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What Drove Darden’s Same-Store Sales Growth in Q2?

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Second-quarter performance

Darden Restaurants (DRI) posted system-wide SSSG (same-store sales growth) of 2.1% in the second quarter of fiscal 2019, outperforming analysts’ consensus expectation of 2.0%. Of the eight brands that Darden operates, four have posted positive SSSG, while the remaining four have posted falls in their same-store sales.

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Performance across brands

The Olive Garden brand posted SSSG of 3.5%, outperforming analysts’ estimate of 3.1%. The increase in the brand’s menu prices contributed 1.9% to its SSSG, while a favorable mix contributed 2.4%. However, the fall in customer traffic at its restaurants negatively impacted its SSSG by 0.8%.

During the quarter, Olive Garden strengthened its everyday value platforms, increased the value of its most preferred menu item, Chicken Alfredo, with the addition of 50% more chicken, and introduced its 5 for $5 beverage platform. The brand also executed its two most popular promotions, the Never Ending Pasta Bowl and Buy One, Take One, which were received well by customers. Also during the quarter, the brand’s off-premises sales rose 10.3% to form 14.6% of its total sales.

The LongHorn Steakhouse brand posted SSSG of 2.9% in the quarter. An increase in its menu prices contributed 1.7% to this growth, while a favorable mix contributed 1.3%. However, the fall in its traffic offset its SSSG by 0.1%. For the flawless execution of its processes, the brand continues to train, test, and certify its grill masters. The brand has also been focusing on simplifying its menu and improving its culinary processes, developments that contributed to its SSSG in the quarter.

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Of the company’s other six brands, only the Capital Grille and Eddie V’s posted positive SSSG in the quarter, with the Capital Grille posting SSSG of 3.7% and Eddie V’s posting a rise of 0.9% in its SSSG. The same-store sales of Cheddar’s, Yard House, Seasons 52, and Bahama Breeze fell 4.0%, 1.1%, 0.8%, and 1.1%, respectively, in the quarter.

Peer comparison and outlook

During the comparable quarter, Brinker International (EAT) posted system-wide SSSG of 1.2%, while Texas Roadhouse’s (TXRH) Texas Roadhouse brand posted SSSG of 5.5%. Bloomin’ Brands (BLMN) posted system-wide SSSG of 2.9% in the United States and a fall of 3.3% in international markets.

After posting its fiscal 2019 second-quarter earnings results, Darden set its SSSG guidance for fiscal 2019 to 2.5% compared to its earlier guidance of 2.0%–2.5%.

Next, we’ll look at Darden’s unit growth.

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