After the bell yesterday, Darden Restaurants
A funny thing happened this time, however. Darden announced that Red Lobster's October same-store sales actually rose 9%-10%. No, that's not a typo. The gain was the first since February, and even outpaced the 6%-7% improvement reported at Olive Garden. Much of the credit for the unexpected gain goes to an improvement in store traffic, which registered a gain for the first time in 14 months. Then, proving that the month before was not a fluke, Red Lobster reported another rise in November.
The back-to-back gains helped the struggling seafood specialist finally end its slump and post a 3.4% increase in second-quarter same-store sales. Olive Garden, meanwhile, must wonder what all the fuss is about; the Italian-themed chain has delivered 40 consecutive quarters of same-store sales growth. Well, with yesterday's 5.5% increase, make that 41 and counting.
With both chains finally working in tandem, overall sales rose 7.6% to 1.23 billion. Earnings surged 43% to $43 million, or $0.26, from $30.1 million ($0.18) the year before. The results came in three cents ahead of estimates, including the fractional per-share impact of an earnings restatement. In another example of the malleability of corporate earnings, Darden announced that the implementation of a new accounting policy will force the restatement of financial results dating back to 1996.
Management is optimistic about the future, and has bumped up its full-year guidance, with earnings growth now projected at 10%-15% (excluding restructuring charges). Darden appears to have sidestepped the general slowdown that has settled over the casual dining sector.
Applebee's
Whether Red Lobster's turnaround is sustainable, or simply the short-term result of a popular "endless shrimp" campaign -- a promotion I personally took advantage of on more than one occasion -- remains to be seen. For now though, Darden shareholders are just happy to see the seafood chain moving in the right direction.
And now for dessert:
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Fool Contributor Nathan Slaughter owns none of the companies mentioned.