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Starboard intervention helps boost Darden sales
December 17, 2014 / 12:11 AM / 3 years ago

Starboard intervention helps boost Darden sales

(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.

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

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

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