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What Is Expected of Darden’s Fiscal 3Q16 Same-Store Sales Growth?

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Same-store sales growth

Same-store sales growth (or SSSG), which is expressed as a percentage, measures the increase in revenue from existing restaurants over a certain period.

Same-store sales growth is driven by ticket size and traffic. It’s an important metric for investors to monitor, as it increases a company’s revenues without increasing capital investment. It’s a direct reflection of how much traffic each location is driving without simply adding more stores.

What is Expected of Darden's 3Q16 Same-Store Sales Growth?

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Fiscal 3Q16 performance

On March 9, 2016, Darden Restaurants (DRI) stated that it was expecting its SSSG to be approximately 4%. This announcement has prompted analysts to revise their estimates upward to 4.7% from the earlier 2.8%.

In fiscal 3Q15, Darden, which forms 0.22% of the iShares Russell Mid-Cap Value ETF (IWS), had recorded a combined SSSG of 3.6%. Two of its major brands, Olive Garden and LongHorn Steakhouse, recorded SSSG of 2.2% and 5.4%, respectively.

Analysts are expecting the remodeling of the Olive Garden restaurants and the introduction of catering service in all Olive Garden restaurants in the US to boost the brand’s SSSG.

Olive Garden has also introduced new menu items, such as Grilled Chicken and Grilled Vegetables Piadinas, Tuscan Sirloin, Mozzarella Fritti, and Create Your Own Tour of Italy, which could also aid in improving the SSSG. LongHorn Steakhouse could benefit from its “You Can’t Fake Steak” marketing campaign.

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Peer comparisons

During the same period, DRI’s peers Texas Roadhouse (TXRH), Brinker International (EAT), and Bloomin’ Brands (BLMN) are expected to post SSSG of 4.4%, -0.93%, and -0.8%, respectively.

Outlook

Darden Restaurants’ (DRI) management sets the 2016 SSSG guidance in the range of 2.5%–3%. Until the completion of fiscal 2Q16, the company had attained a same-store sales growth of 3.2%. For fiscal 3Q16, the company management is expecting to be around 4%.

Analysts are expecting the SSSG for fiscal 3Q16 to be 4.7%, and for fiscal 4Q16, 1Q17, and 2Q17, the company’s SSSG should be 3.1%, 2.2%, and 2.4%, respectively.

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