Darden’s food costs, labor costs, and selling and general expenses

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Nov. 20 2020, Updated 2:48 p.m. ET

Food and beverage costs

Darden Restaurants’ (DRI) food and beverage costs were 1.8% higher as a percentage of sales compared to the corresponding quarter a year ago. Higher beef, seafood, and dairy costs primarily drove up the food costs. Food costs also increased due to core menu enhancements made last year by the company.

Since fluctuation in food costs aren’t in the hands of the company, there’s little it can do to mitigate this risk, as we saw in the Panera Bread (PNRA) series and the McDonald’s (MCD) series.

Labor costs

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Labor costs were down 0.2% as a percentage of sales compared to the same quarter last year. According to the company, the labor costs were low due to sales leverage. We recently covered in the Burger King (BKW) and Tim Hortons (THI) acquisition series that the acquisition will help the former achieve sales leverage.

SG&A expenses

SG&A (or selling, general, and administrative) expenses also were low as a percentage of sales—9.5% from 8.7%—and also benefited from sales leverage. This SG&A expense excludes the 0.5% charge as a percentage of sales that was associated with Red Lobster and strategic action plan costs. Darden completed its sale of Red Lobster to Golden Gate Capital on July 28.

To get a wider exposure to the restaurant industry, you may want to consider the Vanguard Total Stock Market ETF (VTI).

Let’s now look at Darden’s bottom line for the quarter.

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