Darden Restaurants, Inc. (NYSE:DRI) is a leading full-service dining restaurant operator, owning and operating a portfolio of popular brands including Olive Garden, LongHorn Steakhouse, Cheddar's Scratch Kitchen, Yard House, Ruth's Chris Steak House, The Capital Grille, Seasons 52, Bahama Breeze, Eddie V's Prime Seafood, and The Capital Burger. The company has demonstrated resilience and adaptability in navigating the challenging operating environment, delivering strong financial results in fiscal year 2024.

Financials

In fiscal year 2024, Darden generated total sales of $11.39 billion, a testament to the strength of its diversified brand portfolio and operational excellence. The company's annual net income reached $1.027 billion, showcasing its ability to drive profitability even in the face of macroeconomic headwinds. Darden's annual operating cash flow stood at $1.621 billion, providing ample liquidity to fund growth initiatives and return capital to shareholders. Furthermore, the company's annual free cash flow reached an impressive $993.4 million, underscoring its financial flexibility and cash-generating capabilities.

On a quarterly basis, Darden's performance has been equally impressive. In the fourth quarter of fiscal year 2024, the company reported total sales of $3 billion, a 6.8% increase compared to the same period in the prior year. This growth was driven by the addition of 80 company-owned Ruth's Chris Steak House restaurants and 37 net new restaurants from the company's legacy brands. Darden's same-restaurant sales for the quarter were flat, outpacing the industry by 80 basis points, with same-restaurant guest counts exceeding the industry by 130 basis points.

Operational Performance

The company's operational discipline and cost management strategies have been instrumental in driving its financial performance. In the fourth quarter, Darden's food and beverage expenses were 20 basis points better than the prior year, as commodities inflation was better-than-expected at approximately 2%. Restaurant labor costs were also 10 basis points better, driven by productivity improvements and favorability in other benefits, which more than offset the impact of pricing below labor inflation of approximately 4%. These cost management efforts, combined with strong sales execution, resulted in a 20 basis point improvement in restaurant-level EBITDA to 20.9%.

Brand Performance

Darden's brand-level performance has been equally noteworthy. Olive Garden, the company's largest brand, increased total sales by 0.7% in the fourth quarter, driven by new restaurant growth, despite negative same-restaurant sales of 1.5%. However, Olive Garden's same-restaurant guest counts outperformed the industry benchmark by 60 basis points, showcasing the brand's ability to maintain its value proposition and appeal to consumers.

LongHorn Steakhouse, another key brand in Darden's portfolio, delivered a 7.2% increase in total sales, driven by same-restaurant sales growth of 4% and new restaurant growth. LongHorn's same-restaurant sales outperformed the industry by 480 basis points, highlighting the brand's strong competitive positioning and operational execution.

The company's fine dining segment, which includes Ruth's Chris Steak House, The Capital Grille, and Eddie V's, also contributed to Darden's overall performance. Despite negative same-restaurant sales at Capital Grille and Eddie V's, the fine dining segment's profit margin expanded in the fourth quarter, driven by improvements in the cost base.

Darden's other business segment, which includes Cheddar's Scratch Kitchen, Yard House, Seasons 52, Bahama Breeze, and The Capital Burger, saw a 1.3% increase in total sales, partially offset by combined negative same-restaurant sales of 1.1%. However, the segment's profit margin improved by 160 basis points to 17.4%, driven by the sales leverage from the additional royalty revenue generated by the Ruth's Chris franchise and managed locations.

Outlook

Looking ahead, Darden has provided a robust financial outlook for fiscal year 2025. The company expects total sales to be in the range of $11.8 billion to $11.9 billion, driven by same-restaurant sales growth of 1% to 2% and the addition of 45 to 50 gross new restaurants. Darden anticipates total inflation of approximately 3%, including commodities inflation of approximately 2% and labor inflation of approximately 4%. The company's annual effective tax rate is expected to be around 13%, and it projects approximately 119 million diluted average shares outstanding for the year. This financial guidance translates to diluted net earnings per share between $9.40 and $9.60.

Conclusion

Darden's strong financial performance and forward-looking outlook are a testament to the company's strategic initiatives and operational excellence. The company's focus on delivering exceptional guest experiences, maintaining cost discipline, and pursuing accretive growth opportunities has positioned it well to navigate the evolving industry landscape and drive long-term shareholder value.

As Darden continues to execute its proven strategy, investors can expect the company to leverage its diversified brand portfolio, operational expertise, and financial flexibility to capitalize on emerging opportunities and deliver sustainable growth in the years ahead.