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Darden’s culture is grounded in a deeply held and
motivating core purpose, solid core values and a
passion to achieve lasting excellence that rewards
all shareholders. Our culture is the foundation for
everything else we are working to achieve, which
makes our success in strengthening it the single most
important highlight of the year.
With a strong culture as our foundation, we had
very good business results in 2006 at Olive Garden,
where we sustained same-restaurant sales and profit
growth while preparing for accelerated new restaurant
growth in 2007; Red Lobster, where we had a number
of successes that put us back on a strong performance
track sooner than expected; and Bahama Breeze, where
we regained sales momentum by broadening our appeal.
And, although our sales at Smokey Bones were disappointing,
we identified our key issues and developed a
plan to address them. For Darden as a whole, it all added
up to a second consecutive year of over 20 percent
growth in net diluted earnings per share.
Strengthening our culture was also a key to the
progress we made on our longer-term strategy – which
is to create a consistently profitable multi-brand casual
dining growth company. To do that, we have to work
together better across Darden on critical growth drivers,
including our core leadership development, brand
management and restaurant operations and support
processes and systems. In 2006, we had greater teamwork
across the Company in each of these areas, even
as we added a number of new leaders, and some of our
existing leaders moved into new positions. Because of
our strategic progress and operating momentum, we
believe we are on the right path for sustainable longterm
success.
Other highlights for the fiscal year include
the following:
- Sales increased 8.4 percent to $5.7 billion for
fiscal 2006, driven by new restaurant growth
at Olive Garden and Smokey Bones and samerestaurant
sales growth at Olive Garden, Red
Lobster and Bahama Breeze.
- Net earnings for fiscal 2006 were $338.2 million,
a 16.4 percent increase from fiscal 2005 net earnings
of $290.6 million, and earnings per diluted
share were $2.16 in fiscal 2006, a 21.3 percent
increase from earnings per diluted share of $1.78
in fiscal 2005.
- Olive Garden’s total sales were a record $2.62
billion, up 9.0 percent from fiscal 2005. This
reflected record average annual sales per restaurant
of $4.6 million, the addition of 19 net new
restaurants and U.S. same-restaurant sales
growth of 5.5 percent. Olive Garden also ended
the year with their 47th consecutive quarter of
same-restaurant sales growth.
- Red Lobster’s total sales were a record $2.58
billion, an increase of 5.9 percent from fiscal
2005. In fiscal 2006, average annual sales per
restaurant were $3.8 million, and U.S. same restaurant
sales growth was 4.9 percent.
- Bahama Breeze’s total sales were $166 million,
an increase of 1.6 percent from fiscal 2005.
Same-restaurant sales increased 1.7 percent in
fiscal 2006, average annual sales per restaurant were $5.2 million and Bahama Breeze reached
break-even earnings results for the year.
- Smokey Bones’ total sales were $337 million,
a 25.3 percent increase from last year, as it
added 22 net new restaurants. Same-restaurant
sales declined 3.7 percent, and total sales per
restaurant averaged $2.9 million for the year.
While these were disappointing financial results,
we are confident in our plans to reposition
Smokey Bones, and we are moving forward with
a strong sense of purpose.
- Seasons 52 continued to post solid results in
their operational test while opening two additional
restaurants in fiscal 2006, and plans are
in place to open two restaurants in the Atlanta market in fiscal 2007. Seasons 52 focuses on offering great tasting, nutritionally balanced meals that are lower in calories than comparable
restaurant meals. They also offer a wide selection
of premium wines, including many by the glass.
- Because of this year’s outstanding financial
results and our strong cash flow and balance
sheet, we spent $434 million during fiscal 2006
to repurchase 11.9 million shares of our common
stock. Since beginning our share repurchase
program in 1995, we have repurchased more
than 132.5 million shares of our common stock
for $2.25 billion. Recently, the Board of Directors
authorized an additional repurchase authorization
of 25.0 million shares, bringing total open
authorizations to 29.9 million shares.
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These results are particularly satisfying when you
consider the challenging macro-economic environment
in which we operated in fiscal 2006. At Darden, we
have a proven approach to capture the exciting longterm
opportunity in casual dining – an approach that
combines great brand management, great people and
great operations. Our approach has served us well in
the past, and we are confident it will serve us well in
any economic environment.
We are intent on building a great company, one
that continues to create superior, top quartile S&P 500
shareholder value and that will last for generations.
To do so, in the near term we must continue to deliver
industry-leading performance at Olive Garden and
Red Lobster, strengthen Bahama Breeze’s business
model and change the brand positioning of Smokey
Bones so that it appeals to consumers for a broader
range of dining occasions. Achieving each of these
objectives will require brand management excellence, restaurant operating excellence and outstanding
operating support across our Company.
This annual report provides further highlights about
our priorities for fiscal 2007, our long-term goals, our
financial resources and a final element that’s critical to
our near and long-term success – what we are doing
to ensure we’re a valued partner to the communities in
which we operate.
With two established and trusted brands in Red
Lobster and Olive Garden that – managed effectively –
can perform well in any environment; two emerging
brands in Bahama Breeze and Smokey Bones that –
despite the ups and downs inherent in venture efforts –
have great potential; an exciting new concept test
underway in Seasons 52; leading market share in our
industry; strong cash flows and financial position;
and most importantly, the best people in the industry,
we have what it takes to capture the exciting growth
opportunity that we and others see in casual dining.
To be the best in casual dining now and for generations,
we will continue to strengthen our very valuable existing
capabilities while we add important new skills.
Thank you for being a shareholder and for your
confidence in our ability to make Darden a truly
great company.
Clarence Otis, Jr.
Chairman and Chief Executive Officer
Andrew H. Madsen
President and Chief Operating Officer
“ We are intent on building
a great company, one that
continues to create superior,
top quartile S&P 500
shareholder value and that
will last for generations.”
Clarence Otis, Jr., Chairman and Chief Executive
Officer, and Andrew H. Madsen, President and
Chief Operating Officer
(pictured left to right) |
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