It's hard for us to understand why analysts keep saying casual dining is dead. Applebee's, Chili's, Outback Steakhouse, and now Olive Garden have all reported strong quarterly sales.
— Danni Santana
Olive Garden remains a model of consistency for Darden Restaurants, as the casual dining chain reported positive same-store sales for the 18th consecutive quarter — that’s four and a half years of positive growth — on Thursday.
Higher average check size and off-premise growth boosted comparable restaurant sales by 4.3 percent during the brand’s fiscal third quarter, ending Feb. 24. Restaurant guest count also increased marginally after a 1 percent decline last period.
A big component of Olive Garden’s recent success is the chain’s reduction of limited time offers advertised to the public, Lee told analysts. Olive Garden has limited food promotions and incentives for customers to Never Ending Pasta Bowls, Early Dinner Duos, and discounts on select pasta dishes.
Diners have responded by ordering higher-priced items off the restaurant’s regular menu leading to higher average check size for the second straight quarter.
“Incentives are just one piece of our overall advertising and marketing strategy,” said Lee. “And we’ll continue to try to optimize how we spend our advertising dollars and how we interact with our consumers. Depending on the environment and the competitive situation, we will make adjustments as needed to try to continue to grow our market share and increase same-restaurant sales.”
Labor Needed For Off-Premise Demand
Another key to Olive Garden’s strong sales performance is the success of its off-premise business, which made up 16 percent of Olive Garden’s total sales of $1.1 billion for the quarter.
While Olive Garden did not offer any update on a potential delivery partnership, Lee did concede to needing to hire more in-house staff to support demand from customers. Such efforts could be very challenging for the brand. According to the Bureau of Labor Statistics, restaurants and bars added just 1,600 jobs in February compared to 36,600 the month prior. Olive Garden also continues to test delivery in select restaurants across the country, but has not been able to reach a national agreement with a vendor.
“As we continue to grow, if we’re at 10 percent to 15 percent growth in off-premise sales, that’s going to provide us the opportunity to add more people to make sure that we actually get the food on time and accurately to the consumers,” Lee said.
Darden reported overall comparable-store sales growth of 8.2 percent, led by the performances of Olive Garden and Longhorn Steakhouse, which posted 3.8 percent same-store sales growth. Total net sales jumped by nearly 6 percent to $2.2 billion for the restaurant group.