What Olive Garden And LongHorn Steakhouse Tell Us About Darden

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Darden Restaurants, Inc. (NYSE: DRI), the parent company of Olive Garden and LongHorn Steakhouse among others, reported Thursday fiscal first-quarter results highlighted by a continued sales recovery and the reinstatement of its dividend. The stock traded sharply higher and sits around $96.24 per share.

Here is a summary of how some of the Street’s top analysts reacted to the print.


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The Analysts

Raymond James analyst Brian Vaccaro maintains an Outperform rating on Darden’s stock with a price target lifted from $100 to $115.

Credit Suisse analyst Lauren Silberman maintains an Outperform rating on Darden with a price target lifted from $95 to $112.

MKM Partners analyst Brett Levy maintains a Buy rating on Darden with a price target lifted from $110 to $115.

BMO Capital Markets analyst Andrew Strelzik maintains a Market Perform rating on Darden with a price target lifted from $84 to $96.

KeyBanc Capital Markets analyst Eric Gonzalez maintains an Overweight rating on Darden with a price target lifted from $102 to $108.

See Also:¬†Darden’s Earnings Report Signals Improving Trends, Dividend Reinstated

Raymond James: Quarter Recap

Darden’s sales were down 28.4% year over year to $1.53 billion and this was short of expectations by $16 million, Vaccaro wrote in a note. Olive Garden’s revenue was down 29% in the quarter and this compares unfavorably to the broader casual dining industry that recorded a 25.8% decline, according to Knapp Track data. The underperformance can be attributed to a lack of exposure to third-party delivery platforms.

There were some positive takeaways in the quarter, including store margins falling just 23 basis points to 17.8% due to “surprising” labor leverage and lower marketing costs. The company also reinstated its 30 cents per share quarterly dividend and closed a $270 million one-year term loan.

Credit Suisse: Recovery Story

Darden’s report showed sales continued to recover from COVID-19 lows although same-store sales were still down 29% in the quarter, including negative 28.2% at Olive Garden and negative 18.1% at LongHorn, Silberman wrote in a note. But same-store sales at restaurants open for limited capacity fared better at negative 21.1% at Olive Garden and negative 11.3% at LongHorn.

Management guided its fiscal second-quarter Adjusted EBITDA at $200 million to $215 and this is “well above” expectations for $155 million. The company also noted it can recover 100% of EBITDA when it regains just 90% of prior level sales. The company deserves credit for this outlook and reinforces the longer-term top- and bottom-line outlook.

MKM: Sales Recovery

Olive Garden and LongHorn’s triple-digit off-premise growth is credited with supporting a sales recovery as it accounted for 45% of sales and 28% of sales, respectively, Levy wrote in a note. This signals the “strength” of Darden’s large brands during an uncertain landscape.

Management’s comments that a full EBITDA recovery requires 90% of prior sales is encouraging moving forward. Darden noted it expects 5% to 15% of competitors’ stores could close in the future while Darden proceeds with plans to

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