Established 1999
     
8,000 companies from USA and India.  
   
Search over 25,500 news articles and 8,000 companies earnings    
 
Earnings Calls: 
Darden Restaurants Q4 Earnings Call Transcript
Author: 123jump.com Staff
123jump.com
Last Update: 8:57 PM ET June 29 2009

123Jump:


(Continued)

Email article | Print article

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.


Investors Question and Answers

 
 Company Website Links:
Investor Relations Financial Info Corporate / History Profile Executives Products Services
 
You need to upgrade your Flash Player


You need to upgrade your Flash Player

 
Looking ahead to unit growth, the new restaurant plans we outlined mean that we expect a net new restaurant increase of approximately 50 to 55 restaurants, or about 3%. Given our same-restaurant assumptions and new restaurant plans, we anticipate that total sales change for the year will be minus 1% to plus 1%, comparing to the as-reported fiscal 2009 sales of $7.22 billion, which includes the 53rd week. That extra week was worth approximately 2 percentage points of sales in fiscal 2009. With less unit development in fiscal 2010, we expect capital spending to be lower than fiscal 2009 levels. We anticipate it to be approximately $450 million to $475 million, which compares to $535 million in fiscal 2009. Fiscal 2010 includes approximately $25 million in additional remodel spending. Approximately $25 million of capital spending remains on our new restaurant support center. In fiscal 2009, approximately $95 million of our capital spending was attributable to our new restaurant support center. You should know that the incremental expense of building our new restaurant support center is offset by various state and local tax credits and incentives and the previous sale of our current support center that made the net cost to build the new offices relatively minor.

Looking at operating profit margins from continuing operations, we expect restaurants to range from a margin contraction of approximately 10 basis points to a margin expansion of 50 basis points on a full-year basis compared to fiscal 2009. We expect to see substantial benefit from food and beverage expenses in the first half of the fiscal year as we experienced lower year-over-year costs on many of the commodities we use, but we anticipate higher restaurant labor expenses because of same-restaurant sales de-leverage. The remaining line items, restaurant expenses, selling, general, and administrative expenses, and depreciation expenses, are expected to be relatively unchanged. The incremental acquisition synergies and our other cost initiatives and favorable sales mix changes we experienced because of Olive Garden''s expanding share of our overall business should contribute to lower food and beverage expense as a percentage of sales. As we’ve discussed, we have many of our products contracted through the end of calendar 2009, so we have about six months of full visibility on our costs, which I will detail shortly.

There is less visibility beyond calendar 2009 in part because some commodities will continue to experience cost erosion should economic weakness persist, and we want to be in a position to benefit from that decline. In terms of specific food items, total seafood prices for fiscal 2010 are expected to be lower than fiscal 2009 as global demand has softened. Seafood accounts for approximately one-third of Darden''s total cost of goods sold. Category by category, shrimp is our highest volume protein and we have coverage through the second quarter of fiscal 2010 at prices lower than fiscal 2009. Crab is contracted or purchased at prices lower than fiscal 2009 with coverage through September of 2009. And we currently have lobster usage contracted or purchased through January 2010 at favorable prices to last year. Beef prices are lower on a year-over-year basis and we’ve extended our coverage from September of 2009 to January of 2010, depending on the cut and all those at lower prices than fiscal 2009. Chicken and poultry prices are slightly higher on a year-over-year basis and we have contracted our usage through December 2009 at prices slightly above our fiscal 2009 costs.

Wheat prices are lower on a year-over-year basis. We have contracts taking us through the summer for our bread products and contracts on our pasta products that expire in May of 2010. We expect that bread contracts will be renewed at prices favorable to what we are experiencing currently. Energy costs are expected to be lower on a year-over-year basis at least through the calendar year. We have some coverage of natural gas and electricity in the de-regulated markets in which we operate, and we’ll be opportunistic about adding additional coverage. Turning to labor, as I mentioned, we anticipate that labor costs as a percentage of sales will increase due to sales de-leverage and modest wage rate inflation this fiscal year. We believe that restaurant expenses as a percentage of sales will be flat to slightly higher than the prior year because of sales de-leverage. We anticipate that selling, general, and administrative expenses as a percentage of sales will be slightly higher than the prior year. This is because of sales de-leverage and deferred spending from fiscal 2009.

Again, we will also expect to generate solid cash flows, which we’ve done consistently since we became a public company in 1995 and to use these to pay our increased dividend and strengthen our balance sheet. We expect to pay out approximately $140 million in dividends to shareholders, an increase of almost $30 million from fiscal 2009. Finally for fiscal 2010, we expect our tax rate to be approximately 25% to 26%, which is favorable to the 27.5% in fiscal 2009, although this will vary by quarter, depending on the timing of certain tax events. With the new fiscal year, we will return to reporting only GAAP financial results as we now have a full year of comparable revenue and cost results. This will improve the clarity of our communications and eliminate the need to reconcile the non-GAAP disclosures. With our same-restaurant sales assumption and new restaurant growth plans, we anticipate reported diluted net earnings per share growing from continuing operations of minus 2% to plus 8% in fiscal 2010, compared to diluted net EPS of $2.65 in fiscal 2009, which includes approximately $0.06 of benefit from the additional operating week. Excluding the benefit of the additional week, we anticipate reported diluted net earnings per share growth from continuing operations of 0% to 10% in fiscal 2010, compared to diluted net EPS of $2.59 in fiscal 2009.

As you might expect, there will be some quarterly variability in diluted net earnings per share in fiscal 2010 that mirrors the sales variability I previously discussed. Overall, the most important point is that we remain confident our results will be competitively superior in what continues to be a challenging environment.

And now Clarence has some final comments.

Clarence Otis – Chief Executive Officer

Thanks, Brad and I’ll be brief because I know you’ve got a lot of questions but what I would say is that in many respects, really fiscal 2009 I think is our finest year. I mean, obviously some of the most challenging times we’ve seen in our economy and in our industry and despite that, we had very, very solid financial performance. And that performance is because we were able to get ahead of some deteriorating conditions very quickly, aggressively managing our costs and driving our traffic and we did that smartly. We think, protecting our people, our profitability, and the long-term health of not just our brands but also our business model and so we think we are well-positioned to succeed in tough times. But also our performance gives us confidence that we are going to emerge an even stronger company and we’ll have wider positive gaps to industry benchmarks, whether that’s sales or earnings.

As we look ahead, our plans for fiscal 2010, as we’ve said a few times, reflects our assumption that economic and industry conditions are going to remain difficult. And we know many of you are more optimistic than that and we certainly hope that you’re right but we think it’s prudent to plan this way and that’s because it’s easier for us to gear up in response to better-than-planned conditions than it would be for us to make changes to address weaker-than-planned circumstances. The lower end of the sales and earnings per share ranges we’re providing are consistent with that approach but you should know that if we see some economic improvement, including some stabilization in employment levels, then the upper end of the sales and EPS range we’re providing is certainly achievable. In either case, we’re going to manage our business with a relentless focus on guest satisfaction and on maintaining or reducing costs wherever possible while still making the investments that we’ve got to make in order to have long-term success.

As we’ve said before, we have a portfolio of brands that are proven and that collectively have a very strong long-term sales and earnings growth profile. We’ve got scale and all the advantages that scale brings and we’ve made changes in how we work so that our scale works even harder for us, changes that also helped us limit the earnings erosion as sales softened this past year, fiscal 2009. And then finally, we’ve got some great teams, some outstanding teams in our restaurants, in our restaurant support center. These teams are working to successfully navigate the current environment, doing a great job of that but beyond that, they are working to create a great company. All of us are focused on creating again, in good times and bad, a company that is a leader in the full-service restaurant industry now and for generations.

And with that, we are prepared to take your questions. Thank you.

Question-and-Answer Session

Operator

(Operator Instructions) Ladies and gentlemen we’ll now begin our question-and-answer session of our conference. If you wish to ask a question please depress the * followed by the 1 on your touchtone phone. You’ll hear a tone indicating that you’ve placed yourself in a queue and all questions will be polled in the order they are received. You may remove yourself from the queue at any time by depressing the pound key on your touchtone phone. And if you are using a speakerphone please pick up your handset before depressing any of the keys. And as a reminder please limit yourself to one question and one follow up and then you may re-queue again. Once again limit yourself to one question and one follow up and then re-queue if necessary. Our first question comes from the line of Jeff Omohundro of Wachovia. Please go ahead.

Jeffrey Omohundro – Wachovia Capital Markets

Thank you. Referencing Drew’s remarks on Red Lobster, the shifting emphasis to value and affordability, is this a messaging change or will there be something more significant occurring at the menu of that concept during 2010? Thanks.

Andrew H. Madsen

Jeff this is Drew, just to clarify my comments there, the overarching goal for Red Lobster this year is to continue their brand refresh, continue to broaden appeal, but we know it’s a very value-sensitive environment where affordability is a major concern in general and the higher your check is, the more of an opportunity is for brands in particular, and Red Lobster has taken steps to be able to augment their brand building messaging with more affordability and specific value messaging. So their quick catch lunch program that started late in the second half this year would be an example of something that they would be using more consistently this fiscal year.

Jeffrey Omohundro – Wachovia Capital Markets
  1  2  3  4  5  6  7  8  9  10

 


 
Sources: Data collected by 123jump.com and Ticker.com from company press releases, filings and corporate websites.
Market data: BATS Exchange. Inc.

350 Fund Managers Interviews - 10-year Annual earnings on 4,600 U.S. companies - 20-quarter Earnings on 3,800 U.S. companies - 3,200 U.S. IPO Prospectuses
- 2,100 Economic data releases from U.S., EU, UK, India, HK and Australia. 10-year Annual reports on 3,500 U.S. companies -
U.S. Earnings Calendar with 4,800 companies - 90,000 10-K reports - 26,000 Global markets news archive - 2,200 Earnings Conference Call Summaries

Other Sites:
© 1999-2012 123jump.com. All rights reserved