Darden Restaurants, Inc. (DRI)
F1Q11 (Qtr End 08/29/2010) Earnings Call
September 22, 2010 8:30 am ET
Matthew Stroud - VP, IR
Clarence Otis - Chairman and CEO
Drew Madsen - President and COO
Brad Richmond - CFO
Gene Lee - President, Darden's Specialty Restaurant Group
Brad Ludington - KeyBanc Capital Markets
Jeff Omohundro - Wells Fargo
Nicole Miller - Piper Jaffray
John glass - Morgan Stanley
Jeffrey Bernstein - Barclays Capital
Larry Miller - RBC
Jonathan Kamp - Robert W. Baird
Mitch Speiser - Buckingham Research
Howard Penney - Hedgeye Risk Management
John Ivankoe - JPMorgan
Joe Buckley - Bank of America
Ladies and gentlemen, thank you for standing by and welcome to the First Quarter Earnings Release. (Operator Instructions)
I'd now like to turn the conference over to our host, Mr. Matthew Stroud. Please go ahead.
Previous Statements by DRI
» Darden Restaurants, Inc. F4Q10 (Qtr End 05/30/2010) Earnings Call Transcript
» Darden Restaurants Inc. F3Q10 (Qtr End 02/28/10) Earnings Call Transcript
» Darden Restaurants F2Q10 (Qtr End 11/29/09) Earnings Call Transcript
Good morning, everyone. With me today are Clarence Otis, Darden's Chairman and CEO; Drew Madsen, Darden's President and COO; Brad Richmond, Darden's CFO; and Gene Lee, President of Darden's Specialty Restaurant Group. We welcome those of you joining us by telephone or the internet.
During the course of this conference call Darden Restaurant's officers and employees may make forward-looking statements concerning the company's expectations, goals or objectives. Forward-looking statements are made under the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995.
Any forward-looking statements speak only as of the date on which such statements are made and we undertake no obligation to update such statements to reflect events or circumstances arising after such date. We wish to caution investors not to place undue reliance on any such forward-looking statements. By their nature, forward-looking statements involve risks and uncertainties that could cause actual results to materially differ from those anticipated in the statements. The most significant of these uncertainties are described in Darden's Form 10-K, Form 10-Q and Form 8-K reports including all amendments to those reports.
These risks and uncertainties include food safety food-borne illness concerns, litigation, unfavorable publicity, federal, state and local regulation of our business including healthcare reform, labor insurance costs, technology failures, health concerns including virus outbreaks, the intensely competitive nature of the restaurant industry, factors impacting our ability to drive sales growth, the impact of the indebtedness we incur in the RARE acquisition, our plans to expand our newer brands like Bahama Breeze and Seasons 52, our lack of suitable new restaurant locations, higher than anticipated cost to open, close, or remodel restaurants, increased advertising and marketing costs, a failure to develop and recruit effective leaders, the price and availability of key food products and utilities, shortages or interruptions in the delivery of food or other products, volatility in the market value of derivatives, general macroeconomic factors including unemployment in interest rates, severe weather conditions, disruptions in the financial markets, a possible impairment in the carrying value of our goodwill or other intangible assets, a failure of our internal controls over financial reporting and other factors and uncertainties discussed from time to time in reports filed by Darden with the Securities and Exchange Commission.
A copy of our press release announcing our earnings in the Form 8-K used to furnish the release to the Securities and Exchange Commission and any other financial and statistical information about the period covered in the conference call, including any information required by Regulation G is available under the heading 'Investor Relations' on our website at darden.com.
We plan to release fiscal 2011 second quarter earnings and same-restaurant sales for fiscal September, October and November 2010 on Monday, December 20th 2010 after the market close. We released first quarter earnings yesterday afternoon. These results were available on PR Newswire and other wire services.
We recognize that most of you have reviewed our first quarter results, and we won't take the time to go through them in detail once again. Now we would spend time on a brand-by-brand operating summary in an effort to provide more time for your questions.
Rather, Brad will provide some additional detail about the financial results for the quarter. Drew will briefly review our operating performance in the first quarter followed by Clarence, who will have some additional remarks. After that, Clarence, Drew, Brad and Gene will then respond to your questions. Brad?
Thank you, Matthew, and good morning. Darden's total sales from continuing operations increased 4.2% in the first quarter to $1.81 billion. This strong top-line performance compares to 0.8% total industry sales growth for the industry as measured by Knapp-Track and excluding Darden, indicating meaningful share growth for Darden.
Darden's blended same-restaurant sales for the first quarter were up 1.1%. For context, industry same-restaurant sales as measured by Knapp-Track and excluding Darden are estimated to be flat for the quarter.
Olive Garden first quarter same-restaurant sales increased 2.7%. Red Lobster first quarter U.S. same-restaurant sales decreased 1.7%. Red Lobster did have a promotional mismatch in the quarter. Last year, Endless Shrimp started in the first quarter. This year, the promotion started in the second week of the second quarter.
The change adversely affected Red Lobster's first quarter same-restaurant sales results by approximately 100 basis points. The adverse effect for the month of August was approximately 300 basis points.
LongHorn Steakhouse first quarter U.S. same-restaurant sales increased 2.2%. The Capital Grille's first quarter same restaurant sales increased 2.7%. Bahama Breeze first quarter same-restaurant sales decreased 0.1% and Seasons 52 first quarter same-restaurant sales increased 5.8%.
Now let's review the margin analysis for the first quarter. Food and beverage expenses were 77 basis points lower than last year on a percentage of sales basis as a result of reduced food costs. We have continued to benefit from lower commodity prices in the first quarter this fiscal year, and we expect that will continue into the second quarter.