Darden Restaurants, Inc. (DRI): Value-Driven Menu Changes and Promotion Will Drive Sales Growth at This Company

Brinker International, Inc. (NYSE:EAT) is a single brand casual dining restaurant chain that competes with the multi-brand Darden Restaurants, Inc. (NYSE:DRI). It has taken several initiatives to achieve the target of a gross margin increase of 400 bps by 2015. It has introduced new kitchen technology to develop the “kitchen of the future” which has helped it to introduce new menu offerings of pizza and flatbread. It has also invested in the point of sale Ziosk Tabletop technology, which will enhance the customer experience and attract customers to its joints. Its remodeling program is also on track and is expected to complete 370 stores by the end of fiscal 2013. It is benefiting around 3% in same stores sales at stores where remodeling is over. All these initiatives are expected to drive long-term growth.

Source: Google Finance and Yahoo Finance

Darden Restaurants has the lowest P/S ratio of 0.78 among its peers and moderate one year forward P/E ratio of 17.05. Texas Roadhouse Inc (NASDAQ:TXRH) has the highest P/S ratio of 1.19 and forward P/E of 18.69. Brinker International is performing the best in margins with 10.68% and with the lowest forward P/E of 15.

Conclusion

Darden Restaurants, Inc. (NYSE:DRI) is looking for a growth opportunity this year with menu changes. It is expected to increase sales growth through promotional offers with increased use of digital media. Store expansion across brands will help the company to increase sales growth in the long term. I believe its initiative for growth will be positive for the company. From the investment perspective, the company looks good. In addition to Darden, I will also recommend investors consider Brinker International for medium to long-term investment. I have discussed my bullish thesis on the company in my previous article here.

Ash Sharma has no position in any stocks mentioned. The Motley Fool owns shares of Darden Restaurants. Ash is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

The article Value-Driven Menu Changes and Promotion Will Drive Sales Growth at This Company originally appeared on Fool.com and is written by Ash Sharma.

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