Darden warns on 3Q sales decline at top brands

Darden Restaurants Inc. warned Tuesday that U.S. same-store sales are estimated to have declined 4.5 percent across its top three brands — Red Lobster, Olive Garden and LongHorn Steakhouse — during the third quarter of 2013.

In a statement, the company blamed bad winter weather and economic pressure on consumers for the decline.

The company estimates U.S. same-store sales fell 1.5 percent at LongHorn Steakhouse, 4 percent at Olive Garden and 7 percent at Red Lobster locations for the third quarter.

Conversely, Darden reported that it expects same-store sales for its Specialty Restaurant Group, which includes Seasons 52, Eddie V’s and The Capital Grille, to rise 2 percent for the quarter.

“Our priority is reestablishing same-restaurant traffic momentum at our three largest brands,” said Darden chairman and chief executive Clarence Otis in a statement.

Otis cited payroll tax increases and rising gasoline prices as two macroeconomic difficulties that “put meaningful pressure on the discretionary purchasing power of our guests” during the third quarter.

“We recognize there is still more to do to further address affordability and to improve other important aspects of the guest experiences we provide,” he said. “We are confident, however, that we are taking the right steps for our guests and that these will result in same-restaurant traffic improvement as we move forward."

As a result of the estimates, Darden updated its outlook for fiscal 2013. Total sales for the year should increase between 6 percent and 7 percent, the company said in a statement. Blended same-store sales at LongHorn, Red Lobster and Olive Garden are now expected to decrease 1.5 percent to 2.5 percent for the year.

Darden has struggled in recent quarters to gain a foothold for its three largest brands. During the company’s last earnings call, president and chief operating officer Andrew H. Madsen said the chains must respond more aggressively to guests’ need for affordable options.

During the second quarter of 2013, U.S. same-store sales fell 3.2 percent at Olive Garden, dropped 2.7 percent at Red Lobster and decreased 0.8 percent at LongHorn Steakhouse. Darden’s Specialty Restaurant Group reported a same-store sales increase of 0.8 percent during the same period.

Darden also announced three big executive moves during the third quarter. Will Setliff, formerly executive vice president of Darden’s Specialty Restaurant Group, was named senior vice president and chief marketing officer; David George, formerly president of LongHorn Steakhouse, was named president of Olive Garden; and Valerie Insignares, formerly Darden’s chief restaurant operations officer, was named president of LongHorn Steakhouse.

The third-quarter earnings warning comes just before the company’s analyst and investor meeting, which will be held Feb. 25–26 in Orlando, Fla., where Darden is based. The company plans to hold its official third-quarter earnings call on March 22.

Darden operates more than 2,000 company-owned restaurants systemwide.

Contact Erin Dostal at erin.dostal@penton.com.
Follow her on Twitter: @ErinDostal