Multi-chain operator Darden Restaurants (NYSE:DRI) has been one of the best-performing restaurant stocks in the last year. In an industry of hypercompetition and overexpansion, with diners and per-location profit margins having thinned out, Darden has done a good job of outpacing many of its peers.

But not everything was perfect this past year. The marquee brands Olive Garden and LongHorn Steakhouse are bearing the bulk of the load while smaller names continue to struggle. In spite of the disconnect between all the moving parts, Darden thinks another good year lies ahead.

Fiscal 2019 in review

From a high-altitude viewpoint of its latest earnings report out Thursday, Darden did quite well during its fiscal 2019 tour. Revenue was up 5% from a combination of 39 net new restaurants in operation and systemwide comparable-restaurant sales growth of 2.5% during the year. For a company with over 1,700 locations, comparable sales (a metric that combines foot traffic and average guest ticket size) are the single most important way to increase profits. Thus, the revenue growth in 2019 equated to big gains for the bottom line.

Metric

12 Months Ending May 26, 2018

12 Months Ending May 27, 2019

% Increase (YOY)

Revenue

$8.08 billion

$8.51 billion

5%

Operating income

$767 million

$833 million

9%

Net earnings per share

$4.73

$5.69

20%

Data source: Darden Restaurants. YOY = year over year.  

Digging deeper, though, it's clear that this isn't a business firing on all cylinders. While the two biggest names in the fold -- Olive Garden and LongHorn Steakhouse -- posted comps growth of 3.9% and 3.3%, respectively, in the last 12 months, other brands didn't fare so well. Most notable was Cheddar's Scratch Kitchen, which Darden purchased in early 2017 for $780 million. The comfort-food chain has opened new restaurants during that time, but comps -- down another 3.4% in the last year -- keep erasing those gains.

Image source: Getty Images.

A casual-dining mixed bag

Darden management insists that Cheddar's is still integrating tools into the mix that have helped make Olive Garden and LongHorn a success. In the meantime, though, the two largest segments at Darden will continue to carry results while Cheddar's and a handful of other small underperforming names like Bahama Breeze and Seasons 52 keep diluting results. Nevertheless, a further breakdown of the comps growth shows how powerful those two main brands are.

Full-Year Fiscal 2019 Metric

Olive Garden

LongHorn Steakhouse

Same-restaurant traffic growth

0.1%

0.1%

Pricing growth

1.8%

1.7%

Menu mix growth

2%

1.5%

Total same-restaurant sales growth

3.9%

3.3%

Data source: Darden Restaurants. 

The flat foot traffic might seem concerning, but when you note that the industry average has been in negative territory for years now, it says something about Darden's performance. Diners are loyal to Olive Garden and LongHorn, and Darden has made the most of that. It's also the primary reason shareholders got treated to a 17% quarterly dividend increase, good for a 3%-a-year yield as of this writing.

For the fiscal year 2020, 44 net new restaurants, 1% to 2% comps growth, and an extra 53rd week of operations are projected and have management expecting 5.3% to 6.3% total sales growth. Resulting earnings growth is expected to be at least 10%. It's a slowdown from last year, but nonetheless a respectable outlook for an imperfect hodgepodge of restaurant brands. Darden isn't nearly the deal it was earlier this year, but it's worth watching.

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Nicholas Rossolillo and his clients have no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.