Casual-dining restaurant company offers options for consumers feeling impact of weakened lower incomes
Darden Restaurants Inc., parent to the Olive Garden and LongHorn Steakhouse casual-dining concepts among others, has avoided discounting and countered marketing pressure as it noted unsteadiness among lower income consumers, executives said Thursday.
The Orlando, Fla.-based company on Thursday reported financial results for the fourth quarter and fiscal year ended May 26.
“I'm proud of our ability to stay disciplined and control what we can control,” said Rick Cardenas, Darden CEO and president, in an earnings call with analysts. “This continued focus enabled us to have a strong year in what became an increasingly weaker consumer environment especially for consumers below the median household income.”
The median household income is about $75,000, and Raj Vennam, Darden chief financial officer, said pressure seemed especially acute among consumers with a household income of $50,000 or less.
Cardenas said the Olive Garden brand, which traditionally has been a strength in economic downturns, would continue to keep price increases modest and emphasize “never-ending” first course items.
“We're also going to continue to innovate over in our menu,” Cardenas said. “What you see right now on television is our ‘create your own pasta’ at $12.99. Consumers in more challenging times are looking for more price certainty, and that is an amazing value at a ‘create your own pasta’ at $12.99 with unlimited first course. We'll continue to focus our marketing efforts there.” Cardenas said another tool would be digital marketing.
Darden has noted economic pressures among lower-income customers since the first of the year.
In the fourth quarter, Darden completed its announced acquisition of the fine-dining Ruth’s Chris Steak House and bought out one franchisee in Destin, Fla., Cardenas said.
“Thanks to the hard work and collaboration between the Ruth’s Chris team and our integration team, we closed on the acquisition and completed the integration during the same fiscal year,” Cardenas said. “This included onboarding 5,000 new team members with no turnover among our nine directors of operations.”
Cardenas outlined a number of internal corporate changes, including promoting Todd Burrowes, president of LongHorn Steakhouse since July 2015, to a new role as Darden’s president of business development, which includes overseeing international and franchising.
Rik Jenkins was named president of Ruth’s Chris. Laura Williamson, former senior vice president of Olive Garden, was named to head LongHorn, succeeding Burrowes.
Cardenas also said the company had named three new brand presidents within the specialty restaurant group, naming Bryan Clements, the former head of operations at Olive Garden, to lead Yard House; promoting Falon Farrell, head of operations for Eddie V’s, to lead The Capital Grille and Eddie V’s, and Mark Cooper, who led finance for the specialty group, to head Seasons 52 and Bahama Breeze.
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.
Same-store sales for consolidated Darden 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% and 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.
Update June 20, 2024: This story has been edited to correct the first name of Darden's chief financial officer.
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