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Darden: Analysts’ Expectations in Fiscal 2020

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Management’s guidance

Darden Restaurants’ (DRI) management expects its revenues to rise 5.3%–6.3% in fiscal 2020. The extra week will likely contribute 2% of the revenues. The company expects its same-store sales to rise 1%–2% during fiscal 2020. The company plans to open 50 gross or 44 net new restaurants this year.

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Analysts’ revenue estimates

Analysts expect Darden to post revenues of $9.09 billion in fiscal 2019—a rise of 6.8% from $8.51 billion in fiscal 2018. An extra week of operation, positive SSSG (same-store sales growth), and the net addition of new restaurants will likely drive the company’s revenues in fiscal 2020. Darden continues to focus on flawless execution, growing its off-premise sales, and everyday value offerings to drive its SSSG.

Olive Garden has lowered its minimum amount for delivery from $100 to $75. The company relaxed the 24-hour lead time previously required to order ahead of the delivery to 5:00 PM the day before. Darden opened a new prototype restaurant in Orlando, Florida. The restaurant has a dedicated area for the To-Go business, which caters to online sales. The company’s management said that a restaurant with a separate Go-To area could boost sales by $1.0 million. LongHorn Steakhouse already has a separate takeout area in 40% of its restaurants.

EPS growth

Before Darden reported its fourth-quarter earnings, analysts expected an EPS of $6.46 for fiscal 2020. However, the company’s management provided an EPS guidance of $6.30–$6.45, which was lower than analysts’ expectations. Currently, analysts expect Darden to report an adjusted EPS of $6.43, which implies a rise of 10.5% from $5.82 in fiscal 2018. The increased revenues, expanded EBIT margin, and share repurchases will likely drive the company’s EPS in fiscal 2020. By the end of fiscal 2019, the company had ~$304 million available under its share repurchase program.

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