Darden Restaurants

Darden Restaurants (DRI 36.15) posted fiscal first quarter earnings that beat analyst expectations, but sales fell and the company's forecast for fiscal 2010, while in-line, leaves room for a downside surprise.  Shares of DRI are down nearly 7% in premarket action ahead of Wednesday's opening bell.

Darden reported fiscal first quarter earnings of $0.67 per share, a penny better than the First Call consensus of $0.66.

Revenues fell 2.3% year-over-year to $1.73 billion; the consensus expected $1.78 billion.

Darden said that blended same-store sales at Olive Garden, Red Lobster and LongHorn Steakhouse were down 5.3% in the quarter.  Same-store sales at Olive Garden dipped 2.9%, while Red Lobster showed a 7.9% decline and LongHorn Steakhouse fell 6.2%.

Darden projects full year 2010 earnings of $2.59 to $2.85 per share; the consensus currently stands at $2.81.  The company sees fiscal 2010 revenues ranging from a decline of 2% to rising 1% year-over-year, which equates to a range of $7.08 billion to $7.29 billion; the consensus expects $7.25 billion.

Darden said that while sales were a bit slower-than-anticipated, food costs were also lower and are likely to remain more muted for the balance of the year.  The company is targeting additional cost cuts but CFO Brad Richmond warned that "Given industry sales trends, however, at this time the lower half of the diluted net earnings per share range we've provided is more likely than the upper half of the range."