On March 21, Darden Restaurants (DRI) posted its third-quarter earnings. For the quarter ending on February 24, the company posted an adjusted EPS of $1.80 on revenues of $2.25 billion. The company outperformed analysts’ EPS expectation of $1.75 and revenue estimate of $2.24 billion. Darden’s SSSG (same-store sales growth) was 2.8%, which beat analysts’ expectation of 2.2%.
Darden’s revenues rose 5.6% YoY (year-over-year) from $2.13 billion in the third quarter of fiscal 2017. The revenue growth was driven by the company’s new restaurants and positive SSSG.
In the last four quarters, Darden has increased its restaurant count by 39 units to 1,772 restaurants. The company’s overall SSSG for the quarter was 2.8%. Olive Garden, LongHorn Steakhouse, The Capital Grille, and Eddie V’s posted positive SSSG. Cheddar’s Scratch Kitchen, Yard House, Seasons 52, and Bahama Breeze’s SSSG fell during the quarter.
Darden’s adjusted EPS rose 5.3% during the third quarter. The revenue growth, expanded EBIT margins, and share repurchases drove the company’s EPS during the third quarter. However, a higher effective tax rate offset some of the EPS growth.
During the third quarter, Darden’s EBIT margin expanded from 11.3% in the third quarter of 2018 to 11.8%. The company’s effective tax rate was 11.1%—compared to 4.4% in the third quarter of 2018.
Moving to share repurchases, Darden has repurchased ~1.88 million shares for ~193.5 million in the last four quarters. Share repurchases drive the company’s EPS by lowering the number of shares outstanding.
Next, we’ll discuss Darden’s stock performance.