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Darden Shares Tumble after Company Lowers 2012 Outlook (DRI)

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Darden RestaurantsShares of Darden Restaurants Inc. (NYSE: DRI), a full-service restaurant company, tumbled in trading today after the company lowered its fiscal 2012 outlook due to difficulties at its Olive Garden chain and higher costs.

Darden, which owns Red Lobster restaurant chain, said that it expects earnings per share to grow between 4% and 7% in fiscal 2012. This is down from the company’s previous forecast of earnings per share growth of 12%-15%. Under the revised forecast, Darden’s earnings for the fiscal year 2012 are expected to come in between $3.55 per share and $3.65 per share. Analysts were expecting the company’s full year earnings to come in at $3.77 per share.


Darden also slashed its revenue outlook for the fiscal year 2012. The company expects revenue to grow between 6% and 7% in the fiscal year, down from previous estimate of 6.5%-7.5%. The revised revenue forecast implies revenue of $7.95 billion to $8.02 billion in fiscal 2012, compared with Street estimates of $7.98 billion.

The downward revision has been done partly due to the fact that the company’s Olive Garden chain has struggled with a decline in customers. Darden said that the promotions and new merchandising strategies it adopted in the quarter ended November 30 did not reverse the decline as much as anticipated.

A number of brokerages also slashed their price target on Darden shares following the downward revision. Andy Barish of Jefferies & Co. lowered the price target on Darden shares from $53 to $52, while Gregory Badishkanian of Citi Investment Research lowered the price target on Darden shares from $58 to $53. Both Jefferies and Citi have maintained their Buy rating on Darden shares.

Darden shares fell to an intra-day low of $41.74 before ending the day 12.38% lower at $41.82 on above average volume of 15.92 million.

Darden shares have fallen 9.95% this year.

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edliston
Post Written By: Ed Liston

Ed Liston is a senior contributing editor at TheStockMarketWatch.com. An active market watcher and investor, Ed guides an independent team of experienced analysts and writes for multiple stock trader publications. He is widely quoted in various financial publications on the Internet. When Ed is not writing about stocks, investing in stocks, talking about stocks, or otherwise doing something stock related, he likes to go sailing and fishing in his yacht.


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Ed Liston

Ed Liston is a senior contributing editor at TheStockMarketWatch.com. An active market watcher and investor, Ed guides an independent team of experienced analysts and writes for multiple stock trader publications. He is widely quoted in various financial publications on the Internet. When Ed is not writing about stocks, investing in stocks, talking about stocks, or otherwise doing something stock related, he likes to go sailing and fishing.

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