Darden Restaurants Inc. is looking for a boost from its Olive Garden chain to help the business through the current period of high inflation.
The Orlando, Florida-based restaurateur predicts total inflation of 4% for the current fiscal year. The company expects the current period, which is the company’s second quarter, to see the highest inflation of the year.
|DRI||DARDEN RESTAURANTS INC.||134.05||-3.98||-2.88%|
“We believe that with this inflation, the winners will be those who deliver exceptional value to the consumer,” said Eugene Lee, CEO of Darden Restaurants. “We are trying to position Olive Garden as that brand.”
He added that Cheddar’s Scratch Kitchen was another chain where Darden would be “very careful with the prices” so that the low-income consumer felt they were receiving “extremely high value for what they had to pay”.
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Darden does not detail the average check size at his various restaurants, but said he plans to raise prices by less than 2% to help offset his rising production and labor costs.
The restaurateur forecasts for the current fiscal year raw material inflation of 4.5% and total labor inflation in restaurants of 5.5%, including hourly wage inflation of around 7 %.
Olive Garden said first-quarter sales rose 38% year-over-year to $1.09 billion as COVID-19 restrictions were eased. However, sales remained unchanged from pre-pandemic levels, which Darden attributed to heavy promotion two years ago.
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Lee said Darden is looking to add Olive Garden restaurants in more 60-mile shopping areas where people come in and out to shop and dine. He believes Darden can “pretty easily” access more than 1,000 Olive Garden locations, up from 875 at the end of the quarter.
On Wednesday, Darden Restaurants reported quarterly earnings and revenue that beat Wall Street estimates, as same-restaurant sales jumped 47.5%. The company’s board of directors has authorized a new $750 million share buyback program.
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Shares of Darden Restaurant are up 26% this year through Wednesday, compared to the S&P 500’s 17% gain.