Why Olive Garden Is Seeing Record Sales Right Now
Olive Garden is seeing unprecedented popularity with customers right now, and it's not just because of the Chocolate Lasagna and complimentary breadsticks. For any customers who require proof of the Italian-American chain's recent success, just look at the most recent quarter for 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, spurring the company to raise its revenue estimates for the 2023 fiscal year. Additionally, every single Darden brand saw record total sales for the quarter, while Olive Garden and LongHorn Steakhouse set all-time weekly sales records during the week of Valentine's Day, CEO Rick Cardenas announced during an earnings call last week.
In summary, Darden has achieved a lot to brag about lately, and the company is tracing this strong showing back to its prices.
Like many other restaurant brands and companies, Darden has raised its prices in the past year to offset elevated costs for food, labor, and other commodities. But the company hasn't been as aggressive with its price hikes as the others have, keeping its increases below inflation levels, Darden executives said during the earnings call.
Federal data backs up this claim: full-service menu prices were up 8% in February 2023 compared to February 2022, according to the Bureau of Labor Statistics. Meanwhile, Darden raised prices 6.3% in the most recent quarter, according to CFO Raj Vennam.
Aside from prices, Darden executives cited strong staffing levels, which can help drive guest 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 been playing the long game with its lower pricing, high-value strategy. In June 2022, Cardenas said that Darden brands would ride out inflation and refrain from passing along elevated costs to customers, even as other chains hiked up their own prices. It also brought back its Never-Ending Pasta Bowl promotion in October 2022 that allowed customers to order as much food as they could consume for a fixed price.
Looking forward in 2023, Darden plans to continue keeping prices below inflation at its brands, though Cardenas noted that costs have the potential to veer above or below inflation levels during any 12-month period. But even with inflation stretching their wallets, customers are not willing to completely sacrifice eating out, Cardenas said. When they do go to a restaurant, they're seeking great value and consistent experiences, and Darden wants to meet that need.
"Now there is a tension between what people want and what they can afford," Cardenas said. "Consumers continue to seek value, which is not about low prices. Consumers are making spending trade-offs. And food-away-from-home is one of the most difficult expenses to give up, because going out to a restaurant is still an affordable luxury for them."
Customers may have even more reasons to visit a Darden restaurant moving forward, since the company intends to dial down the price hikes it has implemented.
"Peak pricing for us on an annual basis is behind us," Vennam said. "Unless something dramatically changes, we see pricing coming down."
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