Darden Apparently No Victim of Casual Dining Woes (DRI)

Darden Restaurants, Inc. (NYSE: DRI) is seeing shares surge Monday in early trading activity after the company gave an updated guidance to its quarter.  While Darden expects its EPS growth to be adversely affected by its acquisition of RARE Hospitality International, Inc, it offered dilued EPS guidance after the purchase of $0.78 to $0.80, compared to $0.83 to $0.85 without the acquisition.  Earnings estimates for the quarter are $0.77 EPS.

The company expects combined U.S. same-restaurant sales growth for fiscal May-2008 to be 2% to 3%. Without the acquisition, growth would be over 7%, demonstrating that “guests continue to show their loyalty to Darden brands,” according to Chairman and CEO Clarence Otis.

The company is still maintaining a 2% to 4% EPS growth for fiscal May-2008, which is consistent with guidance given in December 2007.  Darden owns and operates roughly 1,700 casual dining restaurants including Red Lobster, Olive Garden, and LongHorn Steakhouse.  This is substantial when you consider all of the concerns about casual dining and tightening consumer spending.  Maybe everyone determined how bad of a job they do cooking their own food new after a few short weeks.

Darden’s third quarter earnings will be released Tuesday, March 10, after market close.  Shares are up more than 8% to $29.19 in early trading.  Its 52-week trading range is $20.89 to $47.60, so it hasn’t even recovered half of its share losses from highs over the last year.

Jon C. Ogg
February 11, 2008