No Price Discounts, No Problem: Darden Restaurants Experience Sales Growth

Darden Restaurants, whose portfolio includes Olive Garden, Red Lobster, and LongHorn Steakhouses, is one of the first casual dining restaurant chains in the U.S. experiencing sales growth, with the rest of the category down 4 percent.

March 29, 2010

NEW YORK - Darden Restaurants, whose portfolio includes more than 1,700 Olive Garden, Red Lobster, and LongHorn Steakhouses restaurants, said that its U.S. chains experienced their first comparable sales gains for the past two years, the Financial Times reports.

Darden said that sales rose 0.5 percent for the third quarter that ended February 28 against a year ago, despite particularly harsh winter weather.

"[We are] experiencing a broad-based sales improvement across al locations and in our central business district and suburban areas," said Gene Lee, head of specialty restaurants for Darden.

Darden is one of the first casual restaurant chains in the U.S. to return to sales growth, and Lee attributed some of the increase to upticks in business and entertainment dining. However, he said that diners are spending less on their overall dining experiences by reducing alcohol consumption. "We??re seeing a little bit of trade-down there."

The rest of the industry??s sales dropped 4.3 percent in the quarter ending February 28, making Darden??s sales figures all the more impressive. In contrast to its competitors, Darden has generally avoided intense discounting during the recession.

Despite that relative success, Brad Richmond, chief financial officer at Darden, cautioned too much optimism, saying that customers remained "in a fairly fragile state right now."

"We need to continue to see their household economics strengthen; we need to see more employment to really drive the industry and our business," Richmond said.

Earlier this month, the NPD Group estimated that overall food service sales dropped 3 percent last year, with fine dining restaurants down 13 percent and casual dining restaurants down 4 percent.

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