ORLANDO, Fla. (AP) - Sales at Olive Garden improved in the latest quarter, helping parent company Darden post a higher quarterly profit from a year as it works to navigate changing dining habits.
Darden Restaurants Inc. said sales at its existing Olive Garden locations rose 2 percent in the quarter from a year ago and rose 1.3 percent for across all its restaurant brands.
The increase at Olive Garden was driven by higher prices and mix of more expensive items, while customer traffic slipped. Darden CEO Gene Lee noted the saturated restaurant market in the U.S. and newer competition from nontraditional businesses.
“Restaurants are competing against a lot of other choices, not just restaurants,” Lee said during an earnings call.
In recent years, sit-down chains like Olive Garden have been hurt as people increasingly prize convenience and food on-the-go. That is reflected in the broader industry shift, with fast-food places now accounting for 53 percent of the market, according to industry tracker Technomic. A decade ago, sit-down restaurants accounted for a little more than half of the market.
Given the changing landscape, Darden has been working on improving the in-restaurant experience, as well as growing its online ordering business. Lee said the company has identified “convenience as a huge opportunity.”
Still, Lee noted that the he didn’t expect the restaurant industry to get “a whole lot better,” and that some closures of restaurant locations would help the situation.
Olive Garden accounts for more than half of the 1,500 locations Darden owns. Darden’s other chains include LongHorn Steakhouse, The Capital Grille and Bahama Breeze.
The Orlando, Florida-based company, which has also been working on slashing costs, reported net income of $110.2 million, or 87 cents per share, in the three months that ended Aug. 28. That’s compared with $86.4 million, or 67 cents per share, in the same quarter a year ago.
The results exceeded Wall Street expectations. The average estimate of 13 analysts surveyed by Zacks Investment Research was for earnings of 83 cents per share.
Revenue rose 1.6 percent to $1.71 billion in the period, missing Street forecasts. Analysts surveyed by Zacks expected $1.72 billion.
Darden also said it expects earnings for the year to be higher than it previously expected. The company now expects earnings for the year between $3.87 per share and $3.97 per share, up from its previous forecast between $3.80 per share and $3.90 per share. Analysts expected earnings of $3.87 per share, according to FactSet.
Shares of Darden Restaurants Inc. rose 67 cents, or 1.1 percent, to $62.03 in morning trading.
_____
Elements of this story were generated by Automated Insights (https://automatedinsights.com/ap) using data from Zacks Investment Research. Access a Zacks stock report on DRI at https://www.zacks.com/ap/DRI
_____
Keywords: Darden Restaurants, Earnings Report
Please read our comment policy before commenting.