Anticipating Darden Restaurants’ Q1 Earnings Report: What to Look For | AlphaStreet

Darden Restaurants, Inc. (NYSE: DRI) is scheduled to release its first-quarter report on September 19, with analysts forecasting a year-over-year increase in sales and profit. The market will be keeping a close watch on the event, considering the decline in discretionary income for customers due to elevated inflation.

After a positive start to 2024, Darden’s shares entered a rough patch that continued until last month. The stock is trading almost flat ahead of the earnings, after recovering from the slump a few weeks ago. DRI is down about 10% since hitting an all-time high in March. Regular dividend hikes and the relatively high yield make it an attractive investment option, especially for income investors.

Q1 Report Due

The Orlando-headquartered restaurant chain is preparing to publish its first-quarter numbers on Thursday, September 19, at 7:00 am ET. It is estimated that August-quarter earnings increased to $1.84 per share, on an adjusted basis, from $1.78 per share in the year-ago quarter. The consensus sales forecast is $2.81 billion, compared to $2.73 billion in Q1 2024.

During a recent interaction with analysts, Darden’s CEO Ricardo Cardenas said, “As we begin fiscal 2025, we remain focused on managing our business for the long term by executing our strategy that drives long – drives growth and long-term shareholder value. We have also taken steps to further position Darden and our brands for future growth and success through several leadership changes. We are fortunate to have a deep bench of talent, and these changes are designed to allow two of our most seasoned Presidents to devote more time to developing our newest brand presidents.”

In the final months of fiscal 2024, total sales increased 6.8% year-over-year to $2.95 billion while same-restaurant sales remained flat, with a 1.5% decrease in Olive Garder sales offsetting a 4% increase in LongHorn Steakhouse sales. Adjusted earnings from continuing operations increased 2.7% annually to $2.65 per share in Q4. Net income was $308.1 million or $2.57 per share, compared to $315.1 million, or $2.58 per share in the year-ago period. Both sales and earnings exceeded estimates, after missing in the previous quarter.

Updates

For fiscal 2025, the management forecasts total sales between $11.8 billion and 11.9 billion and sees same-restaurant sales growth of 1-2%. It is looking for full-year earnings from continuing operations of $9.40-9.60 per share. The guidance is important considering the inflation-related pressure of consumer spending. While the labor scenario has improved a lot, inflation is causing wages and raw material prices to go up, which together account for about two-thirds of Darden’s total costs.

Recently, the company signed an agreement to acquire Chuy’s, which owns and operates full-service restaurants, for about $605 million. The new business is expected to complement its portfolio of iconic brands including Yard House and Ruth’s Chris Steak House.

Darden’s stock is down 5% since the beginning of the year. The shares traded slightly lower during Tuesday’s session.