The restaurant chain, however, faces challenges from weak
customer traffic, particularly in Olive Garden, and the company’s plans on
driving this metric will be worth watching. Another cause of concern is higher
costs which are likely to pressure margins.
Darden has been investing in remodels and culinary
innovation at its Olive Garden and LongHorn divisions. The Brand Renaissance plan
and To Go business are expected to drive momentum at Olive Garden while the menu
innovation could help in driving comp sales growth at LongHorn.
In the fourth quarter of 2019, Darden beat earnings estimates while sales fell short of forecasts. Sales grew 4.5% to $2.23 billion while adjusted EPS jumped 27% to $1.76. Blended same-restaurant sales rose 1.6%.
Also see: Darden Q4 2019 Earnings Conference Call Transcript
For fiscal-year 2020, Darden expects total sales
growth of 5.3-6.3%, including approx. 2% growth related to the 53rd week. Same-restaurant sales is
expected to grow 1-2%. Diluted EPS from continuing operations is expected to be
$6.30-6.45.
Shares of Darden have gained 29% so far this year and 10% in the past one month. The stock has an average price target of $127.92.