For the third quarter of its fiscal year, Darden Restaurants Inc. has released surprisingly strong results. Darden, based in Orlando, Florida, earned $105.9 million, or 82 cents per share, in the quarter. This figure was a 21 percent drop from a year prior, mainly due to higher costs. On an adjusted basis, the company earned $1.21 per share, a penny better than Wall Street had expected, according to a survey by Zacks Investment Research.
Higher sales at the company’s Olive Garden chain were responsible for a significant portion of the improved results. Sales at Olive Garden restaurants rose 6.6 percent in the third quarter to about $1.02 billion. Sales at its LongHorn Steakhouse restaurants were not far behind, rising 5.4 percent to $425 million. The company also reported that sales at fine dining operations rose 5.4 percent to $146 million and sales at other businesses rose 10.7 percent to $256.2 million.
The fortunes of Darden seem to have turned around after activist investor Starboard Value LP ousted the company’s entire board in late 2014. It was the first total overthrow of an S&P 500 boardroom. Before taking over the board, Starboard released a 294-page presentation on what Darden’s management was doing wrong. The presentation mentioned a host of problems, including the number of breadsticks brought to diners and the way pasta was cooked.
Jeffrey Smith, who heads Starboard, was named chair at Darden after the fight. Since then, shares of Darden have risen more than 30 percent. As a sign of the company’s success, Smith has resigned from Darden’s board of directors. The board named Charles M. Sonsteby, a current independent director on Darden’s board and the chief administrative office and CFO of The Michaels Companies, as the new chairman.
Darden now expects full-year earnings in the range of $3.48 to $3.52 per share. Analysts estimated annual earnings of $3.48. However, following Smith’s announcement, shares of Darden opened in negative territory and continued to fall. The stock is currently down 3.5 percent.