EPS of $2.57 increased by 60.3% from previous year
Gross margin of 18.2%
Net income of 308.10M
""on the food basket, we're basically assuming commodities to be around 2%. I think the biggest driver within the food basket is beef. We still expect beef to be in the mid-single-digits. And then we actually expect low-single-digit deflation in chicken."" - Raj Vennam
DRI QQ4 2024 Earnings Review: Ruth’s Chris Integration Complete; Steady Profitability with 2025 Outlook in View (Darden Restaurants, DRI)
Executive Summary
- Darden reported a strong finish to fiscal 2024 with Q4 revenue of $2.958 billion and net income of $308.1 million, or $2.58 per share (GAAP). Adjusted diluted EPS from continuing operations rose 2.7% to $2.65 for the fourth quarter, and adjusted EBITDA was $523 million, underscoring the company’s cost discipline as inflation moderated.
- For the full year, Darden delivered total sales of about $11.4 billion and an adjusted EPS of $8.88, with a total shareholder return of 14.2% for fiscal 2024, placing TSR near the high end of its long-term target range (10-15%). Ruth’s Chris integration was completed within the year, contributing to synergies and a mid-single-digit per-share accretion during the period.
- Management highlighted disciplined execution across the portfolio, including strong labor productivity, advantageous commodity dynamics, and selective pricing, all while maintaining a “profitable sales growth” framework. Looking ahead, Darden provided FY2025 guidance: total sales of $11.8–$11.9 billion, 1–2% same-restaurant sales growth, 45–50 net new restaurants, capex of $550–$600 million, ~3% inflation, an effective tax rate around 13%, ~119 million diluted shares, and EPS of $9.40–$9.60. The board also approved a 7% dividend increase to $1.40 per quarter.
- The driver thesis remains that Darden’s portfolio (notably Olive Garden and LongHorn) can sustain growth through mix management, menu/value innovations, and disciplined capital allocation, supported by a strengthened leadership slate to scale the Specialty Restaurant Group and Ruth’s Chris franchise opportunities.
Key Performance Indicators
Revenue
2.96B
QoQ: 0.00% | YoY:8.30%
Gross Profit
537.00M
18.16% margin
QoQ: 0.24% | YoY:-3.48%
Operating Income
396.80M
QoQ: 3.20% | YoY:61.92%
Net Income
308.10M
QoQ: 0.00% | YoY:58.41%
EPS
2.58
QoQ: 0.00% | YoY:60.25%
Revenue Trend
Margin Analysis
Key Insights
Revenue (Q4 2024): $2.9573B; YoY +8.3%, QoQ +0.0%
Gross profit: $537M (GAAP) with gross margin 18.16% for Q4; YoY margin change: -3.48% (decline) vs prior year; QoQ +0.24% in margin
Operating income: $396.8M; operating margin 13.42% (Q4); YoY margin expansion driven by cost discipline and mix benefits
Net income: $308.1M; net margin 10.42%; EPS $2.58 (GAAP); diluted EPS $2.57; YoY EPS growth +60.3%
- Revenue (Q4 2024): $2.9573B; YoY +8.3%, QoQ +0.0%
- Gross profit: $537M (GAAP) with gross margin 18.16% for Q4; YoY margin change: -3.48% (decline) vs prior year; QoQ +0.24% in margin
- Operating income: $396.8M; operating margin 13.42% (Q4); YoY margin expansion driven by cost discipline and mix benefits
- Net income: $308.1M; net margin 10.42%; EPS $2.58 (GAAP); diluted EPS $2.57; YoY EPS growth +60.3%
- EBITDA: $516.5M (GAAP); adjusted EBITDA (Q4) $523M; EBITDA margin ~17.5% (Q4)
- Free cash flow: $269.1M; operating cash flow: $416.2M; capex: $147.1M; free cash flow yield remains solid
- Balance sheet: Total assets $11.32B; total debt $5.162B; net debt $4.941B; debt/EBITDAR 1.9x (below targeted 2.0x–2.5x range)
- Liquidity ratios: current ratio 0.375, quick ratio 0.136, cash ratio 0.100; cash position steady at $220.1M
- Shareholder returns: dividends paid and buybacks in fiscal 2024; dividend increase approved for 2025 (+7%) to $1.40/share quarterly; 2024 TSR 14.2%
Income Statement
Metric
Value
YoY Change
QoQ Change
Revenue
2.96B
8.30%
0.00%
Gross Profit
537.00M
-3.48%
0.24%
Operating Income
396.80M
61.92%
3.20%
Net Income
308.10M
58.41%
0.00%
EPS
2.58
60.25%
0.00%
Key Financial Ratios
currentRatio
0.38
grossProfitMargin
18.2%
operatingProfitMargin
13.4%
netProfitMargin
10.4%
returnOnAssets
2.72%
returnOnEquity
13.7%
debtEquityRatio
0.65
operatingCashFlowPerShare
$3.49
freeCashFlowPerShare
$2.26
dividendPayoutRatio
50.7%
priceToBookRatio
7.99
priceEarningsRatio
14.55
Net Income vs. Revenue
Expense Breakdown
Management Commentary
- Strategy and execution underpinned by ‘four competitive advantages’ and a disciplined approach to growth, with Ruth’s Chris integration delivering EPS accretion and synergies while maintaining guest and team member experience (Rick Cardenas). The management team emphasized long-term shareholder value creation through growth, cost control, and leadership development across brands.
- Brand performance and pricing: Olive Garden benefited from low pricing discipline (pricing around 1% in FY24 Q4; blended pricing around 2.5–3% for FY2025 guidance), with the team prioritizing value delivery and guest experience over aggressive discounting. LongHorn outperformed industry on guest counts; mix and add-ons helped improve profitability in Q4 (Raj Vennam).
- Consumer environment and marketing: Management signaled a cautious but improving traffic backdrop, driven by macro stabilization and better check composition; marketing investment to tick up modestly in FY2025, focusing on brand filters and value messaging rather than widespread promo campaigns (Lauren Silberman, Eric Gonzalez, and others in Q&A).
- Ruth’s Chris integration and leadership changes: Completion of execution across POS and labor platforms, with a single franchise location acquired; leadership changes across Todd Burrowes, Laura Williamson, and brand presidents to accelerate growth and integration of Ruth’s Chris, Yard House, Capital Grille, Eddie V’s, Seasons 52, and Bahama Breeze (Rick Cardenas and Raj Vennam).
"on the food basket, we're basically assuming commodities to be around 2%. I think the biggest driver within the food basket is beef. We still expect beef to be in the mid-single-digits. And then we actually expect low-single-digit deflation in chicken."
— Raj Vennam
"Our best way to drive sales is our focus on a back to basics operating philosophy and our guests telling others what a great value they have when they come to our restaurants."
— Rick Cardenas
Forward Guidance
- FY2025 revenue and margin trajectory: projected total sales of $11.8–$11.9B with 1–2% same-restaurant sales growth and 45–50 net new restaurants; inflation assumed around 3% (commodities ~2%, labor ~4%), and an FY25 tax rate of ~13%. Diluted shares expected ~119M; EPS target of $9.40–$9.60.
- Margin and cost dynamics: The company expects margin expansion through improved operating leverage, ongoing Ruth’s Chris synergies, and a return to more normalized depreciation and capex pacing post-acquisition; continued cost discipline (labor productivity improvements, favorable vendor terms) should partially offset inflation pressures.
- Guidance caveats and monitoring: Key factors for investors to monitor include consumer discretionary spend in a slow-growth environment, unit growth execution cadence, market promotional activity by peers, and the execution of management’s growth agenda via brand leadership and international/franchise expansion. Risks include macro weakness, softer guest traffic, wage pressures, supply chain volatility, and competitive promotional intensity.
Competitive Position
Company
Gross Margin
Operating Margin
Return on Equity
P/E Ratio
DRI Focus
18.16%
13.40%
13.70%
14.55%
EAT
12.30%
8.01%
1.45%
14.21%
YUM
47.80%
30.50%
-5.89%
19.82%
DIN
46.40%
21.90%
-13.20%
5.68%
DPZ
38.40%
18.30%
-3.86%
22.75%
Gross Profit Margin
Operating Profit Margin
Return on Equity
P/E Ratio Comparison
Investment Outlook
DRI enters FY2025 with a well-capitalized, multi-brand platform, anchored by Olive Garden and LongHorn, and supported by Ruth’s Chris’ integration-driven synergies. The company frames a conservative but achievable path: 1–2% same-store sales growth, 45–50 new restaurants, and 3% inflation in a broad sense, culminating in EPS of $9.40–$9.60 and a 7% dividend increase. The 1.9x debt/EBITDAR ratio remains below the company’s target range, signaling financial flexibility to fund growth while preserving balance sheet strength. The key catalysts are continued operating leverage, menu/value innovations that sustain guest traffic, and the Ruth’s Chris platform’s ability to scale internationally and through franchising. Investors should monitor macro consumer health (particularly below-median income cohorts), Olive Garden traffic dynamics, wage inflation, and the pace of unit growth (including any accelerations in Ruth’s Chris franchising opportunities) as the year unfolds. Overall, Darden’s earnings power remains robust, underpinned by a disciplined model that prioritizes profitable sales growth and sustainable free cash flow.
Key Investment Factors
Growth Potential
- Ruth’s Chris integration completes, with EPS accretion and continued synergies; 45–50 new restaurants in FY25 representing meaningful scalable growth; leadership realignment to accelerate brand development (LongHorn successor, Yard House expansion, and Capital Grille/Eddie V’s optimization).
Profitability Risk
- Macro consumer weakness (esp. below-median income segments) and inflation dynamics; increasing competition and industry-wide promotional activity; potential execution risk in integrating Ruth’s Chris operations and systems; regulatory impacts (examples include wage/benefits or regional labor policy changes); potential variability in same-store sales given quarterly comp dynamics across Olive Garden and LongHorn.
Financial Position
- Solid balance sheet by debt discipline (debt/EBITDAR 1.9x vs target 2.0–2.5x); ample operating cash flow to fund capex and dividends; dividend increase supports shareholder value; free cash flow generation (~$269M in Q4 cash flow).
SWOT Analysis
Strengths
Diversified brand portfolio with Olive Garden, LongHorn, Capital Grille, and Ruth’s Chris integration delivering cross-brand advantages
Solid cost discipline and labor productivity, supporting margins in a challenging environment
Completion of Ruth’s Chris integration with EPS accretion and synergies; strong cash generation (FCF ~$269M in Q4)
Strengthened leadership depth and brand presences across Specialty Restaurant Group; high guest satisfaction across multiple brands
Strong TSR performance (fiscal 2024 TSR 14.2%) and a healthy free cash flow profile
Weaknesses
Q4 same-restaurant sales were flat at the company level; Olive Garden underperformed on comps vs. some peers in prior periods
Reliance on Olive Garden for more than half of sales, making the portfolio sensitive to Olive Garden’s macro trajectory
Higher leverage post-Ruth’s Chris acquisition and ongoing integration costs; industry-wide inflation sensitivity, particularly labor
Dividend yield historically modest vs. some peers
Opportunities
Ramp of net new restaurant openings (45–50 in FY25) and international/franchise expansion; Ruth’s Chris platform can be leveraged for further franchising
Menu/value innovations and Go-to-market strategies (to-go, catering, digital marketing, and value-led promotions) to drive profitable traffic
Further optimization of brand leadership and cost structure leveraging Ruth’s Chris synergies and ongoing efficiency programs
Threats
Macroeconomic slowdown impacting consumer discretionary spend; inflationary pressures in labor and beef; industry promo intensity and discounting competition
Regulatory or wage-related cost headwinds (e.g., wage laws, benefits) in key markets; potential new costs from regulatory changes
Execution risk related to rapid growth and integration of Ruth’s Chris into the broader Darden platform
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