Fans of authentic Italian trattorias may thumb their carpaccio-sniffing noses at the thought of patronizing their local Olive Garden, but Darden Restaurants
Rising comps for Darden are as relentless as Olive Garden's endless breadsticks and salad. With a healthy 5.7% gain at the individual unit level for the most recent quarter, comps have now risen at Olive Garden for an amazing 54 consecutive quarters.
Even fallen former world-beaters such as Cheesecake Factory
Unfortunately for Darden, though, the praise for Darden's latest quarter begins and ends with Olive Garden. Comps at the company's other concepts -- Red Lobster, LongHorn Steakhouse, Capital Grille, and Bahama Breeze -- all fell during the quarter.
Darden's revenue climbed 25% higher to $1.8 billion, but that increase was merely the result of last year's acquisition of RARE Hospitality, which brought LongHorn and the upscale Capital Grille into the Darden family.
Earnings of $0.80 a share from continuing operations, meanwhile, were essentially flat with last year's showing, even though earnings would have come in at $0.85 a share on an adjusted basis.
The company is expecting only marginal bottom-line growth in 2008, even though the top line should clock in roughly 20% higher on the steakhouse acquisition, new openings, and expectations for positive comps beyond its Olive Garden workhorse.
I'm not impressed with Darden's organic growth prospects, but I have to tip my hat to Olive Garden. Casual-dining Italian chains usually have a rough go publicly. Bertucci's cashed out. Buca
As long as Olive Garden can keep the unlimited comp hikes coming to the table, Darden has a chance.
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Longtime Fool contributor Rick Munarriz is always on the lookout for a good Italian eatery, and he has plenty to pick from in Miami. He does not own shares in any of the companies mentioned in this story, save for Cheesecake Factory. He is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early. The Fool's disclosure policy likes its cuts well done.