Olive Garden is enjoying unprecedented popularity with customers right now, and it’s not just because of the free chocolate lasagna and breadsticks. For any diners who need proof of the Italian-American chain’s recent success, just look at the last quarter of Darden Restaurants, the parent company of Olive Garden and other restaurant brands like Longhorn Steakhouse and Yard House.
Darden reported higher-than-expected earnings per share, revenue and same-store sales in the quarter, prompting the company to raise its revenue estimates for fiscal 2023. Additionally, each Darden brand reported record total sales for the quarter, while Olive Garden and LongHorn Steakhouse set all-time weekly sales records during Valentine’s Day week, CEO Rick Cardenas announced at the an earnings call last week.
In summary, Darden has done a lot to brag about lately, and the company traces that strong performance back to its pricing.
Like many other restaurant brands and companies, Darden has raised prices over the past year to offset high food, labor and other commodity costs. But the company hasn’t been as aggressive with its price hikes as others, keeping its increases below inflation levels, Darden executives said on the earnings call.
Federal data backs up this claim: Full-service menu prices rose 8% in February 2023 compared to February 2022, according to the Bureau of Labor Statistics. Meanwhile, Darden has raised prices by 6.3% in the last quarter, according to chief financial officer Raj Vennam.
In addition to pricing, Darden executives cited high staffing levels, which can help increase customer satisfaction, as a contributing factor to the company’s recent success.
“Of course, none of this would be possible without having the right people in the right roles ready to serve our guests,” Cardenas said. “Our restaurants continue to be well staffed and our manager staffing remains at historic highs.”
Darden has played the long game with its lower price, high value strategy. In June 2022, Cardenas said Darden brands would overcome inflation and refrain from passing high costs onto customers, even if other chains raised their own prices. He also brought back his Unending Pasta Promotion Bowl in October 2022 which allowed customers to order as much food as they could consume for a set price.
Looking ahead in 2023, Darden expects to continue to keep prices below inflation across its brands, although Cardenas noted that costs have the potential to veer above or below inflation levels in the future. during any 12 month period. But even with inflation stretching their wallets, diners aren’t ready to completely sacrifice dining out, Cardenas said. When they go to restaurants, they are looking for consistent, value-for-money experiences, and Darden wants to meet that need.
“Now there’s a tension between what people want and what they can afford,” Cardenas said. “Consumers continue to look for value, which is not a question of low price. Consumers make trade-offs when it comes to spending. And out-of-home food is one of the hardest expenses to give up, as dining out remains an affordable luxury for them.
Customers may have even more reason to visit a Darden restaurant in the future, as the company intends to reduce the price increases it has put in place.
“Peak pricing for us on an annual basis is behind us,” Vennam said. “Unless something drastically changes, we see prices go down.”
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