Darden Restaurants, Inc. DRI has completed the acquisition of Chuy's Holdings, Inc., following the merger agreement announced on July 17, 2024. The all-cash transaction has an enterprise value of about $605 million. A majority of Chuy's Holdings stockholders approved the deal on Oct. 10, 2024.

The company financed the acquisition using proceeds from a $400 million offering of 4.35% senior notes due 2027 and a $350 million offering of 4.55% senior notes due in 2029. These notes were issued on Oct. 3, 2024.

A Strategic Addition to Darden's Portfolio

Founded in Austin, TX, in 1982, Chuy's operates more than 100 restaurants across 15 states, serving a distinct menu of authentic Tex-Mex cuisine. Its unique dining experience and freshly prepared dishes are expected to contribute to Darden's overall brand variety.

This acquisition enhances Darden's diverse portfolio, which includes well-known brands like Olive Garden and LongHorn Steakhouse.

DRI’s Price Performance

In the past three months, shares of the company have gained 9.4% compared with the industry’s growth of 15.6%. The company has underperformed its industry in the said period. DRI is likely to benefit from the focus on new restaurant openings, Uber partnership, menu innovation and strategic acquisitions. The company intends to enhance its internal digital media capabilities to drive traffic and growth.

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DRI implemented various strategies as part of its Brand Renaissance Plan to drive growth. These initiatives included optimizing kitchen systems, improving sales planning and scheduling and focusing on operational excellence to enhance guest satisfaction.

The company also introduced new core menu items, allowed for customization and strategically invested in promotions. The upgraded restaurants are already delivering impressive same-restaurant sales and returns. Furthermore, the company is placing significant emphasis on technology-driven initiatives, such as the extensive use of tablets across its systems. This move capitalizes on the surge of digitization, which has swiftly integrated into the U.S. fast-casual restaurant landscape.

DRI’s 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 presently 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 28%, on average. The stock has surged 138.7% in the past year. The Zacks Consensus Estimate for ANF’s fiscal 2024 sales and earnings per share (EPS) indicates growth of 13% and 63.4%, respectively, from the year-ago period’s levels.

Boot Barn Holdings, Inc. BOOT currently carries a Zacks Rank #2 (Buy). BOOT has a trailing four-quarter earnings surprise of 7.1%, on average. The stock has risen 96% in the past year.

The consensus estimate for BOOT’s fiscal 2025 sales and EPS indicates growth of 11.5% and 10.5%, respectively, from the year-ago period’s levels.

Yum China Holdings, Inc. YUMC carries a Zacks Rank of 2 at present. YUMC has a trailing four-quarter earnings surprise of 26.6%, on average. The stock has declined 10.7% in the past year.

The Zacks Consensus Estimate for YUMC’s 2024 sales and EPS indicates a rise of 4.5% and 11%, respectively, from the year-ago period’s levels.

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