stock was rising in premarket trading Thursday, following the Olive Garden parent’s fiscal first-quarter earnings report. The company reinstated its dividend and returned to profitability, despite the headwind of Covid-19, and gave an upbeat forecast.
Darden (ticker: DRI) said it earned an adjusted 56 cents a share, on revenue that fell 28.4% year over year to $1.53 billion. Analysts were looking for Darden to earn just a nickel a share on revenue of $1.56 billion.
Same-restaurant sales slid 28.2% at its Olive Garden chain, 18.1% at LongHorn Steakhouse, and 39.1% at its fine-dining segment, which includes the Capital Grill.
Darden’s board of directors reinstated the quarterly cash dividend of 30 cents per share, for shareholders on record as of Oct. 9. The company also repaid a $270 million term loan in August, “given steadily improving cash flows in the quarter.” It said it has access to $1.4 billion of liquidity, including $655 million of cash on hand.
For the current quarter, Darden said it expects to earn between 65 and 75 cents a share on revenue of $1.685 billion; consensus estimates call for EPS of 37 cents on revenue of $1.77 billion
Darden shares were up 3.6% to $93.21 around 9 a.m. Eastern time even as
Dow Jones Industrial Average
futures fell 0.6%.
The quarter was much better than Darden—and analysts—had feared in June, when the company said it could break even or turn a small profit. At the time, consensus called for a 34-cent loss. So the better-than-anticipated profit—compared with a wide per-share loss in the prior period—is an obvious positive for investors.
Yet the market is likely just as pleased with the company’s dividend payment, as well as its decision to clear some debt, because that projects confidence about Darden’s capital position at a time when many peers are struggling.
Dine-in restaurants have largely been hit harder than fast-food and other delivery-oriented strategies, given their higher price points and many consumers’ reluctance to congregate indoors. Darden, though, has earned analyst praise for how it has handled Covid. While the stock is off more than 17% this year, it has more than tripled from its low this spring.
Write to Teresa Rivas at [email protected]