If Wednesday's report out of Darden
While wiping away 10 million shares from its fully diluted share count over the past year, some pretty impressive things can happen on the way to the bottom line. Even though the company posted a 3% increase in sales for the first quarter and an impressive 11% increase in earnings per share, it's not as if margins ran wild. In fact, actual earnings rose just 3.5% at the company behind the Red Lobster and Olive Garden chains.
We shouldn't take Darden to task for that. It's great to see a company eat its own cooking. Instead of saying it grew sales by just 3%, we can divide the top line by the outstanding shares and discover that Darden actually grew sales per share by a hearty 10%. It's about spin, baby.
Darden isn't the only restaurant company swallowing its own shares. Last month, Chili's parent Brinker International
One can argue about the merit of a slow-growing restaurant stock like Brinker taking on debt to lower its share count. One can even make the case that McDonald's would be better off holding on to the fast-growing fresh Mex chain.
I hear you. I see the point. However, the trend is undeniable in this typically sleepy sector. Share buybacks? It's what's for dinner.
None of these stocks has been singled out in any of our newsletters, even though Motley Fool Inside Value readers were treated to a restaurant stock pick in the latest issue.
Longtime Fool contributor Rick Munarriz enjoys eating at Olive Garden, unless he has a craving for something Italian. Seriously, he really doesn't mind the place. He does not own shares in any of the companies mentioned in this story. Rick is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early. The Fool has a disclosure policy.