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Category: Stock Market and Darden Restaurants
Date: 26 June 2020 Stock Price: $74.59 We take a look at the 4th quarter earnings release of their 2020 fiscal year of Darden Restaurants one of America's leading restaurant groups in the full-service dining space with brands such as Olive Garden and Longhorn Steakhouse. The firm's revenue dropped by -43% compared to the same quarter of the previous year.
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- We benefited greatly from our competitive advantages that form the foundation of our strategy, especially our scale and our culture. Our scale allowed us to quickly react to constant change, while our team members displayed tremendous innovation, flexibility and passion as they continued to serve our guests. I'm incredibly proud of our teams and that our culture grew stronger during this time "
About Darden Restaurants
The Darden family of restaurants features some of the most recognizable and successful brands in full-service dining. Through subsidiaries, we own and operate more than 1,700 restaurants, employ 185,000 people and serve nearly 400 million guests a year. Some of Darden Restaurants brands include:
The image below shows Darden Restaurants different brands
- Olive Garden
- Longhorn Steakhouse
- Cheddar's Scratch Kitchen
- Yard House
- Bahama Breeze
The image below shows Darden Restaurants different brands
Overview of Darden Restaurants' 4th quarter 2020 earnings report
The numbers we are interested in (for the quarter):
- Sales: $1.270 billion (down from $2.229 billion from the same quarter of the previous year)
- Revenues decreased by -43% over the last 12 months
- Total Operating Costs: $1.862 billion (down from $1.993 billion for the same quarter of the previous year)
- Operating costs decreased by -6.7% over the last 12 months
- Net loss: -$480 million (down from $208 million for the same quarter of the previous year)
- Diluted loss per share: -$3.86 (down from $1.67 for the same quarter of the previous year)
- Diluted weighted-average shares outstanding: 124.5 million (down from 124.9 million for the same quarter of the previous year)
- Cash and cash equivalents: $763.3 million
- Cash and cash equivalents per share: $1.27
- Cash and cash equivalents makes up 6.13% of Darden Restaurants' market capital
- Cash and cash equivalents makes up 7.7% of Darden Restaurants' total assets
- Inventories: $206.9 million
- Inventories makes up 2.1% of Darden Restaurants' total assets
- Stockholders equity in Darden Restaurants: $2.331 billion
- Stockholders equity per share: $18.72
- Darden restaurants is trading at 3.96 times its stockholders equity per share which is within the expected range of between 2 and 4 times that most firms tend to trade at.
- The average price to book value of firms in the S&P 500 is 3.7
Darden Restaurants' management commentary on their 4th quarter 2020 earnings guidance
ORLANDO, Fla., June 25, 2020 /PRNewswire/ -- Darden Restaurants, Inc., (NYSE: DRI) today reported its financial results for the fourth quarter and fiscal year ended May 31, 2020, which included a 53rd week of operations compared to 52 weeks last year.
Statement from Gene Lee, CEO.
The strategy we put in place five years ago helped us successfully navigate one of the most challenging periods in our Company's history. When our dining rooms closed, our operators did an amazing job of reimagining the guest experience by staying true to our back-to-basics operating philosophy. We benefited greatly from our competitive advantages that form the foundation of our strategy, especially our scale and our culture. Our scale allowed us to quickly react to constant change, while our team members displayed tremendous innovation, flexibility and passion as they continued to serve our guests. I'm incredibly proud of our teams and that our culture grew stronger during this time. The full-service restaurant industry plays a vital role in our communities. As our industry continues to rebuild, there is significant opportunity to increase market share. Those executing at the highest level are going to win, and Darden is well positioned to take advantage of the opportunity.
Business Update
For fiscal 2021 first quarter to date through Sunday, June 21, Darden blended same-restaurant sales declined 33.2%. As of June 22, 91% of our dining rooms were open with at least limited capacity.
Same-restaurant sales performance for Darden and its reportable segments per week and for the quarter to date are as follows:
Statement from Gene Lee, CEO.
The strategy we put in place five years ago helped us successfully navigate one of the most challenging periods in our Company's history. When our dining rooms closed, our operators did an amazing job of reimagining the guest experience by staying true to our back-to-basics operating philosophy. We benefited greatly from our competitive advantages that form the foundation of our strategy, especially our scale and our culture. Our scale allowed us to quickly react to constant change, while our team members displayed tremendous innovation, flexibility and passion as they continued to serve our guests. I'm incredibly proud of our teams and that our culture grew stronger during this time. The full-service restaurant industry plays a vital role in our communities. As our industry continues to rebuild, there is significant opportunity to increase market share. Those executing at the highest level are going to win, and Darden is well positioned to take advantage of the opportunity.
Business Update
For fiscal 2021 first quarter to date through Sunday, June 21, Darden blended same-restaurant sales declined 33.2%. As of June 22, 91% of our dining rooms were open with at least limited capacity.
Same-restaurant sales performance for Darden and its reportable segments per week and for the quarter to date are as follows:
- Darden: (33.2)%
- Olive Garden: (31.3)%
- LongHorn Steakhouse: (24.3)%
- Fine Dining: (48.1)%
- Other Business: (42.3)%
Liquidity and Cash Balance
Based on week ending June 21 results, the Company is generating positive operating cash flow. With over $750 million of cash on hand as of June 22 and access to its $750 million credit facility, the Company has access to over $1.5 billion of liquidity. "As we shifted to an off premise only model, we took a disciplined approach to pursue sales opportunities that drove incremental profitability and cash flow," said CFO Rick Cardenas. "This approach, which focused on cash management while investing in our team members, resulted in a better liquidity position than we anticipated earlier in the fourth quarter and is the foundation of our first quarter financial outlook."
Fiscal 2021 First Quarter Financial Outlook
Due to uncertainty surrounding future business performance stemming from COVID-19, the Company is providing a financial outlook for the current quarter instead of its usual practice of providing an annual outlook.
The financial outlook for the first quarter of fiscal 2021 is as follows:
Based on week ending June 21 results, the Company is generating positive operating cash flow. With over $750 million of cash on hand as of June 22 and access to its $750 million credit facility, the Company has access to over $1.5 billion of liquidity. "As we shifted to an off premise only model, we took a disciplined approach to pursue sales opportunities that drove incremental profitability and cash flow," said CFO Rick Cardenas. "This approach, which focused on cash management while investing in our team members, resulted in a better liquidity position than we anticipated earlier in the fourth quarter and is the foundation of our first quarter financial outlook."
Fiscal 2021 First Quarter Financial Outlook
Due to uncertainty surrounding future business performance stemming from COVID-19, the Company is providing a financial outlook for the current quarter instead of its usual practice of providing an annual outlook.
The financial outlook for the first quarter of fiscal 2021 is as follows:
- Total sales of approximately 70% of prior year sales
- EBITDA of at least $75 million*
- Diluted net earnings per share from continuing operations greater than or equal to $0.00
- Approximately 131 million weighted average diluted shares outstanding
Darden Restaurants (NYSE:DRI) stock price history
The image below, obtained from Google, shows the stock price history of Darden Restaurants (NYSE: DRI) over the last 5 years. And it has been a very good time for Darden Restaurant stockholders. 5 years ago the stock of Darden was trading around $65.30 and its currently trading at $74.59 Thats a 14.2% returned to Darden Restaurant stockholders over the last 5 years.
The stock of Darden is trading at close to the mid point between its 52 week low and its 52 week low which to us is a clear indication that the short term sentiment and momentum of Darden's stock neutral at this point in time.
The stock of Darden is trading at close to the mid point between its 52 week low and its 52 week low which to us is a clear indication that the short term sentiment and momentum of Darden's stock neutral at this point in time.
Recent coverage of Darden Restaurants
The extract below covers the latest earnings report of Darden Restaurants as obtained from CNBC.com
Darden Restaurants on Thursday reported that same-store sales were nearly cut in half during the fiscal fourth quarter as dining room closures from the coronavirus pandemic weighed on its revenue. But the Olive Garden parent expects its business to pick up in the next three months. The company’s outlook for next quarter projects total sales to be about 70% from a year earlier.
“As our industry continues to rebuild, there is significant opportunity to increase market share,” CEO Gene Lee said in a statement. “Those executing at the highest level are going to win, and Darden is well positioned to take advantage of the opportunity.”
Read the full article here
Darden Restaurants on Thursday reported that same-store sales were nearly cut in half during the fiscal fourth quarter as dining room closures from the coronavirus pandemic weighed on its revenue. But the Olive Garden parent expects its business to pick up in the next three months. The company’s outlook for next quarter projects total sales to be about 70% from a year earlier.
“As our industry continues to rebuild, there is significant opportunity to increase market share,” CEO Gene Lee said in a statement. “Those executing at the highest level are going to win, and Darden is well positioned to take advantage of the opportunity.”
Read the full article here
Darden Restaurants (NYSE: DRI) latest stock valuation
So based on the earnings report of Darden Restaurants (NYSE:DRI) and the latest earnings guidance provided what do we value Darden Restaurants (DRI) stock at? Based on the earnings reported by the group our valuation model provides a target (full value) price for Darden Restaurants at $81.90 a stock (down significantly from our last earnings report valuation of Darden). We therefore believe the stock of Darden Restaurants is undervalued
We usually suggest long term fundamental and value investors look to enter the stock at least 10% below our target price, which in this case is $81.90 Therefore we believe a good entry point into the stock would be at $73.70 or below
We expect that the stock of Darden will kick up in coming weeks and months as states open up more fully following the Covid-19 related lockdowns and stay at home orders starts being lifted
We usually suggest long term fundamental and value investors look to enter the stock at least 10% below our target price, which in this case is $81.90 Therefore we believe a good entry point into the stock would be at $73.70 or below
We expect that the stock of Darden will kick up in coming weeks and months as states open up more fully following the Covid-19 related lockdowns and stay at home orders starts being lifted
Next earnings release of Darden Restaurants
It is expected that Darden Restaurants will release their 1st quarter 2021 earnings report in late September 2020