ORLANDO, FLA. — Focusing on “being brilliant with the basics” in its restaurants helped drive strong second-quarter results at Darden Restaurants, Inc., the company’s chief executive officer said on Dec. 18.
Net income in the second quarter ended Nov. 25 totaled $115.6 million, equal to 93c per share on the common stock, up 36% from $84.7 million, or 69c per share, in the same period a year ago. Sales increased 4.9% to $1,973.4 million from $1,881.5 million.
“As industry sales continue to improve, we made the strategic choice to further reduce our incentives during the quarter, recognizing it would likely put pressure on our same-restaurant sales and traffic,” Eugene I. Lee, president and c.e.o., said during a Dec. 18 conference call with analysts. “This resulted in our gap to the industry narrowing; however, it enabled us to build a stronger guest base and contributed to our margin improvement.
“We continue to focus on the relentless execution of our ‘Back to Basics’ operating philosophy anchored in food, service and atmosphere, and strengthening and leveraging our four competitive advantages.”
Darden’s Olive Garden concept had an especially strong quarter, as segment profit increased 10% to $184.5 million from $167.6 million. Sales rose 4.9% to $998.1 million from $951.6 million.
Mr. Lee attributed the gains at Olive Garden to several factors, including the flawless execution of two of the chain’s most popular and strongest value promotions, the strength of the chain’s off-premise business, which grew 10.3% during the second quarter, and investments made to strengthen everyday value.
“First, they redesigned their menus to more prominently showcase two everyday value platforms: Unlimited Soup, Salad, and Breadsticks; and the Cucina Mia! Create Your Own Pasta,” Mr. Lee said. “Second, they enhanced the value of one of their highest-preference entrees, chicken alfredo, by adding 50% more chicken. And finally, they launched their 5-for-$5 beverage platform. I remain excited about the strategic investments the Olive Garden team is making to compete effectively while continuing to highlight their everyday value proposition.”
LongHorn Steakhouse also had a solid quarter for Darden, as segment profit increased nearly 9% to $65.9 million from $60.5 million, and sales improved 6.4% to $412.6 million from $387.7 million.
Mr. Lee said the LongHorn executive team continues to make the right investments in the business focused on quality, simplicity and culture.
“This quarter, they worked to reduce complexity in their recipes and improved culinary processes to ensure their team members are able to execute every time,” he said.
Elsewhere in Darden’s portfolio, the Cheddar’s Scratch Kitchen concept failed to deliver progress on the top line, Mr. Lee said. Total sales for the concept declined 1.4% during the quarter, which was driven by a same-restaurant sales decline of 4%, partially offset by sales growth of new restaurants of 2.6%.
Mr. Lee said Cheddar’s made a significant operational realignment in the quarter that he expects will position the chain for better long-term success.