Cheaper menu, promotions work for Olive Garden parent

Fri Jun 21, 2013 1:39pm EDT

A man talks on his mobile phone in front of the Times Square Olive Garden in New York, June 23, 2010. REUTERS/Keith Bedford

A man talks on his mobile phone in front of the Times Square Olive Garden in New York, June 23, 2010.

Credit: Reuters/Keith Bedford

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(Reuters) - Darden Restaurants Inc (DRI.N) reported better-than-expected quarterly sales, helped by aggressive promotions and the introduction of cheaper fare at its Olive Garden and Red Lobster chains.

Higher payroll taxes and gasoline prices have hurt traffic at the company's restaurants as frugal customers preferred to eat at home. To draw price-sensitive diners the company expanded lower-priced offerings on its menus.

The company also forecast same-restaurant sales to remain flat or rise up to 2 percent for the year ending May 2014. Darden said it expects earnings to be 3-5 percent below the $3.13 per share it posted in fiscal 2013.

"We expect a macroeconomic environment that is similar in fiscal 2014 to what it was in fiscal 2013, with slow and uneven recovery in both the overall economy and our industry," Chief Executive Officer Clarence Otis said.

"That means many guests will continue to need and expect us to emphasize affordability."

Overall same-restaurant sales rose 2.2 percent in the quarter ended May 26, after same-restaurant traffic rose for the first time at its chains this year.

Sales at Olive Garden, which contributes about half of Darden's revenue, rose 5.3 percent to $952 million in the quarter. Same-restaurant sales rose 1.1 percent, while analysts polled by Consensus Metrix expected a fall of 0.8 percent.

Total sales rose 11 percent to $2.29 billion in the fourth quarter, topping analysts' expectations of $2.27 billion, according to Thomson Reuters I/B/E/S.

Net income for the quarter ended May 26, fell to $133.2 million, or $1.01 per share, from $151.2 million, or $1.15 per share, a year earlier.

Analysts on average expected the company to earn $1.03 per share.

Darden also said it would increase its quarterly dividend by 10 percent to 55 cents per share.

(Reporting by Siddharth Cavale in Bangalore; Editing by Joyjeet Das)

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