UPDATE 1-Olive Garden parent Darden to offer cheaper menu options

Fri Mar 22, 2013 11:03am EDT

* Third-quarter earnings/share $1.02 vs est. $1.01

* Third-quarter sales in-line with Wall St expectations

* Says consumers adjusting to higher payroll taxes, gasoline

* Shares up 1.3 percent

March 22 (Reuters) - Darden Restaurants Inc, owner of the Olive Garden and Red Lobster chains, said it would offer a better selection of lower-priced fare after blaming higher payroll taxes and gasoline prices for a fall in traffic in the third quarter.

The company, which has already introduced lighter lunch items such as calzones and Italian sandwiches at Olive Garden and non-seafood items at Red Lobster, said it would also be more aggressive with promotions.

"We've started (affordable pricing) and we are seeing an improvement in traffic at all three of our large brands," a company executive said on a conference call with analysts.

Chief Executive Clarence Otis said consumers were not prepared for the payroll tax increase and the rapid rise in gasoline prices. "But March indicates that consumers have adjusted," Otis said on the call.

Orlando-based Darden, which also owns LongHorn Steakhouse, reported third-quarter results that were largely in line with analysts' recently lowered estimates.

The company cut its 2013 profit forecast in February when it reported lower-than-expected preliminary results for the quarter ended Feb. 24.

The final results released on Friday were virtually unchanged from those released last month.

Net income fell to $134.4 million, or $1.02 per share, from $164.1 million, or $1.25 per share, a year earlier.

Sales rose 4.6 percent to $2.26 billion.

Analysts on average expected a profit of $1.01 per share on sales of $2.26 billion, according to Thomson Reuters I/B/E/S.

The company reiterated its full-year profit forecast of $3.06 to $3.22 per share. Analysts expect $3.16 per share.

Combined same-restaurant sales fell 4.6 percent in the third quarter.

Darden shares were up 1.3 percent at $49.62 in mid-morning trading on the New York Stock Exchange on Friday.

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Comments (1)
jsp81355 wrote:
I have been a big fan of Olive Garden since its inception, and recently ate at an Olive Garden in Danbury, CT, shortly after I read that the restaurant chain was redecorating and changing their menu. Sadly to say, I was pretty disappointed. They no longer have a lunch menu (it was 1:00 pm on a Saturday when I ate there), they’ve removed some of the best meals off their menu, and the prices actually appear to have increased. I personally think these changes may lead to the downfall of the restaurant chain.

Mar 22, 2013 2:12pm EDT  --  Report as abuse
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