Darden Delivers Edible Numbers
Our casual dining boom play Darden Restaurants (DRI) reported on Thursday that same-store sales, or sales at stores open at least one year, jumped at Red Lobster restaurants in January.Same-store sales, which are a closely watched gauge of a retailer's performance, increased between 11 percent and 12 percent at Red Lobster.
Darden said guest counts were up 8 percent to 9 percent, while the average check rose between 2 percent and 3 percent on slightly higher prices.
We've been touting Darden since it was at $35, if you recall:
Darden -- a pioneer in casual dining and conglomerate of 1,380 restaurants -- is catching on with a loyal customer base that appreciates a balance of price, selection, and service.Whatever you think of the food, shares look tasty.
Its shares, anyway you look at them, are awfully cheap. On a price/book, price/earnings, price/cash flow, price/sales, and PEG basis, Darden's valuation lags that of both its industry and the S&P.
Take Darden's price/earnings multiple, for instance.
The casual dining industry trades at 24 X forward earnings. Darden trades at 18 X projected EPS . Let's be conservative: If Darden trades up to even 20 X earnings-- we have a $40 stock (Darden is expected to earn $2 next year), which sounds reasonable to us.
We expect that investors will wake up to such valuation anomalies and give Darden the multiple(s) it deserves. Darden's sales per restaurant continue to lead this hypercompetitive $63 billion industry.
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