Darden Restaurants (DRI) Beats by 15 Cents, to Spin Off Real Estate Assets

Shares of Darden Restaurants Inc. (DRI) were trading up +4.62 or +6.66 percent to $74.00 per share in this morning's premarket after announcing earnings that beat street expectations by $0.15 per share. In addition, Darden announced it plans to spin off some restaurants in order to separate some of its real estate assets and create a publicly traded real estate investment trust. Darden Restaurants stock closed at $69.38 per share, up +0.51 or +0.74 percent in Monday's regular trading session.

Founded as the Green Frog Restaurant in 1938 by Bill Darden, Orlando, Florida based Darden Restaurants Inc. is one of the world's largest full service restaurant companies.
Darden owns and operates over 1,500 restaurants generating more than $6.8 billion in annual sales. The company currently employs 150,000 people. Darden's restaurant brands include Bahama Breeze, The Capital Grille, Eddie V's, LongHorn Steakhouse, The Olive Garden, Seasons 52 and The Yard House. The company also owned Red Lobster, but sold off the chain in July of 2014.

Darden Restaurants reported earnings per share for the company's fourth quarter of $1.08 on revenue of $1.88 billion. The analyst consensus was for the company to report earnings of $0.93 per share on revenue of $1.87 billion.

Overall same restaurant sales increased 3.8% for the quarter. The breakdown for same restaurant sales was +1.7% for Bahama Breeze; +4.4% for The Capital Grille; +5.2% for Eddie V's; +5.2% for LongHorn Steakhouse; +3.4% for Olive Garden; +3.1% for Seasons 52 and +3.2% for Yard House.

Darden Restaurants Inc. Chief Executive Officer Gene Lee said in the company's press release that, "We are pleased with our improved performance during the fourth quarter. The momentum we have built during the second half of the fiscal year gives us confidence that our back-to-basics focus which is rooted in strong operating fundamentals around food, service and atmosphere is resonating with our guests. We know there is more work to do and still see a lot of opportunity to further strengthen our performance in fiscal 2016.

Darden Restaurants' 2016 full year guidance sees earnings per share of $3.05-$3.20. The analyst consensus for full year guidance was for earnings per share of $2.88.

In addition to the impressive earnings, Darden announced its board had approved strategic plans to separate some of the company's real estate assets. The separation of assets would be achieved through a combination of select sale leaseback transactions with the remaining real estate assets transferred to a new real estate investment trust or REIT. The REIT would then be spun or split off in a separate transaction, which would result in a new independent publicly traded company.

Mr. Lee, the company's CEO added that, "While a significant amount of work remains in order to proceed with the REIT Transaction, we believe this plan will result in a more optimized capital structure and will create long-term shareholder value. We appreciate the valuation differential between restaurant and real estate companies and are excited to create a new company, which we believe will unlock current value while growing through acquisitions of other properties.

The earnings news and the formation of a new real estate investment trust to be spun off into an independent company is positively affecting the price of the company's stock. Darden Restaurants' stock will open at a new all time high this morning.

Other News About DRI

Darden Restaurants Board Declares Regular Quarterly Dividend

Company will pay a $0.55 per share dividend to holders of record on July 10th, 2015.


Stock is upgraded from a "neutral rating to "outperform by Credit Suisse.

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Published on Jun 23, 2015
By Jay Hawk
Jay Hawk
Jay Hawk enjoyed a 12-year professional financial markets career incorporating extensive first hand futures and options experience obtained by trading in the stock, commodity and forex markets on U.S. exchanges. Since retiring as a full-time financial market professional, he has been actively trading stock, commodities, forex and options for his own account and managing funds for others, as well as writing financial market commentary and educational articles.

Copyrighted 2020. Content published with author's permission.

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