Darden Restaurants Inc. is shying away from special officers, but it did post a strong sales quarter with the return of its Olive Garden Never-Ending Pasta Bowl promotion in the second quarter.
The Orlando, Fla.-based company, which also owns the LongHorn Steakhouse, Chaddar’s Scratch Kitchen and other full-service brands, said the return of the promotion helped Olive Garden increase traffic and same-store sales, which were up 7.6% in the Nov. 27-ended second quarter.
Rick Cardenas, Darden’s president and CEO, said Olive Garden’s Never-Ending Past Bowl met the three standards any such promotional activity must meet.
The brand offered the deal Oct. 3-Nov. 20 and guests could get unlimited servings of pasta combinations, homemade soup or salad and freshly baked breadsticks, starting at $13.99.. Each never-ending topping (meatballs, Italian sausage, crispy chicken) could be added for $4.99. Olive Garden originally began offering the unlimited deal in 1995, but it was lifted in 2020 and 2021 during the height of COVID19. The pricing was $3 more than in 2019.
Cardenas outlined the three boxes a promotion needed to check. “First, it needs to elevate brand equity by bringing the brand's competitive advantages to life,” he said on an earnings call Friday. “Second, it should be simple to execute. We will not jeopardize all the work we have done to simplify operations, which allows our teams to consistently deliver exceptional guest experiences. And third, it will not be at a deep discount. We are focused on providing great value to our guests but doing that in a way that drives profitable sales growth.”
The Never-Ending Pasta Bowl’s results exceeded expectations, he said, and kept traffic higher than segment averages in the quarter. “It was priced $3 higher than in 2019, which significantly improved the margin of this offer while still providing tremendous value for our guests,” Cardenas said, and the seven-week promotion was supported with about three-quarters of the media of past years.
Thanksgiving Day provided record sales for Darden’s Capital Grille, Eddie V’s and Seasons 52 concepts, Cardenas said, and bookings for the winter holidays were “encouraging” despite economic uncertainties.
“We have a wide range of consumers,” he added. “We serve a lot of them all across the spectrum. Our data indicates a higher-end consumer hasn't seen the same impact as consumers at the lower end of the spectrum.”
He said the mix of households with incomes of $50,000 a year was still above pre-COVID levels. “Keep in mind that a lot of our consumers below $50,000 are single, retirees or living in multigenerational households,” Cardenas said, “so maybe $50,000 goes a little bit farther for that consumer.”
Raj Vennam, Darden’s chief financial officer, said pricing in the quarter was about 6.5%, which was 200 basis points below total inflation of roughly 8.5%. Commodity inflation was about 13% in the quarter, with chicken, dairy and grains outpacing other food costs, he said.
Staffing has improved since the constraints of COVID.
“At each of our brands, we are fully staffed at the team member level, and manager staffing is at historic highs,” Cardenas said. “As a result, our teams are executing more consistently, which in turn is driving strong guest satisfaction across our brands, according to both internal and external sources
Darden in the quarter generated $10 billion in sales, on a trailing 52-week basis, for the first time in the company’s history, he added.
High guest satisfaction scores derived in part from the company’s efforts in simplifying the menu over the past few years, Cardenas said.
“Simplicity makes it easier for our teams to do what they do,” he said. "If they don’t have a lot of different things to learn and execute, it gets easier.”
For the second quarter ended Nov. 27, Darden’s net income was $187.2 million, or $1.52 a share, down from $193.2 million, or $1.48 a share, in the prior-year period. Sales were up 9.4% to $2.486 billion, from $2.272 billion in the same quarter last year.
Same-store sales in the quarter were up 7.3% for the Darden system, with increases of 7.6% at Olive Garden, 7.3% at LongHorn, 5.9% in the fine-dining division and 7.1% at its other business.
As of Nov. 27, Darden had 1,887 restaurants, including 890 Olive Gardens, 553 LongHorn Steakhouses, 179 Cheddar’s, 85 Yard House units, 61 Capital Grilles, 45 Seasons 52 units, 42 Bahama Breeze restaurants, 29 Eddie V’s and three Capital Burger units.
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