Darden Restaurants, operator of several eateries including Red Lobster and Olive Garden, announced Saturday that it will close 56 of its Smokey Bones Barbeque & Grill locations and put the remaining 73 up for sale. The company will accordingly incur a pretax charge of about $260 million in Q4. Darden is forecasting EPS from continuing operations of $2.48-2.52 in fiscal 2007, up from prior guidance of $2.38-2.42 and ahead of analyst expectations of $2.40. Due to the Smokey Bones actions, however, the company is forecasting a 2007 loss per share from discontinued operations of $1.16-1.21. Darden spokesman Joe Chabus said the closures and sales are expected to improve company profitability and position Darden for growth. The closings will occur in 22 states, mostly in the southwestern and north-central U.S. Darden Chairman and CEO Clarence Otis: "This action in no way reflects adversely on the hard work of people associated with Smokey Bones and we will take care of every employee affected by this action...The remaining Smokey Bones restaurants are a viable business but one that is not consistent with Darden's vision for a national restaurant concept."
Sources: MarketWatch, Reuters
Commentary: CEOs Discuss Steaks, Burgers, Lobsters and Nutrition Bars • Darden Execs Comment on Smokey Bones' Troubles
Stocks/ETFs to watch: Darden Restaurants, Inc. (DRI). Competitors: Applebee's International Inc. (APPB), Brinker International Inc. (EAT), OSI Restaurant Partners, Inc. (OSI)
Conference call transcripts: F3Q07 (Qtr End 2/25/07)
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