Darden Plans To Focus On Value In New Olive Garden Campaign
01 Luglio 2011 - 9:26PM
Dow Jones News
Darden Restaurants Inc. (DRI) plans to focus more on value in
promotions for its Olive Garden chain as the company tries to
extend the recent growth it is seeing in the casual-dining
industry.
Casual-dining restaurants have been hurt by the economic
downturn and higher commodity costs; however, Darden noted that
recent industry data suggest restaurant sales are improving. To
help build on that trend, Darden unveiled a plan Friday to target
households with annual incomes below $60,000, a group that has
pulled back on its share of casual-dining visits in recent
years.
"We believe the ability to offer greater affordability to guests
without eroding margins will continue to be very important going
forward," President and Chief Operating Officer Andrew Madsen said
Friday on a conference call following the company's quarterly
report. Late Thursday, Darden reported a 19% increase in
fourth-quarter earnings on a 6.8% increase in revenue.
Throughout the recession, Darden refrained from offering the
extensive deep discounts of its competitors, saying it didn't want
to hurt its business model or the long-term image of its brand. The
strategy helped the company outperform the industry.
This week, though, Olive Garden began promoting two new "twist
on classics" dishes that offer more price certainty, Darden said,
and that have a more "short-term, call-to-action" marketing
approach than it has used in the past. The new ads represent a
change from the chain's promotions the past two quarters, which the
company said proved to be too "culinary forward" for its customers
and hurt sales.
Darden's changes at Olive Garden come after a similar focus on
value at Red Lobster showed initial success. In June, Darden
launched a $15 "four-course feast" at Red Lobster. Madsen said the
company is able to "do so at a margin that contributes to profit
growth in absolute and percent terms with appropriate guest count
growth."
"Through the first four weeks of the promotion," Madsen said,
"we are generating substantially more incremental traffic than we
require." Darden didn't break out Red Lobster's June results, but
said the chain led the company's combined growth of 5% to 6% in
sales at restaurants opened at least 16 months.
Despite the focus on value, Darden is preparing to raise prices
at Olive Garden after refraining from taking its annual increase
there in the fourth quarter. Darden said Olive Garden's sales were
flat for the second quarter in a row, in part because it raised
prices there early in the fourth quarter of 2010 but didn't do so
in 2011.
Historically, the company had made a 2%-to-3% annual price
increase. Darden said Friday that the coming rise will probably be
on the low end of that, recognizing consumers' demand for
value.
Friday, Darden shares set an all-time high at $53.57, helped by
the company's comments about Olive Garden's strategy and its strong
guidance for fiscal 2012. Darden said it sees same-restaurant sales
rising 2.5% and earnings growing 12% to 15%, which is at the high
end of its long-term target of 10% to 15% growth.
Darden shares recently rose 6.6% to $53.02.
Darden's bullish view of the casual-dining industry--comments
that also lifted the stocks of rivals Brinker International Inc.
(EAT), P.F. Chang's China Bistro Inc. (PFCB) and Ruby Tuesday Inc.
(RT)--also contributed to its gains Friday.
Darden said the casual dining industry is holding up well
despite elevated gas prices, higher commodity costs and other
economic headwinds. "We are encouraged by the gradual and sustained
improvement of our industry, and we anticipate continued modest
recovery during fiscal 2012," Madsen said.
The company noted that according to recent industry data,
casual-dining restaurants had their best quarterly growth in
same-restaurant sales in more than five years and their best
performance in same-restaurant guest counts in six years.
Darden said it expects commodity costs to be up for the fiscal
year, but that food prices will begin to decline in the second half
of fiscal 2012.
-By Annie Gasparro, Dow Jones Newswires; 212-416-2244;
annie.gasparro@dowjones.com
Grafico Azioni Brinker (NYSE:EAT)
Storico
Da Ago 2024 a Set 2024
Grafico Azioni Brinker (NYSE:EAT)
Storico
Da Set 2023 a Set 2024