Darden Restaurants 2Q profit up, but narrows view

AP News
Posted: Dec 17, 2009 7:43 PM

Darden Restaurants Inc., operator of Red Lobster and Olive Garden restaurants, said Thursday its second-quarter profit edged up 1 percent to beat Wall Street expectations as lower taxes and interest payments offset a slight decline in sales.

But the company also narrowed its 2010 profit outlook, citing sales trends that have been "still a little more sluggish" than expected.

Darden shares fell 95 cents, or nearly 3 percent, to $31.80 in after-hours trading Thursday after closing at $32.75, down 61 cents from a day earlier.

In the quarter that ended Nov. 29, the company earned $60.3 million, or 43 cents per share, compared with $59.7 million, or 43 cents per share, a year ago. Per-share profit stayed flat because the average number of shares outstanding rose in the most recent quarter.

The profit result beat a 42-cent-per-share estimate of analysts polled by Thomson Reuters. Revenue fell 2 percent during the quarter to $1.64 billion from $1.67 billion, shy of analysts' $1.65 billion forecast.

Sales at restaurants open at least a year at Olive Garden, Red Lobster and LongHorn Steakhouse fell 4.7 percent during the quarter as consumers continued to eat out less amid unemployment and housing woes. Sales at stores open at least a year is a key measure of retailer performance because it is not skewed by new store openings and closings.

Quarterly sales at Olive Garden rose nearly 3 percent, helped by new restaurant openings, but Red Lobster's sales dropped almost 7 percent to $562 million. Sales also declined at the company's LongHorn, Capital Grille and Bahama Breezes chains.

Lower food and beverage expenses helped counteract the decreased sales.

The company said its 2010 profit will range from $2.65 to $2.76 per share, which implies flat results or growth of up to 4 percent year-over-year. In September, the company had forecast 2010 earnings in a range of $2.59 to $2.85 per share.

The midpoint of the new range falls below analysts' average $2.75-per-share projection.

Sales are expected to drop 2 percent to 3 percent from $7.22 billion in fiscal 2009, which would imply a range of $7 billion to $7.08 billion _ below analysts' $7.11 billion forecast.

Darden, based in Orlando, Fla., also said its board declared a quarterly dividend of 25 cents per share to be paid Feb. 1 to shareholders of record as of Jan. 8.