Image: Bigstock

Darden Restaurants, Inc. (DRI Quick Quote DRI - Free Report) reported third-quarter fiscal 2021 results, wherein both earnings and revenues surpassed the Zacks Consensus Estimate. The bottom line beat the consensus mark for the ninth straight quarter, while the top line outpaced the same after missing in the preceding three quarters. However, both the metrics declined on a year-over-year basis. Following the results, the company’s shares are up 5.2% in a pre-market trading session.

During the fiscal third quarter, the company reported adjusted earnings of 98 cents per share, beating the Zacks Consensus Estimate for earnings of 72 cents. In the prior-year quarter, the company had reported adjusted earnings per share of $1.90.

Total sales during the quarter amounted to $1,733 million, beating the consensus mark of $1,625 million. However, sales declined 26.1% from the prior-year quarter on account of negative blended same-restaurant sales of 26.7%. The decline was partially mitigated by the opening of 10 net new restaurants.

Darden Restaurants, Inc. Price, Consensus and EPS Surprise

Darden Restaurants, Inc. price-consensus-eps-surprise-chart | Darden Restaurants, Inc. Quote

Sales by Segments

Darden reports business under four segments — Olive Garden, LongHorn Steakhouse, Fine Dining that includes The Capital Grille and Eddie V's, and Other Business.

Sales at Olive Garden decreased 25.4% year over year to $872 million. Comps slumped 25.8% at the segment compared with the prior quarter's comp decline of 19.9%.

Sales at Fine Dining plunged 44.6% to $104.4 million. Comps fell 45.2% at the segment, compared with a decline of 31% in second-quarter fiscal 2021.

Sales at Other Business decreased 36.8% year over year to $302.3 million. Moreover, comps Other Business fell 36.9%, compared with a decline of 28.6% in the prior quarter.

At LongHorn Steakhouse, sales were down 11% year over year to $454.3 million. Comps at the segment decreased 12.6%, compared with comps decline of 11.1% in the previous quarter.

Other Business Updates

For the week ended Feb 28, Mar 7, Mar 14, and Mar 21, comps at Darden declined 15.9%, 13.9%, 11.1%, and up 5.4%, respectively.

Meanwhile, comps at Olive Garden for the week ended Feb 28, Mar 7, Mar 14, and Mar 21 were down 17.4%, 15.3%, 11.6%, and up 5.7%, respectively. Moreover, comps at LongHorn Steakhouse were down 3.4% and up 0.3%, 18.5%, 3.8%, and 23.2%, for the week ended Feb 28, Mar 7, Mar 14, and Mar 21, respectively.

Operating Highlights & Net Income

In the fiscal third quarter, total operating costs and expenses decreased 23.4% year over year to $1,535.8 million. The decline was due to an overall decrease in food and beverage costs, restaurant expenses, and labor costs.

Balance Sheet

As of Feb 28, 2021, cash and cash equivalents were $993.9 million compared with $763.3 million as of May 31, 2020.

Inventories during the fiscal third quarter totaled $188.2 million. Long-term debt as of Feb 28, 2020, was $929.7 million, up from $928.8 million as of May 31, 2020.

The company declared a quarterly cash dividend of 88 cents per share, payable on May 3, 2021, to shareholders of record as of Apr 9, 2021. Moreover, Darden’s board of director said that the company may repurchase up to $500 million of its outstanding common stock.

Q4 Guidance

The company expects total sales of nearly $2.1 billion. EBITDA is anticipated in the range of $345 million to $360 million. Earnings per share from continuing operations are anticipated to be $1.60-$1.70. The Zacks Consensus Estimate for the fourth quarter is currently pegged at $1.27.

The company expects to open 33 net new restaurants and projects total capital spending in the band of $285 million to $295 million in fiscal 2021.

Zacks Rank & Key Picks

Darden, which shares space with Brinker International, Inc. (EAT Quick Quote EAT - Free Report), carries a Zacks Rank #3 (Hold). Some better-ranked stocks that warrant a look in the same space include Jack in the Box Inc. (JACK Quick Quote JACK - Free Report) and Chuy's Holdings, Inc. (CHUY Quick Quote CHUY - Free Report), both carrying a Zacks Rank #2 (Buy). 

Jack in the Box has an impressive long-term earnings growth rate of 17%.

Chuy's Holdings has beat estimates in each of the trailing four quarters, with an average being 126.5%.