Acquisition of the Tex-Mex chain would follow the addition of Ruth’s Chris Steak House last year
Darden Restaurants Inc, the portfolio casual-dining company that has a strong presence in Italian with Olive Garden, and steak with LongHorn, is looking to the future with its $605 million planned acquisition of Tex-Mex chain, Chuy’s Holdings Inc.
The Orlando, Fla.-based company on Wednesday announced it had agreed to acquire Austin, Texas-based Chuy’s Tex-Mex, which has 101 restaurants in 15 states, for $37.50 a share.
The Chuy’s acquisition would be Darden’s second over the past year, following last June’s absorption of the fine-dining Ruth’s Chris Steak House, and the company’s first in the Tex-Mex segment, and brings the total number of Darden brands to 10.
“Whenever we consider adding a brand to our portfolio, we have a set of criteria we evaluate,” said Rick Cardenas, Darden CEO and president, in a call with analysts on Thursday. “The brand should be a full-service dining concept with strong appeal, have the ability to exceed the sales growth in our long-term framework and make an impact to our financial performance over time. Chuy’s checks all these boxes.”
Raj Vennam, Darden’s chief financial officer, also noted that, “there's opportunity for growth when we look at Mexican generally” – especially among younger customers.
Chuy’s was founded in 1982 and has an average per person check of $19. The Chuy’s system generated about $450 million in revenue for the fiscal year ended in March 2024 and average unit volumes were about $4.5 million.
The concept also has about 30% off-premises sales, including those from third-party aggregators. Cardenas said he didn’t anticipate that changing for the brand, while the other Darden brands might learn from Chuy’s experience.
For the fourth quarter ended May 26, Darden’s net income was $308.1 million, or $2.57 a share, down from $315.1 million, or $2.58 a share, in the same period a year ago. Sales were $2.957 billion compared with $2.769 billion in the prior-year quarter, reflecting the addition of 80 acquired company-owned Ruth’s Chris Steak Houses and 37 new restaurants.
Darden’s consolidated same-store sales were flat at 0% with declines of 1.5% at Olive Garden and increases of 4% at LongHorn Steakhouse. The fine-dining division had a decline of 2.6% while the other business fell 1.1%.
As of May 26, Darden had 2,031 restaurants, including 920 Olive Gardens, 575 LongHorns, 181 Cheddar’s Scratch Kitchens, 88 Yard Houses, 80 Ruth’s Chris steak houses, 66 Capital Grills, 44 Seasons 52s, 43 Bahama Breezes, 30 Eddie V’s, and four Capital Burgers.
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