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Scott Mlyn | CNBC
An Olive Garden restaurant in Laguna Hills, California
Investors are rallying behind Darden Restaurants.
Shares of the restaurant group surged more than 10 percent in early trading Thursday after the company posted better-than-expected fiscal fourth-quarter earnings, buoyed by strong sales at most of its restaurants, and raised its quarterly dividend.
Darden's stock is on pace for its best day since March 2009.
"Our solid fourth quarter results concluded another strong year of performance as we executed our back-to-basics operating philosophy and strengthened our competitive advantages," CEO Gene Lee said in a statement. "Our strategy remains unchanged, and our operators' consistent focus on being brilliant with the basics has allowed us to continue building guest loyalty while taking market share."
Darden also raised its dividend 19 percent to 75 cents per common share and authorized a new share repurchase program of $500 million.
"Our strong operating model generates substantial cash flows, which enables us to invest in our businesses and continue our history of returning significant cash to our shareholders," Chief Financial Officer Rick Cardenas said in a statement. "In fiscal 2018 we returned $550 million to shareholders in the form of dividends and share repurchases, and more than $1.5 billion over the past three years."
The restaurant group, whose eight brands include Olive Garden and LongHorn Steakhouse, reported adjusted earnings of $1.39 per share on $2.13 billion in revenue, beating Wall Street estimates of $1.35 per share on $2.12 billion in revenue.
Darden's strong fourth-quarter earnings performance was buoyed by positive same-store sales at seven of its eight branded restaurants.
Olive Garden and LongHorn Steakhouse saw same-store sales rise 2.4 percent in the quarter. At Eddie V's, the figure jumped 3.6 percent and The Capital Grille's climbed 2.6 percent. Yard House, Seasons 52 and Bahama Breeze also reported sales growth.
Cheddar's Scratch Kitchen, which the company acquired a year ago, saw same-store sales fall 4.7 percent in the quarter.
The company said it expects same-store sales in fiscal 2019 to grow 1 to 2 percent and it plans to open 45 to 50 new stores.
