Darden Restaurants Reports 1.0% Sales Growth, 6.4% Operating Income Increase in Q3 2024

Darden Restaurants, Inc. reported a solid performance for the three months ended August 25, 2024, with consolidated sales reaching $2,757.0 million, a 1.0% increase from $2,730.6 million in the same period of the previous year. Total operating costs and expenses rose to $2,487.8 million, up 0.4% from $2,477.7 million. Operating income improved by 6.4% to $269.2 million, compared to $252.9 million in the prior year. Earnings before income taxes also increased to $232.1 million, up from $223.2 million, while net earnings rose to $207.2 million, a 6.5% increase from $194.5 million in the previous year.

The company’s diluted net earnings per share from continuing operations increased to $1.74, compared to $1.60 for the same period in 2023, reflecting an 8.8% rise. Darden's total comprehensive income for the quarter was $207.5 million, slightly up from $207.3 million in the prior year.

Segment performance varied, with Olive Garden sales declining by 1.5% to $1,209.1 million, while LongHorn Steakhouse saw a 6.5% increase to $713.5 million. The Fine Dining segment reported a 2.0% increase in sales to $278.9 million, while the Other Business segment experienced a slight decrease of 0.7% to $555.5 million.

Darden's total assets increased to $11,355.5 million as of August 25, 2024, from $11,323.0 million on May 26, 2024. However, total stockholders’ equity decreased to $2,143.7 million, down from $2,242.5 million, primarily due to a worsening retained earnings deficit, which increased to $(144.5) million from $(35.5) million.

In terms of strategic developments, Darden announced an agreement to acquire Chuy’s Holdings, Inc. for $37.50 per share, with an enterprise value of approximately $605 million, expected to close in the second quarter of fiscal 2025. This acquisition will be funded through debt issuance. The company also declared a cash dividend of $1.40 per share, totaling approximately $166.4 million.

Darden's cash flow from operating activities increased to $273.2 million, up from $269.1 million in the prior year, while cash used in investing activities significantly decreased to $(149.7) million from $(854.2) million, which included a substantial acquisition in the previous year. The company repurchased 1.2 million shares during the quarter, compared to 0.9 million shares in the same period last year, as part of its ongoing share repurchase program.