Morningstar Rating

Stock Research and Analysis

by R.J. Hottovy, CFA

Bulls Say

The Specialty Restaurant Group's goal of $1 billion in incremental revenue over the next five years appears feasible and could enhance Darden's brand intangible asset among a wider audience (millennials and multicultural households).
We believe that Olive Garden's traffic issues are correctable through everyday affordability efforts, new menu enhancements (lunch options, takeout, and smaller plates), remodeling activity, simplified operations, and integrated advertising and promotions.
Darden's commitment to dividends and share repurchases could lift longer-term shareholder returns. Read more 

Bears Say

Stagnant employment trends and tighter consumer budgets continue to pressure casual dining guest counts. Many restaurants have turned to aggressive discounting to reverse this trend.
Management has acknowledged that the casual dining price premium relative to other segments has been tougher to justify in today's environment. This provides a troubling picture of the balance of relative pricing power between the casual dining and fast casual players.
Industry price competition has taken its toll on profitability, and integrating recent acquisitions could potentially exacerbate the issue. Read more 

Management

Clarence Otis was appointed CEO in November 2004 and chairman in November 2005 after a decade-long tenure at Darden. In fiscal 2013, his total compensation was around $6.4 million (but only $1.2 million of a base salary), which we find reasonable relative   Read more 

Profile

After the sale of Red Lobster, Darden will remain one of the largest players in the $80 billion U.S. casual dining industry, with $6.3 billion in annual sales. Olive Garden   Read more 

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