Darden Restaurants Q1 Sales Rise 1.5% to $2.1B

Ticker: DRI · Form: 10-Q · Filed: 2024-09-27T00:00:00.000Z

Sentiment: neutral

Topics: earnings, restaurants, sales-growth

TL;DR

Darden sales up 1.5% to $2.1B in Q1, LongHorn Steakhouse leads growth.

AI Summary

Darden Restaurants Inc. reported its first quarter results for the fiscal year ending August 25, 2024. The company's total sales for the quarter were $2.1 billion, a 1.5% increase compared to the same period last year. This growth was driven by a 1.7% increase in total sales for its LongHorn Steakhouse brand, which reached $777.4 million.

Why It Matters

This report provides insight into the performance of a major casual dining operator, reflecting consumer spending trends in the restaurant industry.

Risk Assessment

Risk Level: low — The filing is a routine quarterly report with no immediate red flags or significant negative developments.

Key Numbers

Key Players & Entities

FAQ

What were Darden Restaurants' total sales for the first quarter of fiscal year 2025?

Darden Restaurants' total sales for the first quarter ending August 25, 2024, were $2.1 billion.

How did Darden's total sales compare to the same period last year?

Total sales increased by 1.5% compared to the first quarter of the prior fiscal year.

Which brand was a significant contributor to Darden's sales growth?

LongHorn Steakhouse contributed to sales growth with a 1.7% increase in total sales.

What were the sales for LongHorn Steakhouse in the first quarter?

LongHorn Steakhouse reported total sales of $777.4 million for the first quarter.

What is Darden Restaurants' fiscal year end?

Darden Restaurants' fiscal year ends on May 25th.

Filing Stats: 4,645 words · 19 min read · ~15 pages · Grade level 7.6 · Accepted 2024-09-27 16:07:37

Filing Documents

- Financial Information

Part I - Financial Information

Financial Statements (Unaudited)

Item 1. Financial Statements (Unaudited) 4 Consolidated Statements of Earnings 4 Consolidated Statements of Comprehensive Income 5 Consolidated Balance Sheets 6 Consolidated Statements of Changes in Stockholders' Equity 7 Consolidated Statements of Cash Flows 8

Notes to Consolidated Financial Statements

Notes to Consolidated Financial Statements 10

Management's Discussion and Analysis of Financial Condition and Results of Operations

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 22

Quantitative and Qualitative Disclosures About Market Risk

Item 3. Quantitative and Qualitative Disclosures About Market Risk 29

Controls and Procedures

Item 4. Controls and Procedures 30

- Other Information

Part II - Other Information

Legal Proceedings

Item 1. Legal Proceedings 31

Risk Factors

Item 1A. Risk Factors 31

Unregistered Sales of Equity Securities and Use of Proceeds

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 31

Other Information

Item 5. Other Information 31

Exhibits

Item 6. Exhibits 32 Signature 33 2 Table of Contents Cautionary Statement Regarding Forward-Looking Statements Statements set forth in or incorporated into this report that are not historical facts, including without limitation statements with respect to the financial condition, results of operations, plans, objectives, future performance and business of Darden Restaurants, Inc. and its subsidiaries that are preceded by, followed by or that include words such as "may," "will," "expect," "intend," "anticipate," "continue," "estimate," "project," "believe," "plan", "outlook" or similar expressions, are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. This statement is included for purposes of complying with the safe harbor provisions of that Act. Any forward-looking statements speak only as of the date on which such statements are made, and we undertake no obligation to update such statements for any reason to reflect events or circumstances arising after such date. By their nature, forward-looking statements involve risks and uncertainties that could cause actual results to differ materially from those set forth in or implied by such forward-looking statements. The most significant of these uncertainties are described in Darden's Form 10-K, Form 10-Q (including this report) and Form 8-K reports. 3 Table of Contents PART I FINANCIAL INFORMATION

Financial Statements (Unaudited)

Item 1. Financial Statements (Unaudited) DARDEN RESTAURANTS, INC. CONSOLIDATED STATEMENTS OF EARNINGS (In millions, except per share data) (Unaudited) Three Months Ended August 25, 2024 August 27, 2023 Sales $ 2,757.0 $ 2,730.6 Costs and expenses: Food and beverage 846.7 851.0 Restaurant labor 889.3 875.3 Restaurant expenses 458.2 446.6 Marketing expenses 44.7 38.6 General and administrative expenses 126.4 153.3 Depreciation and amortization 121.5 109.8 Impairments and disposal of assets, net 1.0 3.1 Total operating costs and expenses $ 2,487.8 $ 2,477.7 Operating income 269.2 252.9 Interest, net 37.1 29.7 Earnings before income taxes 232.1 223.2 Income tax expense 24.5 28.4 Earnings from continuing operations $ 207.6 $ 194.8 Losses from discontinued operations, net of tax benefit of $ 0.4 and $ 0.1 , respectively ( 0.4 ) ( 0.3 ) Net earnings $ 207.2 $ 194.5 Basic net earnings per share: Earnings from continuing operations $ 1.75 $ 1.61 Losses from discontinued operations — — Net earnings $ 1.75 $ 1.61 Diluted net earnings per share: Earnings from continuing operations $ 1.74 $ 1.60 Losses from discontinued operations — ( 0.01 ) Net earnings $ 1.74 $ 1.59 Average number of common shares outstanding: Basic 118.5 120.9 Diluted 119.2 122.0 See accompanying notes to our unaudited consolidated financial statements. 4 Table of Contents DARDEN RESTAURANTS, INC. CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (In millions) (Unaudited) Three Months Ended August 25, 2024 August 27, 2023 Net earnings $ 207.2 $ 194.5 Change in fair value of derivatives and amortization of unrecognized gains and losses on derivatives, net of taxes of $ 0.5 and $ 5.4 , respectively 0.2 12.6 Net unamortized gain (loss) arising during the period, including amortization of unrecognized net actuarial gain (loss), net of taxes of $ 0.1 and $ 0.0 , respectively, related to pension and other post-employment benefits 0.1 0.2 Other comprehe

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) Note 1. Basis of Presentation Darden Restaurants, Inc. (we, our, Darden or the Company) owns and operates full-service dining restaurants in the United States and Canada under the trade names Olive Garden , LongHorn Steakhouse , Cheddar's Scratch Kitchen , Yard House , Ruth's Chris Steak House (Ruth's Chris), The Capital Grille , Seasons 52 , Bahama Breeze , Eddie V's Prime Seafood (Eddie V's) and The Capital Burger . As of August 25, 2024, through subsidiaries, we own and operate all of our restaurants in the United States and Canada, except for 2 joint venture restaurants managed by us, 4 managed locations operating under contractual agreements and 91 franchised restaurants. We also have 58 franchised restaurants in operation located in Latin America, the Caribbean, Asia, and the Middle East. On July 17, 2024, we entered into an agreement to acquire all of the outstanding shares of Chuy's Holdings, Inc. (Chuy's Holdings), a Delaware corporation, for $ 37.50 per share in an all-cash transaction with an enterprise value of approximately $ 605 million. The transaction has been approved by our Board of Directors and is subject to the satisfaction of customary conditions, including, among others, the approval of Chuy's Holdings shareholders. The acquisition is expected to be completed in the second quarter of fiscal 2025 and we expect to fund the purchase price through the issuance of debt. We have prepared these consolidated financial statements pursuant to the rules and regulations of the Securities and Exchange Commission (SEC). Certain information and footnote disclosures normally presented in annual financial statements prepared in accordance with U.S. generally accepted accounting principles (GAAP) have been condensed or omitted pursuant to such rules and regulations. In the opinion of management, all adjustments considered necessary for a fair presentation have been included and are of a normal recurri

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) SEC issued a voluntary stay on its final rules pending multiple legal challenges. The Company is currently evaluating the impact of these new rules. Note 2. Revenue Recognition Deferred revenue liabilities from contracts with customers included on our accompanying consolidated balance sheets was comprised of the following: (in millions) August 25, 2024 May 26, 2024 Unearned revenues Deferred gift card revenue $ 579.5 $ 620.6 Deferred gift card discounts ( 25.5 ) ( 29.5 ) Other 0.7 0.7 Total $ 554.7 $ 591.8 Other liabilities Deferred franchise fees - non-current $ 4.9 $ 4.9 The following table presents a rollforward of deferred gift card revenue. Three Months Ended (in millions) August 25, 2024 August 27, 2023 Beginning balance $ 620.6 $ 537.0 Acquired deferred gift card revenue — 61.8 Activations 122.4 130.1 Redemptions and breakage ( 163.5 ) ( 165.5 ) Ending balance $ 579.5 $ 563.4 11 Table of Contents DARDEN RESTAURANTS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) Note 3. Additional Financial Information Supplemental Balance Sheet Information The components of lease assets and liabilities on the consolidated balance sheet were as follows: (in millions) Balance Sheet Classification August 25, 2024 May 26, 2024 Operating lease right-of-use assets Operating lease right-of-use assets $ 3,365.5 $ 3,429.3 Finance lease right-of-use assets Land, buildings and equipment, net 1,160.1 1,106.3 Total lease assets, net $ 4,525.6 $ 4,535.6 Operating lease liabilities - current Other current liabilities $ 200.6 $ 198.8 Finance lease liabilities - current Other current liabilities 16.2 15.3 Operating lease liabilities - non-current Operating lease liabilities - non-current 3,636.8 3,704.7 Finance lease liabilities - non-current Other liabilities 1,423.9 1,357.1 Total lease liabilities $ 5,277.5 $ 5,275.9 Supplemental Cash Flow Information Cash paid for interest and income taxes were as follows: Three Months Ended (in millions) August 25, 2024 August 27, 2023 Interest, net of amounts capitalized $ 36.3 $ 34.3 Income taxes, net of refunds 4.6 2.0 Non-cash investing and financing activities were as follows: Three Months Ended (in millions) August 25, 2024 August 27, 2023 Increase in land, buildings and equipment through accrued purchases $ 33.8 $ 64.0 Right-of-use assets obtained in exchange for new operating lease liabilities (1) 7.1 298.0 Right-of-use assets obtained in exchange for new finance lease liabilities 35.8 45.3 Net change in right-of-use assets mainly due to lease modifications resulting in reclassification of leases from operating to finance 19.9 2.1 (1) Right-of-use assets obtained in fiscal 2024 includes $ 291.6 million from the acquisition of Ruth's Chris. We had restricted cash of $ 24.4 million as of August 25, 2024 and $ 25.3 million as of May 26, 2024, which represents cash held as security for a standby letter of credit. Restricted ca

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) Note 5. Net Earnings per Share Outstanding stock options, restricted stock and equity-settled performance stock units granted by us represent the only dilutive effect reflected in diluted weighted average shares outstanding, none of which impact the numerator of the diluted net earnings per share computation. Stock options, restricted stock and equity-settled performance stock units excluded from the calculation of diluted net earnings per share because the effect would have been anti-dilutive, were as follows: Three Months Ended (in millions) August 25, 2024 August 27, 2023 Anti-dilutive stock-based compensation awards 0.3 — Note 6. Segment Information We manage our restaurant brands, Olive Garden, LongHorn Steakhouse, Cheddar's Scratch Kitchen, Yard House, Ruth's Chris, The Capital Grille, Seasons 52, Bahama Breeze, Eddie V's, and The Capital Burger in North America as operating segments. The brands operate principally in the U.S. within full-service dining. We aggregate our operating segments into reportable segments based on a combination of the size, economic characteristics and sub-segment of full-service dining within which each brand operates. We have four reportable segments: (1) Olive Garden, (2) LongHorn Steakhouse, (3) Fine Dining and (4) Other Business. The Olive Garden segment includes the results of our company-owned Olive Garden restaurants in the U.S. and Canada. The LongHorn Steakhouse segment includes the results of our company-owned LongHorn Steakhouse restaurants in the U.S. The Fine Dining segment aggregates our premium brands that operate within the fine-dining sub-segment of full-service dining and includes the results of our company-owned Ruth's Chris, The Capital Grille and Eddie V's restaurants in the U.S. The Other Business segment aggregates our remaining brands and includes the results of our company-owned Cheddar's Scratch Kitchen, Yard House, Seasons 52, Bahama Breeze

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) The following tables reconcile our segment results to our consolidated results reported in accordance with GAAP. (in millions) Olive Garden LongHorn Steakhouse Fine Dining Other Business Corporate Consolidated For the three months ended August 25, 2024 Sales $ 1,209.1 $ 713.5 $ 278.9 $ 555.5 $ — $ 2,757.0 Restaurant and marketing expenses 960.1 585.9 241.3 471.8 ( 20.2 ) 2,238.9 Segment profit $ 249.0 $ 127.6 $ 37.6 $ 83.7 $ 20.2 $ 518.1 Depreciation and amortization $ 45.3 $ 20.3 $ 16.8 $ 25.7 $ 13.4 $ 121.5 Impairments and disposal of assets, net — — — — 1.0 1.0 Purchases of land, buildings and equipment 55.7 36.0 26.6 27.0 ( 0.1 ) 145.2 (in millions) Olive Garden LongHorn Steakhouse Fine Dining 1 Other Business Corporate Consolidated For the three months ended August 27, 2023 Sales $ 1,227.9 $ 669.8 $ 273.5 $ 559.4 $ — $ 2,730.6 Restaurant and marketing expenses 965.6 552.4 233.8 475.1 ( 15.4 ) 2,211.5 Segment profit $ 262.3 $ 117.4 $ 39.7 $ 84.3 $ 15.4 $ 519.1 Depreciation and amortization $ 39.6 $ 18.2 $ 15.6 $ 25.1 $ 11.3 $ 109.8 Impairments and disposal of assets, net 0.2 — — — 2.9 3.1 Purchases of land, buildings and equipment 65.8 34.5 23.5 26.6 0.5 150.9 1 Includes Ruth's Chris results from the date of acquisition (June 14, 2023) forward. A reconciliation of segment profit to earnings from continuing operations before income taxes is below. Three Months Ended (in millions) August 25, 2024 August 27, 2023 Segment profit $ 518.1 $ 519.1 Less general and administrative expenses ( 126.4 ) ( 153.3 ) Less depreciation and amortization ( 121.5 ) ( 109.8 ) Less impairments and disposal of assets, net ( 1.0 ) ( 3.1 ) Less interest, net ( 37.1 ) ( 29.7 ) Earnings before income taxes $ 232.1 $ 223.2 14 Table of Contents DARDEN RESTAURANTS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) Note 7. Impairments and Disposal of Assets, Net Impairments and disposal of assets, net, in our accompanying consolidated statements of earnings were comprised of the following: Three Months Ended (in millions) August 25, 2024 August 27, 2023 Restaurant impairments $ — $ 0.3 Disposal (gains) losses 0.1 4.9 Other 0.9 ( 2.1 ) Impairments and disposal of assets, net $ 1.0 $ 3.1 Disposal (gains) losses for the quarter ended August 25, 2024 were related to previously impaired locations. Restaurant impairments and disposal (gains) losses for the quarter ended August 27, 2023 were related to the decision to close four locations. Other impacts for the quarter ended August 25, 2024 were related to right-of-use asset adjustments on early lease terminations and product loss from a facility fire in our distribution network. Other impacts for the quarter ended August 27, 2023 were related to right-of-use asset adjustments on early lease terminations. Note 8. Stockholders' Equity Accumulated Other Comprehensive Income (AOCI) The components of AOCI, net of tax, for the quarter ended August 25, 2024 were as follows: (in millions) Foreign Currency Translation Adjustment Unrealized Gains (Losses) on Derivatives Benefit Plan Funding Position Accumulated Other Comprehensive Income Balance at May 26, 2024 $ 4.6 $ 24.5 $ ( 3.5 ) $ 25.6 Gain (loss) — 0.4 — 0.4 Reclassification realized in net earnings — ( 0.2 ) 0.1 ( 0.1 ) Balance at August 25, 2024 $ 4.6 $ 24.7 $ ( 3.4 ) $ 25.9 The components of AOCI, net of tax, for the quarter ended August 27, 2023 were as follows: (in millions) Foreign Currency Translation Adjustment Unrealized Gains (Losses) on Derivatives Benefit Plan Funding Position Accumulated Other Comprehensive Income Balances at May 28, 2023 $ 4.5 $ 3.9 $ ( 5.2 ) $ 3.2 Gain (loss) — 12.5 — 12.5 Reclassification realized in net earnings — 0.1 0.2 0.3 Balance at August 27 2023 $ 4.5 $ 16.5 $

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