ORLANDO The era of discounting in casual dining showed more signs of ending as executives at Darden Restaurants Inc. said this week they would be using price-driven promotions even more judiciously.
Darden reported this week that profit in the third quarter ended Feb. 28 rose 25 percent as sales improved at each of its restaurant chains, including Olive Garden, Red Lobster and Longhorn Steakhouse. Profit rose to $134.3 million, or 94 cents per share, from $107.5 million, or 78 cents per share, in the same year-ago quarter. Latest-quarter revenue rose 4 percent to $1.87 billion.
As the gap between sales trends at Red Lobster and Olive Garden widens with other casual-dining competitors, who are still suffering declines, Darden said it was becoming even more selective about offering discount promotions, which in 2009 swept many casual-dining chains such as Applebee’s “2 for $20” and Chili’s “3 for $20.”
Beyond its seasonal value promotions, Red Lobster held off on discounting, but in the third quarter it did offer a new “Seafood Dinner for Two” promotion at $29.99, which started in early January and ran through mid-February.
“We thought it did a great job of balancing the two things we really are striving to do in this environment,” Andrew H. Madsen, president and chief operating officer of Darden, told analysts in an earnings conference call Wednesday. “One is, on a brand like Red Lobster, [the promotion] periodically give guests the affordability they are looking for but does it in a way that doesn’t negatively impact brand image or business model … We think it did everything we were looking for it to do.”
Madsen said, “We are going to use promotions like that selectively on a brand like Red Lobster, and we don’t really want to comment further on what is going to happen in the future but we will periodically use things like that to give price certainty to their guests without deep discounts.”
Earlier this year, Chili’s, which owned by Dallas-based Brinker International Inc., said it would end its “3 for $20” deal and focus on a revamped and higher quality menu. Some analysts questioned whether the sector would still be able to drive traffic without deep discounting, as consumers today still are shopping for deals.
Darden provided a breakdown of third-quarter results by brand, as follows:
- The 710-unit Olive Garden posted sales of $870 million, 5.2 percent higher than the same quarter last year. Same-store sales rose 1.5 percent.
- The 692-unit Red Lobster booked sales of $655 million, up 1.9 percent from a year ago. Same-store sales increased 0.9 percent.
- The 326-unit Longhorn Steakhouse’s sales totaled $238 million, up 4.5 percent from last year. Same-store sales rose 1.3 percent.
- The 40-unit Capital Grille posted sales of $69 million, up 13.7 percent over last year’s quarter, and was helped by the opening of five new restaurants. Same-store sales fell 1.9 percent.
- The 24-unit Bahama Breeze booked $29 million in sales, up 3.1 percent up from the prior year. One new restaurant was added. Same-store sales fell 0.6 percent.
Darden did not break out sales for its nine Seasons 52 restaurants.
Increased business-and-entertainment spending for helped sales at the Capital Grille, said Gene Lee, president of Darden’s specialty restaurant group.
“We are experiencing larger gains on Monday through Thursday night,” Lee said. “We are still seeing a little bit of negative check in the Capital Grille business. That is primarily being driven by lower wine expenditures. We are seeing a little bit of trade-down there; not a whole lot in food but more in alcohol.”
Contact Ron Ruggless at [email protected].
