Darden Restaurant: Brief Summary

Darden Restaurants headquarters is located in Orlando, Florida.  The company competes in the restaurant industry—specifically, the consumer cyclical sector.  At present, the organization employs approximately 175,000 individuals.  Darden Restaurant brands include the Olive Garden, Longhorn Steakhouse, Cheddar's Scratch Kitchen, the Capital Grille, and others.  At present, the organization operates approximately 1,800 restaurants in the United States as well as Canada.

Darden Restaurant Financial Report Sources

“Darden Restaurant Inc. 2020 Company Analysis… For Beginners: Financial Statements and Financial Ratios: Defined, Discussed, and Analyzed for 5 Years” was written by, Paul Borosky, MBA., and owner of Quality Business Plan.  In this report, the author selected Darden's 202010k, 2017 10k annual report, 2016 10k annual report, and Darden's 2019 10k annual report as the basis for information gathering.  Once all Darden's 10k annual statements were collected, the author then inserted Darden's s income statement information and Darden's balance sheet information into a customized financial template. 

Darden Restaurant’s Income Statement – Summary Analysis

In this section, I walk through a broad definition of what an income statement is and why it is important.  From this, I then discuss and define income statement line items, such as revenues, gross profits, etc. in detail.  After each line item is defined and discussed, I finally offer a summary analysis of Darden Restaurant's important income statement line item trends from 2016 to 2020, in most cases.

Revenue Growth:  

Darden Restaurants ended 2016 with revenues of approximately $6.9 billion.  In the next three years, the organization would increase revenues to approximately $8.5 billion.  However, in 2020, the revenues would fall to $7.8 billion due to the coronavirus.  In growth percentage terms, the organization's best growth was 12.7% from 2017 to 2018.

From an investor's perspective, $7.8 billion in revenues through the current economic climate is pretty good for a casual dining restaurant.  An important factor for continued revenue growth in the coming years maybe how the organization best adapts to the current economic environment.  If the organization is able to provide a safe dining experience for customers, then it should expect moderate to low revenue growth in the next several years.  However, if dining experiences continue to be perceived as dangerous, then plummeting revenue growth may be the result.

Darden Restaurant’s Balance Sheet

For Darden Restaurant's balance sheet, I again go through each important line item from the balance sheet.  In reviewing each line item, I will define Darden's balance sheet line item, such as cash, property, plant and equipment, and liabilities between 2016 to 2020.  Next, I then offer a summary analysis of Darden’s important balance sheet line items.

Cash:

In 2016, Darden Restaurants had approximately $274 million in cash.  In the next two years, the cash position would fall to $146 million in 2018.  Fortunately, though, the 2019 and 2020, their cash position would substantially increase, ending 2020 at $763 million.

This cash position is noteworthy, not only because the organization has increased its cash position over the last two years.  But, the firm was able to do it through the recent COVID outbreak.  Possible reasons for this improvement could be cost-cutting measures, or the organization has taken out short and/or long-term debt to ensure liquidity.

Section 3: Darden Inc. Financial Ratios Analyzed

For this section, I have chosen about 16 different financial ratios to review for Darden Restaurant Inc from 2016 to 2020.  In reviewing each of Darden's financial ratios, I first start with defining the financial ratio.  Next, I supply the financial formula for calculating the specific ratio.  Finally, I offer a brief analysis of important Darden's Financial ratios.

Darden's Current Ratio

Darden's current ratio has ranged between .4 and .69.  In 2020, their current ratio was .61.  For most industries, the optimal current ratio would be 1.0 or higher.  However, in industries with high cash flows such as restaurants and retail stores, lower current ratios have become a trend.  From this, the organization seems to have adequate short-term funding to cover its short-term liabilities.

Darden's Total Asset Turnover

Darden's total asset turnover ended in 2016 at 1.51.  Over the next three years, the company improved its total asset turnover ratio.  This resulted in a 1.44 total asset turnover in 2019.  To continue this trend, the organization must continue to optimize the usage of all assets, which includes short-term as well as fixed.  However, due to the COVID shutdown, the firm's total asset turnover was detrimentally impacted in 2020, ending the year at .78.  Once the virus subsides, the firm should be able to continue its trend in optimizing total asset usage.

Darden's Return on Assets

Darden's return on assets steadily increased between 2016 and 2019.  This means that the company is making more money on the same or fewer assets.  In 2016, their return on assets was 8.18%.  2019 ended with the company at 12.1%.  To ensure that this trend continues, the company may increase the tables available at restaurants or design business strategies to increase its per table turnover.  Unfortunately, in 2020, the organization's return on assets fell to -.53%.  This was to be expected through a COVID outbreak.  Again, once the virus subsides, the organization should be able to achieve a return on asset growth utilizing proven business models.