With Darden Restaurants Inc. poised to report fourth quarter earnings next week, a securities analyst said Red Lobster’s new $15 Seafood Feast limited time offer has caused a bump in wait times and traffic this month at the casual-dining seafood chain.
Jeff Omohundro, a Wells Fargo senior analyst in Richmond, Va., wrote that the performance of Red Lobster’s four-course menu promotion has strengthened his outlook for Red Lobster’s Orlando, Fla.-based parent company.
The $15 Seafood Feast, which debuted May 31 and runs through July 25, includes soup, salad, entrée, dessert and unlimited biscuits.
“We have seen a substantial pick-up in average wait times at Red Lobster since the May 31 rollout of the new Seafood Feast promotion,” Omohundro wrote. “Red Lobster wait times were up 10 minutes this week versus last week, while QTD [quarter to date] wait times are up seven minutes year over year.
“We attribute this wait time increase in large part to the new Seafood Feast promotion, which we think is benefiting traffic and comps at the brand,” he said.
In March, Darden reported that Red Lobster’s same-store sales rose 0.1-percent based in part on taking a 1.3-percent menu price hike. Red Lobster’s same-store traffic declined 0.6-percent in both December and January, and fell 2.5-percent in February.
But Red Lobster’s Seafood Feast deal impressed Omohundro, who wrote that he’s increasing Darden’s earnings estimates based on what he believes is the promotion-related traffic increase at the 700-unit seafood dinnerhouse chain.
“We have had an opportunity to sample the new offering and were impressed by the variety and volume of food included in the promotion,” Omohundro wrote. “In our view, the offering features a compelling price value proposition for consumers with four courses including a soup, salad, entrée, and dessert, all for $15.”
Red Lobster spokeswoman Erica Jaeger declined to comment.
Darden is scheduled to release fourth quarter 2011 earnings on June 30 after the market closes and will hold a conference call July 1 at 8:30 a.m.
Contact Alan Snel at [email protected].
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