Olive Garden’s parent beats on earnings but pulls outlook and dividend, draws down credit line

A take-out order from a Darden Restaurants Inc. Olive Garden.

Daniel Acker | Bloomberg | Getty Images

Darden Restaurants on Thursday reported quarterly earnings and revenue that topped analysts’ expectations.

The company also withdrew its fiscal 2020 outlook and suspended its quarterly dividend, citing the uncertainty it faces as states mandate the closure of dining rooms due the coronavirus epidemic.

Shares of the company initially rose then fell 12% in premarket trading.

Here’s what the company reported compared with what Wall Street was expecting, based on a survey of analysts by Refinitiv:

  • Earnings per share: $1.89 vs. $1.88 expected
  • Revenue: $2.35 billion vs. $2.32 billion expected

Olive Garden’s parent reported fiscal third-quarter net income of $232.3 million, or $1.89 per share, up from $223.6 million, or $1.79 per share, a year earlier. Analysts surveyed by Refinitiv were expecting earnings per share of $1.88.

Net sales rose 4.5% to $2.35 billion, topping expectations of $2.32 billion. Across its eight brands, which include The Capital Grille and LongHorn Steakhouse, same-store sales grew by 2.3% during its fiscal third quarter. 

Olive Garden, which accounts for nearly half of Darden’s revenue, reported same-store sales growth of 2.1%, driven by higher prices. LongHorn Steakhouse same-store sales increased by 3.9%, while The Capital Grille’s same-store sales rose by 4.2%. Cheddar’s Scratch Kitchen was once again the laggard of Darden’s portfolio, reporting same-store sales declines of 1.6%.

The company’s same-store sales have declined 5.9% in the fourth quarter, as of March 15. 

Darden has fully drawn down its $750 million credit facility “out of an abundance of caution.”

“With the drawdown of our revolver, and cash on the balance sheet, we will have approximately $1 billion in cash on hand,” CFO Rick Cardenas said in a statement. “We believe this positions us well to deal with potential near term volatility under the current market conditions.”

Read Darden’s full earnings release here.