Darden Restaurants reported Q4 and fiscal year results Thursday morning on the heels of its $715 million Ruth’s Chris Steak House acquisition.
Highlights from the quarter include a total sales increase of 6.4%, to $2.8 billion, driven by a 4% same-store sales increase and 47 net new units. Broken down, Olive Garden’s same-store sales were up 4.4%, while LongHorn Steakhouse was up 7.1%. The company’s fine dining category decreased by 1.9%, with executives attributing the decline to a challenging year-over-year lap following a post-omicron business surge.
For the fiscal year, Darden’s total sales increased 8.9% to $10.5 billion, driven by a 6.8% same-store sales increase and 47 net new units. Olive Garden’s same-store sales were up 6.7% on the year, while LongHorn was up 7.4% and fine dining was up 5.7%.
During the company’s earnings call Thursday morning, executives noted that guest counts exceeded the overall industry by 540 basis points. CEO Rick Cardenas said the company met or exceeded expectations set in the beginning of the year, with a particularly strong performance coming from LongHorn. The steakhouse brand set a weekly sales record the week of Mother’s Day in May and has generated a 34% increase in sales versus pre-covid levels, as well as higher traffic versus pre-Covid. Further, profit margins are 70 basis points higher than last year.
“I can’t tell you there’s any silver bullet and in fact there aren’t any silver bullets here. It’s just about having great execution and investing in the product and the team to drive profitable same-store sales growth,” Cardenas said during the call.
Olive Garden also set a sales record both on Mother’s Day itself and during the week of the holiday. The concept, which accounts for about 45% of Darden’s overall sales, came in shy of same-store sales expectations, however Cardenas said the Never-ending Pasta Bowl promotion earlier this year “significantly improved margins while still providing value.”
As for the fine dining category, executives noted not only that challenging year-over-year lap, but also “a little pullback” on alcohol sales. Demographically, consumers 35 and below are above pre-Covid levels but below last year’s post-omicron wave. The 55-plus crowd remains below pre-Covid levels and is similar to last year.
To-go sales remain a major opportunity for the company, executives shared, and have been consistent quarter-over-quarter. Olive Garden’s to-go sales, for instance, are close to 25% and without any third-party delivery, which Cardenas said is a competitive advantage.
“We continue to see that we’re able to get overall sales growth and outperformance while not tapping into those other channels and actually manage those channels better,” he said. “It’s higher than we would have expected and we’re really happy with it. We’re focused on executing at the highest level possible to make sure we can sustain and grow from here.”
Looking ahead, executives are forecasting net sales of $11.5 billion to $11.6 billion in fiscal 2024, as well as same-store sales growth of 2.5% to 3.5%. As that guidance comes into focus, Cardenas noted that the consumer “seems pretty strong overall.”
“There appears to be only minimal twitching between lower-priced occasions, but overall, we’re not seeing anything concerning. We’re not seeing material changes in check trends,” he said. “We have not seen an impact from the consumer as much as maybe some competitors have. There’s tension between what people want and what they can afford and in a slowing economy, consumers seek value. That’s not only about low prices, but also execution and experience. Food-away-from-home is difficult to give up if you’re executing.”
Contact Alicia Kelso at [email protected]
