OIive Garden parent's same-store sales near pre-pandemic levels as Covid restrictions ease

OIive Garden parent's same-store sales near pre-pandemic levels as Covid restrictions ease

A take-out order from a Darden Restaurants Inc. Olive Garden location is arranged for a photograph in Tiskilwa, Illinois, U.S.

Daniel Acker | Bloomberg | Getty Images

Darden Restaurants on Thursday reported that its fiscal fourth quarter same-store sales nearly returned to 2019 levels as states rolled back dining restrictions.

The company also released an outlook for fiscal 2022, predicting that that its total sales for the year will top pre-pandemic revenue.

Shares of the company rose more than 2% in morning trading.

Here’s what the company reported compared with what Wall Street was expecting, based on a survey of analysts by Refinitiv:

  • Earnings per share: $2.03 adjusted vs. $1.79 expected
  • Revenue: $2.28 billion vs. $2.19 billion expected

The Olive Garden parent reported fiscal fourth-quarter net income of $369 million, or $2.79 per share, up from a loss of $479.7 million, or $3.85 per share, a year earlier.

Excluding items, Darden earned $2.03 per share, beating the $1.79 per share expected by analysts surveyed by Refinitiv.

Net sales rose 79.5% to $2.28 billion, topping expectations of $2.19 billion. Across the company’s portfolio, same-store sales rose 90.4% compared with the same quarter a year ago and fell just 0.5% compared with the period two years before.

Same-store sales at Olive Garden, which accounts for about half of Darden’s revenue, surged 61.9%. Compared with the same time two years ago, same-store sales for the Italian-inspired chain were down just 1.5%. To-go orders accounted for a third of Olive Garden’s sales during the quarter, even as dining room restrictions disappeared. It also broke its all-time single-day sales record on Mother’s Day.

LongHorn Steakhouse was the only segment of Darden’s business to report positive same-store sales on a two-year basis. Its same-store sales more than doubled compared with the year prior and rose 13.5% compared with two years ago.

As diners returned, so did the two chains’ profits. The company said that Olive Garden’s profits quadrupled, and LongHorn’s surged nearly 1,000%. Executives said that both chains saw their highest quarterly profit of all time.

Darden’s fine-dining business, which includes The Capital Grille, has been the hardest hit by the pandemic. This quarter, it reported same-store sales growth of 143% as diners finally returned to upscale restaurants. However, on a two-year basis, same-store sales were still down 10.6%.

“Upscale fine dining is performing well above where we thought it would be. And it’s coming back very quickly,” CEO Gene Lee told analysts.

So far in June, same-store sales across Darden’s portfolio are up 2.5% on a two-year basis.

As ingredient shortages hit the restaurant industry, executives said that it has avoided significant supply chain interruptions. It has seen a few spot shortages, but the company said those were related to warehouse staffing and driver shortages, not product availability.

Executives weren’t concerned about inflation in food prices, pointing to long-term contracts for their most important items, but said that they have room to raise prices if needed. They said seafood, chicken, dairy, cooking oil and packaging are driving inflation right now.

For fiscal 2022, Darden expects total sales of $9.2 billion to $9.5 billion, up 5% to 8% from pre-pandemic levels, assuming that essentially all of its locations can operate at full capacity. The company is forecasting same-store sales growth of 25% to 29%, compared with fiscal 2021. It also said it expects diluted net earnings per share from continuing operations in a range of $7 to $7.50.

The forecast is in line with Wall Street’s expectations. Analysts were predicting fiscal 2022 earnings of $7.21 per share on revenue of $9.22 billion.

Darden said it will hold its annual shareholder meeting on Sept. 22.