Why Olive Garden is recording record sales

Olive Garden is enjoying unprecedented popularity with customers right now, and it’s not just for the chocolate lasagna and free breadsticks. For any customers who need proof of the Italian-American chain’s recent success, just look to the latest 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 for the quarter, prompting the company to raise its revenue estimates for fiscal 2023. Additionally, every single Darden brand posted record 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 during a conference call last week.

RELATED: 7 Reasons the LongHorn Steakhouse is so Affordable

In summary, Darden has achieved a lot to brag about lately, and the company attributes this strong performance to its prices.

Like many other restaurant brands and businesses, Darden has raised its prices over the past year to offset the increased cost of food, labor and other commodities. But the company hasn’t been as aggressive in its price hikes as the others and has kept its increases below inflation levels, Darden executives said during the earnings call.

Federal data backs up this claim: According to the Bureau of Labor Statistics, full-service meal prices increased 8% in February 2023 compared to February 2022. Meanwhile, Darden hiked prices 6.3% in the most recent quarter, according to CFO Raj Vennam.

Awards aside, Darden executives cited strong staffing, which can help increase guest satisfaction, as a factor contributing 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 managerial staffing remains at an all-time high.”

Darden has been playing for the long haul with its low-price, high-value strategy. In June 2022, Cardenas said Darden brands would weather inflation and not pass the increased costs on to customers, even if other chains raised their own prices. It also brought his back Never ending pasta Bowl promotion in October 2022, where customers could order as much food as they could use for a fixed price.

Looking ahead to 2023, Darden plans to continue to price its brands below inflation, although Cardenas noted that costs have the potential to fall above or below inflation levels in any 12-month period. But even if inflation takes a toll on their wallets, customers aren’t willing to sacrifice dining out entirely, Cardenas said. When they go to a restaurant they are looking for great value and consistent 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 seek value that is not about low prices. Consumers are making compromises when it comes to spending. And eating out is one of the hardest expenses to give up because dining out is still an affordable luxury for them.”

Customers may have even more reasons to visit a Darden restaurant in the future as the company intends to scale back the price increases it has been conducting.

“The peak prices for us on an annual basis are behind us,” said Vennam. “If nothing changes dramatically, we’ll see price cuts.”

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