Darden’s EBIT Margin Is Expected to Rise in Fiscal 1Q18
Fiscal 1Q18 expectations
During fiscal 1Q18, analysts expect Darden Restaurants (DRI) to post EBIT (earnings before interest and tax) of $182.8 million, which represents EBIT margins of 9.5%. In 1Q17, the company’s EBIT margins stood at 9.4%.
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What lowered Darden’s EBIT margins?
The expansion in Darden’s EBIT margin is expected to be driven by sales leverage from positive SSSG (same-store sales growth), lower SG&A (selling, general and administrative) expenses, and D&A (depreciation and amortization) expenses. Analysts expect the company’s SG&A expenses to fall from 8.8% to 8.5%, while D&A expenses are expected to fall from 3.9% to 3.8%.
Some of the expansion in the EBIT margins is expected to be offset by the rise in commodity prices and labor expenses. The company’s management expects commodity inflation to be 0%–1% in fiscal 2018, while the labor wages are expected to rise 3%–4%.
Analysts expect Darden’s EBIT margins to improve from 9.9% in fiscal 2017 to 10.2% in fiscal 2018. The expanded EBIT margin is expected to be driven by sales leverage and lower SG&A expenses.
In the next part, we’ll look at analysts’ 1Q18 EPS estimates.