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Darden’s Fiscal 3Q18 Same-Store Sales Growth Lower than Expectated

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Mar. 23 2018, Published 8:35 p.m. ET

Fiscal 3Q18 performance

In fiscal 3Q18, Darden Restaurants (DRI) posted systemwide SSSG (same-store sales growth) of 2.0%, compared to analysts’ expectation of 2.5%. The company’s management stated that unfavorable weather conditions have negatively impacted the company’s SSSG by 0.7%. Adverse winter effects in January and February 2018 were blamed for lower-than-expected SSSG.

Same-store sales growth across brands:

  • Olive Garden: Olive Garden posted an SSSG of 2.2% with a rise in menu prices contributing 1.7%, a favorable mix contributing 0.4%, and growth in traffic adding 0.1%. The SSSG was driven by menu innovations, the enhancement of customer experience through better execution, marketing and promotional initiatives, and growth in off-premise sales. During the quarter, the brand introduced pasta chips and the meatball pizza bowl, which were also supported by marketing campaigns. The brand had also launched a new advertising campaign during the quarter to highlight the brand’s Lunch Duos, starting at $6.99, the early dinner duo, starting at $8.99, and create your own pasta starting at $9.99.
  • LongHorn Steakhouse: The brand posted SSSG of 2.0% with a favorable menu mix contributing 1.4% and a rise in menu prices contribution 0.7%. However, the decline in traffic at its restaurants offset 0.1% of the SSSG. The company has been focusing on enhancing customer experience, simplifying operations by lowering the number of menu items to support promotional offers, and higher levels of execution to drive its SSSG.
  • Other business: During the quarter, The Capital Grille, Eddie V’s, Yard House, and Bahama Breeze posted an SSSG of 2.8%, 2.7%, 1.9%, and 0.2%, respectively. However, the SSSG of Cheddar’s Scratch Kitchen and Seasons 52 declined 2.2%, and 0.2%, respectively. The decline in Cheddar’s SSSG was driven by the acquisition of 52 restaurants from franchisees in last 14 months.
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Peer comparisons and outlook

During the same period, Texas Roadhouse (TXRH) posted SSSG of 5.9%, Bloomin’ Brands (BLMN) posted a systemwide SSSG of 3.3% in the United States, and Brinker International’s (EAT) SSSG declined 1.0%.

For 2018, Darden’s management maintained its SSSG guidance at 2.0%.

Next, we’ll look at Darden’s unit growth in the last four quarters.

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