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How Darden Restaurants Beat on the Top and Bottom Lines

By Motley Fool Staff – Sep 26, 2018 at 10:57AM

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All-you-can-eat breadsticks? Thumbs up. Biscuits? Answer unclear, ask again later.

In this segment from Motley Fool Money, host Chris Hill and senior analysts Jason Moser, Matt Argersinger, and Ron Gross discuss the most recent quarterly results from Darden Restaurants (DRI 0.44%), owner of Olive Garden and LongHorn Steakhouse, among other chains. It was a strong report: Same-restaurant sales were up across the company's operations by 3.3%. And the biggest driver of the company's success is Olive Garden, which is great news overall. But Cheddar's Scratch Kitchen, which it bought last year, isn't doing so well.

A full transcript follows the video.

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This video was recorded on Sept. 21 , 2018.

Chris Hill: First quarter profits for Darden Restaurants came in higher than expected. Darden is the parent company of Longhorn Steakhouse, Capital Grille, and of course, Olive Garden. Darden shares falling a little bit, Ron. This was a good quarter!

Ron Gross: It's a very strong report. As you said, they beat on both sales and earnings. That's strong. The one dark spot is that Cheddar's Scratch ain't making no scratch. Same-store sales for that chain down 4%. But overall, the blended same-store restaurant sales increased 3.3% with Olive Garden, of course, leading the way at 5.3% comp sale increase.

I think things are going well. Labor costs are higher pretty much across the board. That's not surprising. But they did see a drop in food marketing and other restaurant costs, which helped to offset it. They raised guidance. Very strong report.

Hill: Let's go to our man behind the glass, Steve Broido. Steve, before we get to the stocks on our radar, how much credit would you like to claim personally for Darden Restaurants' strong quarter?

Steve Broido: I did eat there yesterday, and I'm not kidding. The thing is, I get a lot of gift cards because people think I love the Olive Garden, because I do love the Olive Garden. So I came with three gift cards. I was like, "I don't know how much money's on these." I got a free meal. It was great!

Hill: That's fantastic. That's going to show up in next quarter's report.

Broido: Next quarter, yeah.

Hill: You're welcome, shareholders.

Chris Hill has no position in any of the stocks mentioned. Ron Gross has no position in any of the stocks mentioned. Steve Broido has 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.

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