Darden (NYSE:DRI) Posts Q2 Sales In Line With Estimates

Kayode Omotosho /
2024/06/20 7:06 am EDT

Restaurant company Darden (NYSE:DRI) reported results in line with analysts' expectations in Q2 CY2024, with revenue up 6.8% year on year to $2.96 billion. On the other hand, the company's full-year revenue guidance of $11.85 billion at the midpoint came in slightly below analysts' estimates. Its GAAP profit of $2.57 per share was flat year on year.

Is now the time to buy Darden? Find out by accessing our full research report, it's free.

Darden (DRI) Q2 CY2024 Highlights:

  • Revenue: $2.96 billion vs analyst estimates of $2.97 billion (small miss)
  • EPS: $2.57 vs analyst expectations of $2.60 (1.3% miss)
  • Management's revenue guidance for the upcoming financial year 2025 is $11.85 billion at the midpoint, missing analyst estimates by 0.8% and implying 4% growth (vs 8.7% in FY2024)
  • Gross Margin (GAAP): 22.2%, up from 21.8% in the same quarter last year
  • Free Cash Flow of $302.9 million, down 30.7% from the previous quarter
  • Locations: 2,031 at quarter end, up from 1,914 in the same quarter last year
  • Same-Store Sales were flat year on year
  • (4% in the same quarter last year)
  • Market Capitalization: $18.14 billion

"We had a strong year by staying disciplined, being brilliant with the basics, and controlling what we could control," said Darden President & CEO Rick Cardenas.

Started in 1968 as the famous seafood joint, Red Lobster, Darden (NYSE:DRI) is a leading American restaurant company that owns and operates a portfolio of popular restaurant brands.

Sit-Down Dining

Sit-down restaurants offer a complete dining experience with table service. These establishments span various cuisines and are renowned for their warm hospitality and welcoming ambiance, making them perfect for family gatherings, special occasions, or simply unwinding. Their extensive menus range from appetizers to indulgent desserts and wines and cocktails. This space is extremely fragmented and competition includes everything from publicly-traded companies owning multiple chains to single-location mom-and-pop restaurants.

Sales Growth

Darden is one of the most widely recognized restaurant chains in the world and benefits from brand equity, giving it customer loyalty and more influence over purchasing decisions.

As you can see below, the company's annualized revenue growth rate of 6% over the last five years was mediocre , but to its credit, it opened new restaurants and grew sales at existing, established dining locations.

Darden Total Revenue

This quarter, Darden's revenue grew 6.8% year on year to $2.96 billion, missing Wall Street's expectations. Looking ahead, Wall Street expects sales to grow 4.7% over the next 12 months, a deceleration from this quarter.

Here at StockStory, we certainly understand the potential of thematic investing. Diverse winners from Microsoft (MSFT) to Alphabet (GOOG), Coca-Cola (KO) to Monster Beverage (MNST) could all have been identified as promising growth stories with a megatrend driving the growth. So, in that spirit, we’ve identified a relatively under-the-radar profitable growth stock benefitting from the rise of AI, available to you FREE via this link.

Same-Store Sales

Same-store sales growth is an important metric that tracks organic growth and demand for a restaurant's established locations.

Darden's demand within its existing restaurants has generally risen over the last two years but lagged behind the broader sector. On average, the company's same-store sales have grown by 4.3% year on year. With positive same-store sales growth amid an increasing number of restaurants, Darden is reaching more diners and growing sales.

Darden Year On Year Same Store Sales Growth

In the latest quarter, Darden's year on year same-store sales were flat. By the company's standards, this growth was a meaningful deceleration from the 4% year-on-year increase it posted 12 months ago. We'll be watching Darden closely to see if it can reaccelerate growth.

Key Takeaways from Darden's Q2 Results

It was good to see Darden beat analysts' gross margin expectations this quarter. On the other hand, its revenue and EPS missed and its full-year revenue and EPS guidance fell short of Wall Street's estimates. Overall, this was a bad quarter for Darden. The stock is up 1% after reporting and currently trades at $153.64 per share.

So should you invest in Darden right now? When making that decision, it's important to consider its valuation, business qualities, as well as what has happened in the latest quarter. We cover that in our actionable full research report which you can read here, it's free.