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Darden Restaurants Q4 Earnings Call Transcript
Author: 123jump.com Staff
123jump.com
Last Update: 8:57 PM ET June 29 2009

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Darden fourth quarter sales rose 8% to $1.98 billion and net earnings from continuing operations grew 18.87% to $122.8 million, performing well above Knapp-Track benchmark. Earnings per share were 87 cents as against 71 cents in the prior year quarter.


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Our next question comes from the line of Jeff Bernstein with Barclays Capital. Please go ahead.

Jeffrey Bernstein - Barclays Capital

Great, thank you. First as a follow-up on the cost savings thoughts, I think you guys had previously mentioned that it was going to be in the $31 million to $39 million range for fiscal ’09 in terms of cost-saving opportunities. I know you had previously talked about the $55 million related to RARE. I’m just wondering if you could talk in a little bit more depth about the opportunities or the magnitude of the cost-saving opportunities in fiscal 2010, whether you can classify it in a couple of buckets and kind of what magnitude we should expect lapping the $30 million to $40 million I guess in fiscal ’09?

Clarence Otis

Good point there, Jeff. Let me break those down into two pieces. As it relates to the acquisition cost synergies, we did this year capture for the entire year about $45 million. We still look at the annual run-rate of $55 million that we talked about previously as where we are and we expect to realize that as we look into fiscal 2010. So that part of our element gives us roughly $10 million of incremental savings year-over-year and we talked back in January at the investor analyst meeting that we had then about what we call our business strengthening initiatives and we talked about that being able to get us last fiscal year $31 million to $39 million in savings. We were in the middle to upper end of that range and that really got started in late September last year, so we do see the opportunity to add a little bit to that, probably in the mid-single-million dollar range in the first quarter of the New Year. And then just a part of our ongoing process, we look to minimize costs as well but we don’t see that as being a significant opportunity in 2010.

Jeffrey Bernstein - Barclays Capital

You’re probably looking at an additional $10 million from the acquisition of synergies and then another mid-single-digit from the business strengthening as compared to kind of the mid-30 or high-30 million range you saw in fiscal ’09?

Clarence Otis

That’s correct. We’re talking about the year-over-year growth there, yes, the $10 million from synergies and mid-single million dollars on our business strengthening initiatives.

Operator

Our next question comes from the line of Mitch Speiser of Buckingham Research. Please go ahead.

Mitchell Speiser - Buckingham Research

Thanks very much and on the topic of discounting or I guess incremental discounting, it sounds like Darden did not go that route. Can you give us an update on what you are seeing in the industry? Have you seen any changes in the level of promotional activity in discounting? And then I have a follow-up.

Andrew H. Madsen

Yeah I’ll start. I think we’ve seen a little bit of pull-back in the last few weeks. Our sense, as we try to figure out the situation is we don’t know that a lot of the folks who did discounting got much for it, from a traffic perspective and so we have seen a little bit of pull-back from some of the more significant offers.

Mitchell Speiser - Buckingham Research

Got it and separately, just on media rates, can you give us an update on where they stand and do you view it as just more bang for the buck or will you perhaps let some of that savings flow through to the bottom line? Thanks.

Clarence Otis

We think the up-front market, which won’t be finalized for another month or so, will probably be flat to slightly down versus last year and so it’s not going to be a material change. But strategically, we’d be looking to maintain what we think are very effective media waits and media plans already and any meaningful savings would be redirected.

Operator
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