Darden rises on better-than-expected 2Q profit

Darden Restaurants Inc. shares jumped Friday as Wall Street analysts and investors lauded the sit-down restaurant chain's better-than-expected fiscal second-quarter results.

Shares climbed $4.57, or 19.1 percent, to close at $28.55.

The boost came after the company reported its quarterly profit rose 37 percent after the market closed Thursday.

Darden, in a departure from much of the competition, also reported a slight rise in same-store sales, or sales at locations open at least a year, at its two largest brands — Olive Garden and Red Lobster.

Overall, same-store sales dipped just 0.2 percent, mainly because of a large drop in sales at its LongHorn Steakhouse chain.

The company also said its sales improved substantially in November after a fairly dismal October showing. Much of the casual dining industry reported sharply declining same-store sales in October as the economy fell deeper into a recession and consumers cut back more on eating out to save cash.

But, as expected, the company cut its fiscal 2009 profit guidance due to expectations that same-store sales will likely decline in the second half of the year due to the recession.

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On a conference call with analysts Friday morning, Chief Executive Clarence Otis said despite the difficult environment, Darden should be able to best the rest of the industry.

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The company said in the second quarter, it was able to beat expectations, in part, due to cost controls and more of a focus on its lower-priced menu offerings.

Morgan Keegan analyst Robert Derrington said in a note to investors that Darden's ability to control its spending was a big reason for its profit boost.

"Frugal spending seems to apply to more than just consumers and retailers this holiday season as much lower than projected general and administrative spending contributed to Darden's strong second quarter earnings per share beat," he said.

Derrington has an "Outperform" rating on the shares.