Darden’s fine-dining business weakens, but overall sales grow
Same-restaurant sales at Darden Restaurants’ fine-dining eateries fell in the quarter ending May 28 despite overall business improving at the Orlando-based chain.
Darden owns Olive Garden as well as other chains, including fine-dining restaurants Eddie V’s and The Capital Grille.
The company reported overall sales in the quarter were up 6.4% to $2.8 billion. Same-restaurant sales grew 4%, but that figure for just the fine-dining restaurants fell 1.9%.
CEO Rick Cardenas addressed concerns about the economy and consumers on an earnings call Thursday, saying Darden has not seen an effect in its customers “as much as maybe our competitors have.”
“There is a tension between what people want and what they can afford,” Cardenas said. “Even in a slowing economy, consumers really continue to seek value, and it’s not always about low prices. It’s about execution. … They’re making spending tradeoffs and, as I said before, food away from home is really difficult to give up, if you’re executing.”
Cardenas and CFO Raj Vennam expected the softness in fine dining to continue in the next quarter and attributed the drop to having to compare it to last year, when business was strong.
“One area we’re seeing a little bit of check management is with alcohol sales, primarily at our higher-end brands,” Cardenas said. “We think part of this is … a function of last year, similar to the guest count trends we saw last year. There was probably a little bit of euphoria in check last year.”
Darden has just bought another fine-dining brand, finishing its $715 million deal for Winter Park-based Ruth’s Hospitality Group last week.
Ruth’s has 81 company-owned or operated Ruth’s Chris Steak House restaurants and 74 franchised locations worldwide.
Darden also concluded its fiscal year on May 28, with total sales for the year up 8.9% to $10.5 billion.
The company forecasts total sales in its new fiscal year will improve to $11.5 to $11.6 billion, thanks to adding Ruth’s as well as projected same-restaurant sales growth of 2.5% to 3.5%. Darden also expects to open about 50 new restaurants in this new fiscal year.
It was also revealed Thursday that former CEO Gene Lee, who retired from that post last year, also now plans to retire as chairman of Darden’s board.
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Darden’s stock price was down about 2.4% Thursday morning to $162.41.
Darden has 1,914 restaurants, not including the newly acquired Ruth’s, with Olive Garden, LongHorn Steakhouse, Cheddar’s Scratch Kitchen, Yard House, The Capital Grille, Seasons 52, Bahama Breeze, Eddie V’s and The Capital Burger.