15 Mar

Why Analysts Expect Darden’s Revenue to Rise in Q3 2019

WRITTEN BY Ralph Nathan FEATURED IN Pre-Release Earnings Reports and Consumer Discretionary

Analysts’ expectations

Analysts expect Darden Restaurants’ (DRI) revenue to come at $2.24 billion in the third quarter of fiscal 2019, which represents a rise of 5.2% from $2.1 billion in the corresponding quarter of fiscal 2018. This revenue growth will likely to be driven by positive SSSG (same-store sales growth) and the net addition of new restaurants.

Why Analysts Expect Darden’s Revenue to Rise in Q3 2019

Revenue drivers

By the end of the second quarter of fiscal 2019, Darden operated 1,762 restaurants in total compared to 1,733 restaurants at the end of the third quarter of fiscal 2018. Its addition of these 29 restaurants, along with the restaurants it opened in the third quarter, is expected to drive its revenue.

Darden has been focusing on the enhancement of the guest experience, menu simplification, off-premises sales, flawless execution, and various marketing and promotional initiatives to drive its sales. Last quarter, the company strengthened its everyday value platforms by adding 50% more chicken to Olive Garden’s most preferred menu item, Chicken Alfredo. It also introduced the 5 for $5 beverage platform at the chain. During the third quarter, the company added stuffed pasta to Olive Garden’s Never Ending Pasta Bowl menu options.

Last quarter, Olive Garden’s off-premises sales grew 10.3% to generate 14.6% of its revenue during the quarter. The brand continues to invest in delivering a great takeout and catering experience for its customers.

Peer comparison and outlook

During the same period, Bloomin’ Brands (BLMN), Texas Roadhouse (TXRH), and Brinker International (EAT) posted revenue growth of -6.9%, 11.2%, and 3.2%, respectively.

In fiscal 2019, Darden’s management expects its revenue to rise 5.0%–5.5%, with its overall same-store sales growth expected to be 2.5%. Management also plans to open 45–50 restaurants in fiscal 2019. For the same period, analysts expect Darden to post revenue of $8.52 billion, which represents a rise of 5.4% from $8.08 billion in fiscal 2018.

Next, we’ll look at analysts’ EPS expectations for the third quarter.

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