Ruth’s oldest Chris increases revenue for Darden
Orlando, Florida — In the first quarter that concluded on August 27, Darden Restaurant Inc. received some encouraging news. Executives raised expectations for synergies from the purchased Ruth’s Chris Steak House brand, and same-restaurant sales improved by 5%.
Nevertheless, Orlando-based Darden maintained its fiscal-year guidance of $8.55 to $8.85 per share in adjusted diluted net profits from continuing operations. Chief financial officer Rajesh Vennam stated he had noticed “mixed data” on consumer trends.
“What happens with the consumer is obviously the primary biggest risk,” he stated during a first-quarter results conference call on September 21. The commodities come in second. We’re attempting to comprehend the future, particularly as it pertains to beef, which makes up 22% of our basket. There is therefore considerable danger. Due to a mid-single digit reduction in supply, beef prices have remained quite high. Although it’s still too early, we’re starting to see some more imports that might help with the beef situation.
“I guess, taking everything into account at this point, we thought it prudent to stick with the guidance we provided.”
Compared to the first quarter of the prior year, when Darden’s net earnings were $193 million, or $1.58 per share, they increased by 0.7% to $195 million, or $1.61 per share, on the common stock during the period. There was a negative effect of 18¢ per share from the Ruth’s Chris sale and integration-related expenditures.
Due to a 12% rise in same-restaurant sales as well as the addition of 46 net new restaurants and 77 company-owned Ruth’s Chris Steak House locations, total sales increased to $2.73 billion from $2.45 billion.
President and CEO of Darden Restaurants Ricardo Cardenas stated, “We are seeing a little softness versus last year with household incomes above $125,000, and that primarily affects our fine-dining brands, but it does affect all of our brands.”
Plans to operate additional eateries are also hampered by delays in obtaining permits.
“We also like to have a good margin of error with our projects, and we are being a little selective, particularly where costs and inflation have made the economics of the deals a little less attractive,” Mr. Cardenas stated. Because the expenses of a few projects are a little more than we had anticipated, we have had to reject them down.
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“In the past, we projected annualized run-rate synergies of $20 million,” Mr. Vennam stated. “We anticipate investing approximately $10 million into the business, resulting in annualized net run rate synergies of approximately $25 million, and we now expect approximately $12 million of net synergies for fiscal 2024.” In addition, “we now expect approximately $35 million of gross run-rate synergies and other cost savings.”