Restaurant stock under pressure: Darden Restaurants, Inc. (NYSE: DRI)

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Darden Restaurants, Inc. (NYSE: DRI) stock fell 6.26% after the company reported the net income of $24.7 million compared to $115.6 million, in last year’s second quarter.

DRI in the second quarter of FY 20 has reported the adjusted earnings per share of $1.12, beating the analysts’ estimates for the adjusted earnings per share of $1.07, according to Zacks Investment Research. The company had reported the adjusted revenue growth of 4.6 percent to $2.06 billion in the second quarter of FY 20, which met the analysts’ estimates. The sales growth is driven by 2.2% growth from the addition of 37 net new restaurants and same-restaurant sales growth of 2%.

Moreover, Olive Garden’s sales and profit both grew in the quarter on the back of positive same-restaurant sales and net new restaurant growth. Segment profit margin expanded by 20 basis points by leveraging the same-restaurant sales growth and managing cost effectively. LongHorn, also grew sales and segment profit in the second quarter, due to positive same-restaurant sales and net new restaurant growth. The sales for the other business segment rose 3.5%, due to net new restaurants. LongHorn Steakhouse’s total sales rose 8.4% due to 1.7% growth from new restaurants and same-restaurant sales growth of 6.7%.

Additionally, the company has declared a regular quarterly cash dividend of $0.88 per share on the Company’s outstanding common stock, payable on February 3, 2020 to shareholders of record at the close of business on January 10, 2020. During the second quarter, the Company has repurchased approximately 1.2 million shares of its common stock for a total cost of approximately $136 million. As of the end of the second quarter of FY 200, the Company had approximately $390 million remaining under the current $500 million repurchase authorization.

For fiscal 2020, the company expects total sales growth to be in the range of 5.3% to 6.3%, including approximately 2% growth related to the 53rd week. Same-restaurant sales growth is expected to be in the range of 1% to 2%. The company intends approximately 50 gross and 44 net new restaurant openings in FY 20. Total capital spending is expected to be in the range of $450 to $500 million and total inflation to be of approximately 2.5%. Effective tax rate is expected to be in the range of 10% to 11%. DRI expects full-year earnings to be in the range of $6.30 to $6.45 per share.

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