Investopedia: Can Darden Go 3 For 3?

Not many companies do one thing very well, and precious few manage to do two things well. So maybe it is a little bit greedy to look for Darden Restaurants (NYSE:DRI) to develop a third restaurant chain to match the performance of Olive Garden and Red Lobster. Still, greedy though it may be, Wall Street has a hard core addiction to growth and Darden is going to need to find some new lever of performance, be it a third leading concept or global expansion, or risk never seeing full fair value on the shares. 


A Solid End to the Year
Darden did not post any major surprises for the fiscal fourth quarter. Sales rose a bit less than 7%, with same-store growth of just over 2% in its core restaurant group. Longhorn Steakhouse led the way with 6%, Red Lobster posted almost 4% same-store growth due in part to a promotion, and Olive Garden was a disappointment with flat same-store performance. Darden also reported better than 5% same-store growth from its specialty group (which includes Capital Grille, Bahama Breeze and Seasons 52).

Even though there is rampant talk everywhere about food cost inflation, Darden managed to maintain pretty healthy margins. Gross margin ticked up about 40 basis points, while adjusted operating income rose more 18% and operating margin increased by 60 basis points. 



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