Darden Restaurants (NYSE:DRI) saw its shares dip in morning trading as its first quarter profits slipped 6% on higher commodity costs, as well as weak business at its Olive Garden brand, and the negative effects of Hurricane
Irene.
For the three months ended August 28, the restaurant company posted net income of $106.6 million, or $0.78 per share, down 5.7% from $113.1 million, or $0.80 per share, a year ago. Darden said Hurricane Irene impacted profits by $0.02 per share
Revenues, however, increased to $1.94 billion, up 7.5% from $1.81 billion in the same period last year, on a total comparable store sales growth of 2.8%.
Analysts had expected 78 cents in earnings, on a per share basis, and $1.9 billion in sales.
CEO Clarence Otis said: "As we previously announced, strong sales growth this quarter at Red Lobster, LongHorn Steakhouse and our Specialty Restaurant Group was offset by below expectation sales results at Olive Garden, unfavorable year-over-year commodity costs and the adverse impact of Hurricane Irene."
Indeed, results at Olive Garden were less-than-stellar, as same-store sales, or those locations open at least one year, decreased 2.9%. Sales rose 0.8% to $884 million, driven by the addition of 30 net new restaurants.
Sales at red Lobster rose 12.3% to $674 million, with same store sales hiking 10.7%. Comparable sales at Longhorn Steakhouse rose 4.8%, driving the 12.1% increase in sales to $253 million.
Meanwhile, the Specialty Restaurant Group posted total sales of $129 million, up 20.7%, as same store sales at The Capital Grille increased 7.0%, increased 2.9% at Bahama Breeze, and improved 2.5% at Seasons 52.
Still, Darden shares shed nearly 5% in morning trading, before dropping 5.43% as of 10:17 am EDT, on news of the
company's lowered earnings expectations for the full year.
Darden said it now expects its earnings on a per share basis to be in the low end of its 12% to 15% growth guidance, which represents a range of $3.82 to $3.92. The company had originally anticipated profits in the high end of the outlook.
However, the restaurateur increased its comparable sales forecast, now expecting growth of 3%, from its original 2.5% estimate. It also boosted its sales guidance to a growth range of 6.5% to 7.5%, or between $7.99 billion and $8.06 billion, from its original growth estimate of 6% to 7%.
In other news, Darden also reported that its board of directors declared a 43-cent per share quarterly cash dividend, payable on November 1. The company also repurchased 1.9 million shares during the quarter, as part of its buyback program. There remain 22.8 million shares in the repurchase authorization.
In New York, the Orlando, Florida-based company's shares traded at $44.43 as of 10:17 am EDT.