Why Restaurant Operator Darden Shares Are Slipping Today

Darden Restaurants Inc DRI reported second-quarter FY24 sales growth of 9.7% year-on-year to $2.727 billion, missing the analyst consensus estimate of $2.741 billion.

The sales growth was driven by a blended same-restaurant sales increase of 2.8% and sales from the addition of 78 company-owned Ruth's Chris Steak House restaurants and 45 other net new restaurants.

Darden clocked an operating margin of 10.2%, and the operating income rose 19.4% Y/Y to $278.5 million. Adjusted EPS of $1.84 beat the consensus estimate of $1.74.

Darden generated an operating cash flow of $609.9 million for six months. It held $219.9 million in cash and equivalents as of November 26, 2023. Inventories at the end of Q2 were $310.6 million.

Darden's Board of Directors declared a quarterly cash dividend of $1.31 per share on the common stock, payable on February 1, 2024, to shareholders of record on January 10, 2023.

As of Q2-end, the company had approximately $328 million remaining under the current $1 billion repurchase authorization.

Outlook: Darden sees FY24 adjusted EPS from continuing operations of $8.75-$8.90 (estimate $8.81), excluding approximately $0.37, after-tax, of Ruth's Chris transaction and integration related costs.

The company previously expected adjusted EPS from continuing operations of $8.55-$8.85, including Ruth's Chris operating results, but excluding approximately $55 million, pre-tax, of expected transaction and integration related costs.

DRI sees FY24 revenue of $11.5 billion versus an estimate of $11.57 billion. While announcing its Q4 FY23 results, DRI expected FY24 total sales of $11.5 billion-$11.6 billion.

Price Action: DRI shares are trading lower by 1.7% at $160.30 in premarket on the last check Friday.

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