Darden (NYSE:DRI) Reports Sales Below Analyst Estimates In Q1 Earnings

Radek Strnad /
2024/03/21 7:06 am EDT

Restaurant company Darden (NYSE:DRI) fell short of analysts' expectations in Q1 CY2024, with revenue up 6.8% year on year to $2.97 billion. The company's full-year revenue guidance of $11.4 billion at the midpoint also came in slightly below analysts' estimates. It made a non-GAAP profit of $2.62 per share, improving from its profit of $2.34 per share in the same quarter last year.

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Darden (DRI) Q1 CY2024 Highlights:

  • Revenue: $2.97 billion vs analyst estimates of $3.03 billion (1.7% miss)
  • EPS (non-GAAP): $2.62 vs analyst expectations of $2.62 (small miss)
  • The company dropped its revenue guidance for the full year from $11.5 billion to $11.4 billion at the midpoint, a 0.9% decrease
  • EPS guidance for the full year of $8.85 at the midpoint slightly below current expectations of $8.86
  • Gross Margin (GAAP): 21.7%, up from 21% in the same quarter last year
  • Free Cash Flow of $420.1 million, up 134% from the previous quarter
  • Same-Store Sales were down 1% year on year (miss vs. expectations of up 1% year on year)
  • Store Locations: 2,022 at quarter end, increasing by 132 over the last 12 months
  • Market Capitalization: $20.85 billion

"I am proud of our teams and the way they performed this quarter," 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 5.9% over the last five years was weak , 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 $2.97 billion, missing Wall Street's expectations. Looking ahead, Wall Street expects sales to grow 6.9% over the next 12 months, an acceleration from this quarter.

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Same-Store Sales

Same-store sales growth is a key performance indicator used to measure organic growth and demand for restaurants.

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 5.7% 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 11.7% 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 Q1 Results

Darden's revenue unfortunately missed analysts' expectations and its full-year revenue guidance was lowered and slightly missed Wall Street's estimates. EPS guidance was also slightly below. Overall, this was a mediocre quarter for Darden. The company is down 4.9% on the results and currently trades at $166 per share.

Darden may have had a tough quarter, but does that actually create an opportunity to invest 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.