Darden 2Q net falls 28% on soft sales

Staff Writer
Darden 2Q net falls 28% on soft sales

Darden Restaurants Inc. said disappointing sales at Olive Garden, as well as increased commodity costs, contributed to a 28-percent year-over-year decline in second-quarter profit.

Management of the Orlando, Fla.-based company, which operates Olive Garden, Red Lobster, LongHorn Steakhouse and several other restaurant brands, said they intended to make bolder moves at the Italian casual-dining chain to stem declines in same-store sales.

For the second quarter ended Nov. 27, Darden earned $53.7 million, or 40 cents a share, compared with $74.5 million, or 53 cents a share, in the same quarter last year.

Sales rose 6.1 percent to $1.83 billion, from $1.73 billion in the same prior-year quarter. Closing costs associated with the purchase of the Eddie V’s restaurants reduced profit by 1 cent a share, Darden said.

Darden earlier this month warned that same-store sales at Olive Garden would be negative in the quarter as it saw the chain’s customer traffic slip and guests trading down, reducing add-ons and taking advantage of value promotions in great numbers than expected.

Olive Garden’s U.S. same-store sales fell 2.5 percent in the quarter. When combined with Red Lobster and LongHorn, same store sales rose 1.8 percent in the quarter.

In the quarter, Olive Garden offered such promotions as the “never-ending pasta bowl” at $8.95 in September and the first week of October, which was followed by stuffed rigatoni with sausage for $9.95 or stuffed rigatoni with chicken for $11.95.

“Neither promotion delivered as many guests as anticipated,” Drew Madsen, Darden’s president and chief operating officer, said in an conference call Friday with analysts, “and there was more trading to the lower-priced promoted entrées than we have seen historically.

“This trading, combined with lower add-on sales as guests continued to manage their check, resulted in negative menu mix for the quarter,” Madsen said.