Darden boosts its sales, but hurricanes cut into growth

Darden Restaurants’s first-quarter results were down a bit due to Hurricane Harvey, as the storm closed restaurants in Texas and dragged down sales of new acquisition Cheddar’s Scratch Kitchen, which has a big presence in Texas.

And Irma will hurt worse, company leaders said Tuesday.

The two storms temporarily closed hundreds of restaurants and may have resulted in nearly $5.6 million in lost profits.

Cheddar’s Scratch Kitchen sales fell 1.4 percent in the quarter compared to the year before, but Darden CFO Rick Cardenas said Hurricane Harvey hampered growth.

Harvey made landfall in Texas Aug. 25, two days before the end of Darden’s fiscal quarter. Until recently, Cheddar’s was headquartered in Texas and the chain has an outsized presence in the Lone Star State.

Closing restaurants because of Harvey cost the company about 1.5 cents a share in the first quarter, Cardenas said. That equals about $1.8 million.

Darden bought the 165-restaurant Cheddar’s chain for $780 million in April, hoping for a young, high-growth restaurant to counter mature brands such as Olive Garden.

Cardenas said Hurricane Irma could have double the impact on Darden’s bottom line during its second-quarter reporting period. He said the combined impact of Harvey and Irma is estimated about 4.5 cents a share.

“In the field, our teams did a tremendous job getting restaurants that were closed back open,” CEO Gene Lee said.

Outside of Cheddar’s, Darden same-restaurant sales grew 1.7 percent for the fiscal first quarter, including 1.9 percent growth at flagship Olive Garden. LongHorn Steakhouse sales grew 2.6 percent and Eddie V’s grew 2.5 percent. Sales fell at Seasons 52 and Yard House.

Darden’s sales for the quarter were $1.93 billion, compared to $1.7 billion the year before. That includes the added sales from Cheddar’s. Lee said Darden’s performance was strong compared to the rest of the full-service casual dining industry.

Net earnings for Darden (NYSE: DRI) were $119 million, up 7.9 percent from the same period the year before.

Darden’s earnings per share registered at 99 cents, in line with analysts’ estimates.

The earnings report sent Darden shares tumbling, dropping nearly 6.5 percent in trading Tuesday. Shares settled at $77.71.

Even with the drop in sales from hurricanes Harvey and Irma, Darden reaffirmed its 2018 financial outlook of earnings per share of $4.38 to $4.50 a share, which is in line with analysts’ expectations.

While restaurant sales were up at Olive Garden for the 12th quarter in a row, traffic dropped in the first quarter by 0.3 percent. That was countered by increased pricing, such as a $1 increase to the unlimited soup, salad and breadsticks lunch to $6.99. Traffic was up slightly at LongHorn Steakhouse.

Take-out sales also increased 12 percent in the quarter compared to the same period in 2016.