Darden Restaurant Inc. Company Analysis… For Beginners.

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. 2022 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 2022 10k, 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, in most cases.

Revenue Growth:  

Darden Restaurant’s revenues were $8 billion as of 2018.  Over the next several years, the company would increase its revenues moderately, ending 2022 at $9.6 billion.  On average, the annual revenue growth rate over the last five years was about 5.8%.  This trend indicates that the company has entered the mature phase of the business cycle and is consistently growing the revenues moderately but seemingly sustainable over the long term.  From an investor’s perspective, this is a good trend.

Analyst Grade: A

Darden 2022 Summary Income Statement
Column1	2022	2021	2020	2019	2018
Revenues	9,630	7,191	7,806	8,510	8,080
COGS	2,943	2,072	2,240	2,412	2,303
Gross Profit	6,687	5,119	5,566	6,098	5,777
SG&A	466	487	614	405	409
Depreciation	368	350	356	591	565
R & D	-	-	-	-	-
Other	-	-	-	-	-
Total Operating Expenses	8,468	3,630	4,157	4,248	4,031
EBIT	1,162	648	48	832	766
Other Income	-	-	-	-	-
Interest Expense	69	63	57	50	161
EBT	1,094	576	(161)	782	605
Taxes	139	(55)	(111)	64	2
Net Income	953	629	(52)	713	596

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.  Next, I then offer a summary analysis of Darden’s important balance sheet line items.

Cash:

Darden Restaurant’s cash holding was $146 million in 2018.  As a percentage of sales, their cash holdings were 1.8%.  As of 2022, their cash holdings increased to $421 million or 4.4% of sales.  The substantial increase in cash holdings indicates that the organization feels the need to increase its liquidity to ensure current liability coverage.  From an investor perspective, a significant increase in idle cash is a concerning and negative trend.

Analyst Grade: B

Darden 2022 Summary Balance Sheet
Column1	2022	2021	2020	2019	2018
Cash	421	1,214	763	457	146
Short Term Investment	-	-	-	-	-
Account Receivable	72	68	50	88	83
Inventory	271	190	207	207	205
Other	-	-	-	-	-
Current Assets	1,179	1,871	1,101	893	553
Net PPE	3,356	2,869	2,757	2,553	2,429
Goodwill	1,037	1,037	1,037	1,184	1,183
Other	-	-	-	-	-
Total Assets	10,136	10,656	9,946	5,893	5,469
Accounts Payable	367	304	249	333	277
Accrued Expense	182	177	150	175	177
Accrued Taxes	32	35	6	12	-
Notes Payable	-	-	270	-	-
LT Debt - Current	-	-	-	-	-
Other	-	-	-	-	-
Total Current Liabilities	1,848	1,848	1,793	1,474	1,384
LT Debt	91	929	929	928	926
Other	-	-	-	-	-
Total Liabilities	7,938	7,843	7,615	3,500	3,274
Common Stock	2,226	2,286	2,205	1,685	1,631
Treasury	-	-	-	-	(8)
Retained Earnings	(26)	522	144	807	658
Other	-	-	-	-	-
Total Equity	2,198	2,813	2,331	2,393	2,195
Total Equity & Liability	10,136	10,656	9,946	5,893	5,470

 

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 Restaurant’s current ratio was .4 in 2018.  In the next several years, the organization would improve its current ratio ending in 2021 at 1.01.  However, in 2022, the organization would reduce its current ratio to .64.  This trend indicates that the company is having moderate difficulties in sustaining a stable current ratio.  Investors should be concerned about this trend because it indicates that the organization is unable to execute optimal current asset management strategies consistently.

Analyst Grade: B

Darden's Return on Assets

Darden Restaurant’s return on assets (ROA) in 2018 was 10.9%.  In 2022, their return on assets was 9.4%.  This trend indicates that the company is underutilizing assets under management on a consistent basis in terms of generating revenues.  From this, the company either needs to sell off underperforming fixed assets or quickly implement new sales strategies to increase revenues in the short term.  From an investor’s perspective, this is a poor trend.

Analyst Grade: C