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This discussion and analysis should be read
in conjunction with the Company’s consolidated financial
statements and related notes found elsewhere in this report.
As of May 26, 2002, Darden Restaurants, Inc.
(Darden or the Company) operated 1,211 Red Lobster, Olive
Garden, Bahama Breeze, and Smokey Bones BBQ Sports Bar restaurants
in the United States and Canada and licensed 33 restaurants
in Japan. All of the restaurants in the U.S. and Canada are
operated by the Company with no franchising. Darden’s
fiscal year ends on the last Sunday in May. Fiscal 2002, 2001,
and 2000 each consisted of 52 weeks of operation.
On March 21, 2002, the Company’s Board
of Directors declared a three-for-two stock split of the Company’s
common stock. The stock split was effected in the form of
a 50 percent stock dividend which was distributed to stockholders
on May 1, 2002, for all stockholders of record as of the close
of business April 10, 2002. All applicable references to number
of shares and per share amounts of common stock have been
adjusted to reflect the stock split.
The following table sets forth
selected operating data as a percentage of sales for the periods
indicated. All information is derived from the consolidated
statements of earnings for the periods indicated.
Sales were $4.4 billion in fiscal 2002, $4.0 billion
in fiscal 2001, and $3.7 billion in fiscal 2000.
The 9.4 percent increase in sales for fiscal
2002 was primarily due to increased annual same-restaurant
sales in the U.S. and a net increase of 43 Company-owned restaurants
since fiscal 2001. Increased U.S. same-restaurant sales for
Red Lobster totaled 6.2 percent and resulted primarily from
a 2.8 percent increase in average check and a 3.4 percent
increase in guest counts. Increased U.S. same-restaurant sales
for Olive Garden totaled 6.3 percent and resulted primarily
from a 3.1 percent increase in average check and a 3.2 percent
increase in guest counts. Red Lobster and Olive Garden have
enjoyed 18 and 31 consecutive quarters of U.S. same-restaurant
sales increases, respectively.
The 8.6 percent increase in sales for fiscal
2001 was primarily due to increased annual same-restaurant
sales in the U.S. and a net increase of 29 Company-owned restaurants
since fiscal 2000. Increased U.S. same-restaurant sales for
Red Lobster totaled 5.9 percent and resulted primarily from
a 4.8 percent increase in average check and a 1.1 percent
increase in guest counts. Increased U.S. same-restaurant sales
for Olive Garden totaled 7.2 percent and resulted primarily
from a 4.9 percent increase in average check and a 2.3 percent
increase in guest counts.
Total costs and expenses were $4.0 billion in fiscal 2002,
$3.7 billion in fiscal 2001, and $3.4 billion in fiscal 2000.
As a percent of sales, total costs and expenses have decreased
from 92.6 percent in fiscal 2000 to 92.5 percent in fiscal
2001 to 91.7 percent in fiscal 2002.The following analysis
of the components of total costs and expenses is presented
as a percent of sales.
Food and beverage costs decreased in fiscal
2002 primarily as a result of lower product costs and pricing
changes. The comparability in fiscal 2001 and 2000 food and
beverage costs is primarily a result of pricing changes, favorable
menu-mix changes, and other efficiencies resulting from higher
sales volumes in fiscal 2001, offset by higher product costs
in fiscal 2001.
Restaurant labor decreased in fiscal 2002
and 2001 primarily due to efficiencies resulting from higher
sales volumes.
Restaurant expenses include lease, property
tax, credit card, utility, workers’ compensation, new
restaurant pre- opening, and other operating expenses. Restaurant
expenses increased in fiscal 2002 primarily as a result of
increased workers’ compensation, credit card, new restaurant
pre-opening, and other operating expenses which were only
partially offset by lower utility expenses and the impact
of higher sales volumes. Restaurant expenses in fiscal 2001
and 2000 were comparable, primarily as a result of higher
sales volumes in fiscal 2001 and the fixed component of restaurant
expenses in fiscal 2001 which were not impacted by higher
sales volumes, offset by higher fiscal 2001 utility expenses.
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