We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
Darden (DRI) to Diversify Its Portfolio by Acquiring Chuy's
Read MoreHide Full Article
Darden Restaurants, Inc. (DRI - Free Report) has entered into a definitive agreement with Chuy's Holdings, Inc. (CHUY - Free Report) to acquire all its outstanding shares for $37.50 per share.
Chuy's owns and operates full-service restaurants, serving a distinct menu of made-from-scratch Tex-Mex-inspired dishes. This new dining category induces optimism in Darden as it believes this will diversify its offerings portfolio and help reach out to new customers in the market.
Highlights of the Acquisition
Darden is expected to acquire Chuy’s in an all-cash transaction with a total transaction enterprise value of approximately $605 million, upon the unanimous approval from the board of directors of both the companies.
As of Jul 16, 2024, Chuy’s had 101 restaurants in 15 states, which will be welcomed by Darden upon the closure of the buyout. Also, as of the year ended on Mar 31, 2024, Chuy’s had total revenues of more than $450 million and average annual restaurant volumes of $4.5 million.
Darden expects pre-tax net synergies of about $15 million by its fiscal 2026 end, from this strategic transaction. Also, the company expects this buyout to be accretive to its net earnings per share (EPS) by about 12 to 15 cents in fiscal 2027.
Upon the satisfaction of the customary closing conditions, this transaction is expected to be complete by Darden's fiscal second quarter of 2025.
Effective Capital Allocation Priorities
Darden continuously seeks accretive opportunities to effectively utilize its additional capital, thus fostering its growth prospects. While considering capital allocations, it prioritizes maintaining existing restaurants, growing new restaurants, and returning capital to shareholders through dividends and strategic share repurchases. The company’s strength in balance sheet and sufficient capital allows it to undergo such growth initiatives seamlessly.
Regarding new restaurants, during the fiscal fourth quarter of 2024, Darden announced the completion of Ruth's Chris Steak House integration, with all company-owned restaurants transitioning to proprietary point of sale and labor management systems. The integration resulted in the expected synergies with an EPS accretion of 10 cents. Despite the challenges, the restaurant teams maintained a strong focus on guest and team member experience throughout the process.
Furthermore, considering the return of capital through dividends, during the fiscal fourth quarter, the company’s board of directors announced a 6.9% sequential hike of the quarterly cash dividend to $1.40 per share. The dividend will be paid on Aug 1, 2024, to shareholders of record as of Jul 10. Also, during fiscal 2024, Darden returned $1.1 billion to shareholders with $628 million in dividends and $454 million in share repurchases.
Image Source: Zacks Investment Research
The aforementioned growth synergies of the company have been faring well and positioning it for a possible outperformance in the upcoming period. Shares of this global casual dining restaurant operator have lost 3.4% in the past three months compared with the Zacks Retail - Restaurants industry’s 5.7% decline.
Zacks Rank & Key Picks
Darden currently carries a Zacks Rank #3 (Hold).
Here are some better-ranked stocks from the Zacks Retail-Wholesale sector.
ANF has a trailing four-quarter earnings surprise of 210.3%, on average. The stock has surged 320.7% in the past year. The Zacks Consensus Estimate for ANF’s fiscal 2024 sales and EPS indicates growth of 10.4% and 47.3%, respectively, from the year-ago period’s levels.
The Gap, Inc. (GPS - Free Report) currently sports a Zacks Rank of 1. GPS has a trailing four-quarter earnings surprise of 202.7%, on average. The stock has gained 145% in the past year.
The Zacks Consensus Estimate for GPS’ fiscal 2024 sales and EPS indicates a rise of 0.2% and 21.7%, respectively, from the year-ago period’s levels.
See More Zacks Research for These Tickers
Normally $25 each - click below to receive one report FREE:
Image: Bigstock
Darden (DRI) to Diversify Its Portfolio by Acquiring Chuy's
Darden Restaurants, Inc. (DRI - Free Report) has entered into a definitive agreement with Chuy's Holdings, Inc. (CHUY - Free Report) to acquire all its outstanding shares for $37.50 per share.
Chuy's owns and operates full-service restaurants, serving a distinct menu of made-from-scratch Tex-Mex-inspired dishes. This new dining category induces optimism in Darden as it believes this will diversify its offerings portfolio and help reach out to new customers in the market.
Highlights of the Acquisition
Darden is expected to acquire Chuy’s in an all-cash transaction with a total transaction enterprise value of approximately $605 million, upon the unanimous approval from the board of directors of both the companies.
As of Jul 16, 2024, Chuy’s had 101 restaurants in 15 states, which will be welcomed by Darden upon the closure of the buyout. Also, as of the year ended on Mar 31, 2024, Chuy’s had total revenues of more than $450 million and average annual restaurant volumes of $4.5 million.
Darden expects pre-tax net synergies of about $15 million by its fiscal 2026 end, from this strategic transaction. Also, the company expects this buyout to be accretive to its net earnings per share (EPS) by about 12 to 15 cents in fiscal 2027.
Upon the satisfaction of the customary closing conditions, this transaction is expected to be complete by Darden's fiscal second quarter of 2025.
Effective Capital Allocation Priorities
Darden continuously seeks accretive opportunities to effectively utilize its additional capital, thus fostering its growth prospects. While considering capital allocations, it prioritizes maintaining existing restaurants, growing new restaurants, and returning capital to shareholders through dividends and strategic share repurchases. The company’s strength in balance sheet and sufficient capital allows it to undergo such growth initiatives seamlessly.
Regarding new restaurants, during the fiscal fourth quarter of 2024, Darden announced the completion of Ruth's Chris Steak House integration, with all company-owned restaurants transitioning to proprietary point of sale and labor management systems. The integration resulted in the expected synergies with an EPS accretion of 10 cents. Despite the challenges, the restaurant teams maintained a strong focus on guest and team member experience throughout the process.
Furthermore, considering the return of capital through dividends, during the fiscal fourth quarter, the company’s board of directors announced a 6.9% sequential hike of the quarterly cash dividend to $1.40 per share. The dividend will be paid on Aug 1, 2024, to shareholders of record as of Jul 10. Also, during fiscal 2024, Darden returned $1.1 billion to shareholders with $628 million in dividends and $454 million in share repurchases.
Image Source: Zacks Investment Research
The aforementioned growth synergies of the company have been faring well and positioning it for a possible outperformance in the upcoming period. Shares of this global casual dining restaurant operator have lost 3.4% in the past three months compared with the Zacks Retail - Restaurants industry’s 5.7% decline.
Zacks Rank & Key Picks
Darden currently carries a Zacks Rank #3 (Hold).
Here are some better-ranked stocks from the Zacks Retail-Wholesale sector.
Abercrombie & Fitch Co. (ANF - Free Report) currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
ANF has a trailing four-quarter earnings surprise of 210.3%, on average. The stock has surged 320.7% in the past year. The Zacks Consensus Estimate for ANF’s fiscal 2024 sales and EPS indicates growth of 10.4% and 47.3%, respectively, from the year-ago period’s levels.
The Gap, Inc. (GPS - Free Report) currently sports a Zacks Rank of 1. GPS has a trailing four-quarter earnings surprise of 202.7%, on average. The stock has gained 145% in the past year.
The Zacks Consensus Estimate for GPS’ fiscal 2024 sales and EPS indicates a rise of 0.2% and 21.7%, respectively, from the year-ago period’s levels.