Darden Restaurants(DRI)2025-04-01 20:09Financial Performance - Total sales increased by 6.2% to $3.16 billion for the third quarter of fiscal 2025, and by 4.4% to $8.81 billion for the first nine months compared to the same periods in fiscal 2024[107]. - Net earnings from continuing operations were $323.7 million for the third quarter and $747.0 million for the first nine months of fiscal 2025, compared to $313.4 million and $720.5 million for the same periods in fiscal 2024[107]. - Operating income for the third quarter was $418.2 million, an increase of 8.0% compared to $387.4 million in the same quarter of fiscal 2024[101]. - For the three months ended February 23, 2025, operating income was 13.2% of sales, compared to 13.0% for the same period in 2024[117]. - Losses from discontinued operations for the first nine months of fiscal 2025 were $1.2 million, compared to $1.0 million for the same period in 2024[121]. Sales and Growth - The company expects fiscal 2025 sales to be approximately $12.1 billion, with same-restaurant sales growth of about 1.5% and 50 to 55 new restaurant openings[108]. - Olive Garden's sales increased by 1.5% to $1.33 billion for the third quarter, driven by a 4.6% increase in average check[111]. - LongHorn Steakhouse's sales increased by 5.1% to $768.1 million for the third quarter, supported by a 3.3% increase in average check[112]. - The total number of company-owned restaurants increased to 2,165 as of February 23, 2025, up from 2,031 at the end of fiscal 2024[102]. Expenses and Costs - Marketing expenses rose by 11.7% to $35.4 million for the third quarter, reflecting increased investment in brand promotion[101]. - Food and beverage costs decreased as a percentage of sales by 0.9% due to pricing leverage and 0.2% from cost savings, partially offset by a 0.3% impact from menu mix[118]. - Restaurant labor costs remained flat as a percentage of sales, with a 0.9% impact from pricing leverage and a 0.3% impact from productivity improvements, offset by a 1.1% impact from inflation[118]. - General and administrative expenses increased as a percentage of sales primarily due to transaction and integration costs related to the Chuy's acquisition[118]. Tax and Financial Ratios - The effective tax rate increased to 13.1% for the third quarter of fiscal 2025, compared to 10.7% for the same quarter of fiscal 2024[101]. - The effective income tax rate for continuing operations increased to 13.1% for the quarter ended February 23, 2025, compared to 10.7% for the same quarter in 2024[120]. - Segment profit margin for Olive Garden increased by 50 basis points to 23.0% for the three months ended February 23, 2025, driven by lower food and beverage and labor costs[123]. Financing and Investments - The acquisition of Chuy's Holdings was completed for a total consideration of $649.1 million, financed through the issuance of $400 million and $350 million senior notes[105]. - The company entered into a $1.25 billion Revolving Credit Agreement on October 23, 2023, with no outstanding balances as of February 23, 2025[129]. - The company issued $400 million of 4.350% Senior Notes due 2027 and $350 million of 4.550% Senior Notes due 2029 on October 3, 2024, to finance the acquisition of Chuy's[135]. - Capital expenditures rose to $472.6 million for the first nine months of fiscal 2025, compared to $460.8 million in the same period of fiscal 2024, reflecting increased spending on new restaurant construction and remodels[142]. Cash Flow and Liquidity - Net cash flows from operating activities increased to $1.25 billion for the first nine months of fiscal 2025, up from $1.20 billion in the same period of fiscal 2024, driven by higher net earnings of $747.0 million compared to $720.5 million[140]. - Net cash flows used in investing activities were $1.10 billion for the first nine months of fiscal 2025, a decrease from $1.18 billion in the same period of fiscal 2024, with significant acquisitions including $500.0 million for Chuy's[141]. - Net cash flows used in financing activities were $123.9 million for the first nine months of fiscal 2025, down from $158.5 million in the same period of fiscal 2024, including $750.0 million from long-term debt issuance[143]. - Current assets totaled $880.6 million as of February 23, 2025, an increase from $822.8 million as of May 26, 2024, primarily due to higher inventories and cash[147]. - Current liabilities increased to $2.28 billion as of February 23, 2025, compared to $2.19 billion as of May 26, 2024, driven by higher unearned revenues from gift card sales[148]. Shareholder Returns and Future Outlook - The company authorized a new share repurchase program of up to $1 billion, with 2.4 million shares repurchased in the first nine months of fiscal 2025[145]. - The company targets an investment-grade bond rating to maintain flexible access to financing at reasonable costs[128]. - The company plans to continue expanding its restaurant locations and capital expenditures in fiscal 2025, with a focus on managing cost pressures and competition in the restaurant industry[151]. - The company is not aware of any trends that would materially affect its capital requirements or liquidity, indicating confidence in its internal cash-generating capabilities[144].