Darden Restaurants, Inc. — FY2024 Form 10-K
Reporting period: Fiscal year ended May 26, 2024 (52 weeks), compared with fiscal 2023 ended May 28, 2023 (52 weeks). Although the request metadata refers to “2023 Q4,” this filing reports the full fiscal year; it does not provide a separate Q4 results summary. Darden operated 2,031 company-owned restaurants in the U.S. and Canada across ten brands. It completed its acquisition of Ruth’s Chris in June 2023.
Financial performance and key metrics
| Metric | FY2024 | FY2023 |
|---|---|---|
| Sales | $11.390 billion | $10.488 billion |
| Operating income | $1.314 billion | $1.202 billion |
| Earnings from continuing operations | $1.031 billion | $983.5 million |
| Diluted EPS from continuing operations | $8.53 | $8.00 |
| Net earnings | $1.028 billion | $981.9 million |
| Operating margin | 11.5% | 11.5% |
| Effective tax rate | 12.3% | 12.2% |
| Operating cash flow from continuing operations | $1.622 billion | $1.553 billion |
| Capital expenditures | $601.2 million | $564.9 million |
Sales rose 8.6%, reflecting a 1.6% blended same-restaurant sales increase, Ruth’s Chris and net new restaurants. Continuing-operations earnings increased 4.8%; diluted EPS increased 6.6%. The company reported a $2.9 million loss from discontinued operations, versus a $1.6 million loss in FY2023. Operating cash flow less capital expenditures was approximately $1.021 billion, a simple calculation rather than a company-defined free-cash-flow measure.
Same-restaurant sales by segment: Olive Garden +1.6%; LongHorn Steakhouse +4.7%; Fine Dining -2.4%; Other Business -0.7%. Management attributed growth at Olive Garden and LongHorn to higher average checks, partly offset by lower guest counts. Fine Dining and Other Business also recorded guest-count declines; Fine Dining’s results include Ruth’s Chris only from the acquisition date.
Costs and margins: Food and beverage costs improved to 30.9% of sales from 32.0%, supported by pricing leverage, partly offset by 0.4% food inflation. Restaurant labor was 31.8% of sales versus 31.9%; labor inflation offset sales leverage and productivity gains. Restaurant expenses were 16.1% versus 16.2%. Marketing, G&A, and depreciation and amortization increased as a share of sales. G&A included Ruth’s Chris acquisition and integration costs; total related expenses were $51.8 million ($42.1 million after tax).
Liquidity, debt, and capital allocation
Cash and cash equivalents were $194.8 million at year-end, down from $367.8 million. Current assets were $822.8 million and current liabilities were $2.193 billion. Management notes that the cash-oriented business model typically operates with current liabilities above current assets.
Reported short-term debt was $86.8 million of commercial paper; long-term debt carrying value was $1.370 billion. The company had $1.16 billion of available capacity under its $1.25 billion revolving credit facility after commercial paper and letters of credit. It was in covenant compliance. Adjusted debt to adjusted total capital, including a lease-debt equivalent and guarantees, was 66%, up from 62%. Lease liabilities totaled $5.276 billion. Contractual obligations totaled $6.263 billion, including $3.030 billion of leases.
FY2024 investing cash outflow was $1.325 billion, including $701.1 million net cash used for Ruth’s Chris and $601.2 million of capital expenditures. Financing cash outflow was $483.4 million, including $628.4 million of dividends and $453.9 million of repurchases, partly offset by debt issuance proceeds. Dividends declared were $5.24 per share, versus $4.84 in FY2023.
Outlook, commentary, risks, and unusual items
For FY2025, Darden expects continuing-operations sales growth of 3.5%–4.5%, same-restaurant sales growth of 1.0%–2.0%, 45–50 new restaurant openings, a 13% effective tax rate, and capital expenditures of $550–$600 million. Same-restaurant sales guidance excludes Ruth’s Chris for the specified 16-month period. Management said the outlook does not include the planned Chuy’s acquisition.
On July 17, 2024, after fiscal year-end, Darden agreed to acquire Chuy’s Holdings for $37.50 per share in cash, with an enterprise value of approximately $605 million. Closing was expected in Q2 FY2025, subject to customary conditions, and was to be funded with new debt issuance. Completion, integration, and expected benefits are uncertain.
Management cited continuing food, labor, health-care, utility, and other inflation pressures, as well as the need to balance menu pricing with guest traffic. Principal risks include weaker consumer spending or traffic, intense competition, labor availability and costs, food safety and supply interruptions, severe weather, cybersecurity and privacy incidents, regulatory changes, and execution of growth and acquisition plans. The filing reports no cybersecurity incident then known to be reasonably likely to materially affect the company.
Other notable items include $12.4 million of net impairment and disposal expense, compared with a $10.6 million net gain in FY2023; closures of nine locations were among the FY2024 factors. The company disclosed $71.0 million of guarantees associated primarily with previously assigned Red Lobster leases, with a $10.6 million recorded liability for expected credit losses. Management did not expect current litigation, individually or in aggregate, to materially adversely affect financial position, results, or liquidity. The independent auditor issued unqualified opinions on the financial statements and internal controls; management also concluded controls were effective.
Important facts for investors to verify
- Whether sales and earnings growth persist after separating Ruth’s Chris acquisition effects, new-unit growth, pricing, and guest-count trends.
- Whether FY2025 sales and same-restaurant sales guidance is achieved, particularly given lower traffic in several segments.
- How food, labor, and other inflation affect margins, and whether pricing can offset cost increases without weakening demand.
- The funding, final terms, closing status, integration costs, and realized benefits of the Chuy’s acquisition, including the effect of additional debt.
- Debt and lease obligations, liquidity, capital spending, dividends, and repurchases; also monitor the disclosed lease guarantees and impairment exposure.