Darden's Olive Garden strains for a turnaround

Associated Press Modified: June 22, 2012 at 9:15 pm •  Published: June 22, 2012
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NEW YORK (AP) — Darden Restaurants Inc. is struggling to revive sales at its flagship Olive Garden and Red Lobster restaurants. A key sales figure fell at the chains during the latest quarter, and the company issued a profit forecast that fell short of Wall Street expectations.

The Orlando, Fla.-based restaurant operator has been reworking the menu and pricing to reverse declining sales at Olive Garden, which is its biggest chain and accounts for almost half its revenue. The 10 percent rise in Darden's net income for the quarter came primarily from the opening of new locations, including those for its smaller specialty chains.

Revenue at Olive Garden restaurants open at least a year fell 1.8 percent in the quarter. At Red Lobster, the figure fell 3.9 percent. The metric is an indicator of health because it strips out the effect of newly opened and closed stores.

Darden attributed the drop at Olive Garden in part to its "Taste of Tuscany" promotion, which it said didn't emphasize value enough at a time when diners are watching their budgets and have so many more casual dining options.

Olive Garden's menu "failed to keep pace with guest expectations that started to evolve much faster than they had in the past," said Andrew Madsen, Darden's president and chief operating officer.

Executives noted that a new promotion starting next week — two meals for $25 — will go back to underscoring value. A new core menu and advertising campaign are also slated for next year.

"We're making progress on our efforts to elevate the guest experience at Olive Garden, and over the next 12 months guests will see more and more of the improved food, service, value and advertising we've been developing," CEO Clarence Otis said in a prepared statement.

For 2013, Darden forecast a profit of $3.86 to $4 per share, which fell short of Wall Street expectations of $4.06 per share, according to FactSet. Given the expectations for a slow economic recovery, the company forecast sales at established restaurants to grow just 1 percent to 2 percent.