 profitability on higher sales at Olive Garden, LongHorn

Darden Restaurants, which operates Olive Garden and LongHorn Steakhouse, said Friday its fiscal second quarter net income totaled $43.2 million, swinging back to profitability from a year ago as sales rose and operating costs were cut. Per-share earnings from continuing operations, after adjusting for some items, totaled 54 cents, beating 42 cents estimated by analysts. In the year-ago period, Darden reported $32.8 million of loss.

Total revenue for the three-month period ended Nov. 29 jumped 3.2% to $1.61 billion, with same-stores sales ticking up 1.6%. Darden also raised its estimate for fiscal 2016 same-store sales to a range of 2.5% to 3% increase and adjusted per-share net earnings to $3.25 to $3.35. Shares of the Orlando-based company rose 3.2% in pre-market trading to $60.25. Casual-dining restaurants have been forced to come up with new strategies to remain relevant among younger customers as cheaper options — such as Chipotle and Panera Bread — gain more market share.

In 2014, Darden began restructuring its operations to stem falling sales and slowing customer traffic. It sold its Red Lobster casual dining chain and related real estate assets for $2.1 billion last year to pay off some debt and focus on its more popular brands — Olive Garden and LongHorn. Darden also replaced its CEO last year after some investors called for his resignation and sweeping changes in operations. “We saw continued momentum this quarter, with all our brands once again posting positive same-restaurant sales growth and delivering meaningful margin improvement,” said CEO Gene Lee, who assumed the company’s top job permanently February after replacing his predecessor, Clarence Otis, on an interim basis. “These results reflect our continuous focus on operating great restaurants and leveraging our competitive advantages to drive sales and profitability.”

LongHorn was the growth driver during the quarter. Sales of the steakhouse chain rose 5.6% to $365.1 million during the quarter. Olive Garden, Darden’s largest chain with more than 800 locations, reported a 1.2% sales increase to $892.3 million. Darden, which also operates Bahama Breeze, Seasons 52, The Capital Grille, Eddie V’s and Yard House, said sales of its “fine dining” unit were 2.4% higher to $123.3 million.

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