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Darden (DRI) Earnings Next Week
Darden (DRI) earnings are due out next week.
Thats always a big note. They are the McDonald's of the casual dining sector, and everyone should take notice.
Darden is a very sophisticated operator. I looked at their forecasts and notes, and here's what I see:
First, I wish the business press would talk to profits on a per unit basis, not just compare two columns of numbers. Darden's 2007-2008-2009 comparisons are flawed because of the RARE acquisition (LongHorn, Cap Grill )
It never fails to amaze me that in this environment, sticking totally to a US expansion plan, that DRI is able to find sites, fund and execute opening 55 new units projected in 2010. They did about 71 in 2009. Amazing.
And they have been able to grow one new brand very successfully (Olive Garden) and grow/preseve Red Lobster, way past its 40 year lifecycle. And its working on it's smaller brands, but no certain success. Extended consumer weakness will pose problems for the premium brands, despite their high AUVs.
Darden is one of the few chains with price planned (2%) in 2010 and expects the final $10M in cost synergies from the 2008 RARE acquisition. And another 60 Long Horn units are coming into media efficiency coverage, which should help.
But it is still digesting the 2008 RARE acquisition, with $1.2 billion more in debt and about 400 more restaurants, its continuing operating income was $6M lower in 2009 verus 2007.
Its valuation Monday (TTM basis) was 13.9X, with plenty of other chain restaurants without the stong fundamentals, that are higher right now. So, pretty cheap.
It's modest 2010 EPS (0 to 10%) and sales expectations are a signal to the Street: let us work this as slowly as we need to.
John A. Gordon
Chain Restaurant Earnings and Economics Expert
www.pacificmanagementconsultinggroup.com
Thats always a big note. They are the McDonald's of the casual dining sector, and everyone should take notice.
Darden is a very sophisticated operator. I looked at their forecasts and notes, and here's what I see:
First, I wish the business press would talk to profits on a per unit basis, not just compare two columns of numbers. Darden's 2007-2008-2009 comparisons are flawed because of the RARE acquisition (LongHorn, Cap Grill )
It never fails to amaze me that in this environment, sticking totally to a US expansion plan, that DRI is able to find sites, fund and execute opening 55 new units projected in 2010. They did about 71 in 2009. Amazing.
And they have been able to grow one new brand very successfully (Olive Garden) and grow/preseve Red Lobster, way past its 40 year lifecycle. And its working on it's smaller brands, but no certain success. Extended consumer weakness will pose problems for the premium brands, despite their high AUVs.
Darden is one of the few chains with price planned (2%) in 2010 and expects the final $10M in cost synergies from the 2008 RARE acquisition. And another 60 Long Horn units are coming into media efficiency coverage, which should help.
But it is still digesting the 2008 RARE acquisition, with $1.2 billion more in debt and about 400 more restaurants, its continuing operating income was $6M lower in 2009 verus 2007.
Its valuation Monday (TTM basis) was 13.9X, with plenty of other chain restaurants without the stong fundamentals, that are higher right now. So, pretty cheap.
It's modest 2010 EPS (0 to 10%) and sales expectations are a signal to the Street: let us work this as slowly as we need to.
John A. Gordon
Chain Restaurant Earnings and Economics Expert
www.pacificmanagementconsultinggroup.com
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