Darden’s Tepid 2020 Outlook Raises Questions, but Still Leaves Room for Upside; Shares Fairly Valued
With Olive Garden comps decelerating (2.4% versus an average of 4.4% the past three quarters) and a tepid outlook for fiscal 2020 (comps of 1%-2%, total sales growth of 5.3%-6.3%, and diluted EPS of $6.30-$6.45, versus consensus of $6.46), it’s reasonable for investors to ask whether Darden’s fourth-quarter update is indicative of structural industry headwinds, increased competition, or resetting expectations against more difficult comparisons. We believe the answer lies somewhere in between, as...Darden Restaurants is a restaurant company. The company owns and operates restaurants through subsidiaries in the U.S. and Canada under the Olive Garden?, LongHorn Steakhouse?, Cheddar's Scratch Kitchen?, Yard House?, The Capital Grille?, Seasons 52?, Bahama Breeze?, and Eddie V's Prime Seafood? trademarks. The company has four reportable segments: Olive Garden; LongHorn Steakhouse; Fine Dining (which includes The Capital Grille and Eddie V's); and Other Business (which includes Cheddar's Scratch Kitchen, Yard House, Seasons 52, Bahama Breeze and results from its franchise operations).
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