December 17, 2014 / 12:11 AM / 3 years ago

Starboard intervention helps boost Darden sales

A man talks on his mobile phone in front of the Times Square Olive Garden in New York, June 23, 2010. REUTERS/Keith Bedford

(Reuters) - Darden Restaurants Inc (DRI.N), whose entire board was replaced by activist investor Starboard Value LP, reported a 4.9 percent rise in quarterly sales and raised the lower end of its adjusted profit forecast for the full year.

The company’s shares were up 1.9 percent in extended trading.

The quarterly report was the first since Starboard ousted Darden’s board in a stunning move for the largest full-service restaurant operator in the United States.

Darden said it now expects adjusted profit of $2.25-$2.30 per share from continuing operations for the year that will end in June 2015, compared with the $2.22-$2.30 it expected earlier.

The company has suffered more than a year of traffic declines at Olive Garden, which accounts for more than half of Darden’s overall revenue and about two-thirds of its profit.

The company spun off its Red Lobster unit earlier this year, to focus more on the Olive Garden brand.

Darden said, in a post-earnings call on Tuesday, it has been trying to cut costs at its restaurants and implement some of the Starboard-specified changes, such as boosting alcohol sales and using technology to eliminate “false waits” for tables.

Same-restaurant sales at Olive Garden rose 0.5 percent in the quarter, compared with a 0.4 percent fall expected by analysts polled by Consensus Metrix.

Sales were also helped by a steady rise in online ordering and take-out sales, the company said on the call.

LongHorn Steakhouse, Darden’s second-largest restaurant chain, also recorded higher-than-expected comparable sales growth of 2.6 percent growth.

Darden reported a loss of $32.8 million, or 26 cents per share, for its second quarter ended Nov. 23, compared with a profit of $19.8 million, or 15 cents per share, a year earlier.

Excluding items, it earned 28 cents per share, while sales rose to $1.56 billion from $1.49 billion.

Analysts on average had expected a profit of 27 cents per share on revenue of $1.55 billion, according to Thomson Reuters I/B/E/S.

The Orlando, Florida-based company’s shares closed at $55.91 on the New York Stock Exchange on Tuesday.

Stock has risen nearly 28.3 percent since July 17, when shares recorded a year low of $43.56.

Reporting by Devika Krishna Kumar and Nayan Das in Bengaluru and Lisa Baertlein in Los Angeles; Editing by Joyjeet Das and Alan Crosby

Our Standards:The Thomson Reuters Trust Principles.
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