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DARDEN RESTAURANTS (DRI)
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Darden Restaurants, Inc. : Darden Net Down 37% on Weak Same-Restaurant Sales

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12/20/2012 | 01:56pm CEST

Darden Restaurants Inc.'s (DRI) fiscal second-quarter profit fell 37% as same-restaurant sales at all three of the restaurant operator's major chains sank, led by Olive Garden's decline.

Darden, whose primary chains include Olive Garden, Red Lobster and LongHorn Steakhouse, earlier this month lowered its sales growth expectations for the year due to worse-than-expected second-quarter results.

The company began stumbling coming out of the recession, when its rivals offered deep discounts to attract attention, while it refrained from similar promotions to avoid hurting profit margins. In late 2010, Darden said it would shift its strategy--focusing more on low prices rather than the quality of its food in advertisements. But two years later, Darden is still struggling to find the right balance.

Meanwhile, Darden is turning to its specialty-restaurant group, which includes higher-end chains such as Capital Grille and Bahama Breeze, to help it expand. The company built up that business in August with its $585 million purchase of Yard House USA Inc., a pub-style chain with about 40 locations.

For the period ended Nov. 25, Darden reported a profit of $33.6 million, or 26 cents a share, down from $53.7 million, or 40 cents a share, a year earlier. Acquisition-related costs for Yard House hurt the bottom-line by about five cents. The company earlier this month had forecast 25 cents to 26 cents a share.

Sales rose 7% to $1.96 billion, just above predictions of $1.95 billion from analysts polled by Thomson Reuters.

By chain, same-restaurant sales fell 3.2% at Olive Garden--the company's biggest chain by revenue. At Red Lobster, same-restaurant sales were down 2.7%. LongHorn posted 0.8% lower same-restaurant sales.

Those three chains combined posted a same-restaurant sales decline of 2.7%.

Same-restaurant sales at the specialty restaurant segment grew 0.7%.

Shares of Darden, which affirmed its full-year guidance, closed Wednesday at $46.81 and were inactive premarket. The stock is up 2.7% this year.

Write to Ben Fox Rubin at [email protected]

Subscribe to WSJ: http://online.wsj.com?mod=djnwires

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Financials ($)
Sales 2018 8 072 M
EBIT 2018 775 M
Net income 2018 591 M
Debt 2018 796 M
Yield 2018 2,88%
P/E ratio 2018 18,66
P/E ratio 2019 16,19
EV / Sales 2018 1,45x
EV / Sales 2019 1,37x
Capitalization 10 879 M
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Darden Restaurants Technical Analysis Chart | DRI | US2371941053 | 4-Traders
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Mean consensus OUTPERFORM
Number of Analysts 26
Average target price 101 $
Spread / Average Target 15%
EPS Revisions
Managers
NameTitle
Eugene I. Lee President, Chief Executive Officer & Director
Charles M. Sonsteby Chairman
David C. George Chief Operating Officer & Executive Vice President
Ricardo Cardenas Chief Financial Officer & Senior Vice President
Chris Chang Chief Information Officer & Senior Vice President
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