Darden Restaurants Inc. officials said they plan to emphasize affordability, a new core menu and more remodeled restaurants as part of the company’s efforts to improve lagging sales at its Italian Olive Garden concept.
Executives of Orlando, Fla.-based Darden addressed Olive Garden’s soft traffic and sales during a 2012 first-quarter earnings call Wednesday.
“We’re making changes at Olive Garden with appropriate urgency,” Darden chief executive Clarence Otis told securities analysts during the call.
Olive Garden’s same-store sales fell 2.9 percent for the three-month period ended Aug. 28, compared with the same period a year ago. Same-store sales declined 3.1 percent in June, 3.5 percent in July and 2.1 percent in August, compared with the previous year. Olive Garden has 751 units.
“Sales were below expectations,” said Darden president and chief operating officer Drew Madsen.
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But a new ad campaign that “broadens the range of emotional attributes” associated with the Olive Garden brand is forthcoming, he said. He also noted a new core menu — which aims to appeal to households that earn less than $60,000 a year — and more remodeled locations, are expected to help reverse sluggish sales and traffic.
Overall, Darden reported earnings per share of 78 cents for the quarter, down 3 percent from the 80 cents per share from the same period a year ago. Hurricane Irene cost Darden two cents per share for the quarter, Otis said, so earnings would have been flat without the storm.
First-quarter company net earnings were $106.6 million, down 5.8 percent from $113.1 million a year ago. Besides coping with Olive Garden’s struggling same-store sales, Darden also faces a 5-percent rise in commodity costs.
Darden’s total sales increased 7.5 percent, from $1.81 billion to $1.94 billion, for the quarter.
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Brands’ performances from the first quarter:
• Olive Garden: Sales rose 0.8 percent to $884 million compared with the previous year, driven by 30 net new restaurants that helped offset a 2.9-percent decrease in U.S. same-store sales.
• Red Lobster: Sales of $674 million were 12.3 percent higher compared with the previous year, driven by a 10.7-percent U.S. same-store sales increase and five net new units. Madsen said Red Lobster emphasized craveable dishes and price certainty, such as the $15 four-course “Seafood Feast.” [/article/red-lobster-offers-15-four-course-meal] Red Lobster reported a 19.9-percent hike in same-store sales in June over last year, a 5.8-percent increase in July and a 5-percent rise in August.
• LongHorn Steakhouse: Sales of $253 million were 12.1 percent higher compared with the previous year, driven by a 4.8-percent increase in U.S. same-store sales and 23 net new restaurants. LongHorn’s same-store sales rose 6.5 percent in June, 4 percent in July and 3.5 percent in August, compared with the year-ago periods.
• Specialty Restaurant Group — The Capital Grille, Bahama Breeze, Seasons 52: First quarter sales of $129 million rose 20.7 percent compared with the year-ago quarter. The company said the increase was driven by same-store sales hikes of 7 percent at The Capital Grille, 2.9 percent at Bahama Breeze and 2.5 percent at Seasons 52. Four new Capital Grille units, one new Bahama Breeze and seven new Seasons 52 locations contributed to the sales increase.
Madsen said menu prices have risen 2 percent to 3 percent this year, but added, “We’re pricing to cover the net inflation in our business.”
Darden executives were impressed with Red Lobster’s $15 Seafood Feast, and said they are studying the role of limited-time offers on the brand’s core menu.
Darden has 1,903 total units among its six brands, including a Red Lobster that opened in Dubai in July. Two additional units are planned for Kuwait City, the company’s first restaurants in the Middle East.
Contact Alan Snel at [email protected].
Follow him on Twitter: @AlansnelNRN
