Analyst Note| Sean Dunlop |
Narrow-moat (based on a cost advantage) Darden Restaurants outstripped our expectations in its first fiscal quarter, with $2.4 billion in sales (up 6.2%) and diluted EPS of $1.56 (versus our 5.9% and $1.50 forecasts, respectively). While this performance was impressive against a record mark last year, pricing contributed 6.5% to the top line, implying flat volume. Still, we are encouraged by the same-store sales growth observed across its restaurant brands despite a weaker macro backdrop. In fact, management noted little sign of weakness among low-income consumers (earning less than $50,000 per year) thus far. However, we remain optimistic about Darden's position given its more diversified brand portfolio, better value proposition, and moves to attract a more affluent consumer base (all relative to 2007-09).