Olive Garden Generates Record Profit Growth

The CEO says the chain is by far the best casual dining company.

From a sales perspective, Olive Garden’s does not keep pace with its casual competitors.

Compared to 2019, the chain’s same-store sales of 875 units fell 4.9% in March and rose 0.3% in April and 1% in May. However, Texas Roadhouse comps were up 15.5% in March from 2019 and 20.9% in April. Applebee’s rose 6.1% and 11.4% in March and April, respectively, and Chili’s rose 2% and 10.1% in those same months.

So what’s up with Olive Garden? Darden Restaurants CEO Gene Lee said it was because the brand was “not involved in giving away our food through third-party channels.” Olive Garden also doesn’t cut its money like the others by selling gift cards, Lee said.

He said Darden “runs a business here to try to drive profitable sales growth.” In his view, Olive Garden posted fourth-quarter segment profit of $281.6 million and restaurant-level margins of 25.5%, both company records. The chain also broke its single-day sales record on Mother’s Day.

“Our businesses make over $5 million on average unit volumes,” Lee told analysts on Darden’s fourth-quarter conference call. “In the fourth quarter, we increased restaurant margins by 25%. Isn’t our job to try to generate profitable sales growth? And that’s what we focus on. And so there are a lot of reasons why we don’t track where some of the other people are going. There are a lot of things that have changed in two years and the way they run their business. Some of them have virtual marks and all these other things that exist.

“I mean, guys, you gotta get out of this,” he continued. “… it’s the best casual dining company, not even a little more, by a lot.”

DARDEN’S COVID ROAD SO FAR:

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Darden CEO: Virtual brands are a ‘distraction’

Pandemic report: Olive Garden, Texas Roadhouse have the most satisfied guests

CEO Gene Lee forfeits salary as early impact hits

The challenges are ‘far from over’ as Darden looks to a new business model

Darden is progressing on the road to recovery

Olive Garden is getting closer to normal life

COVID could ignite Darden’s growth. here’s why

Although Olive Garden usually gets the most attention, the 533-unit LongHorn Steakhouse seems to be the current star. The brand posted a record fourth-quarter segment profit of $118 million, a 982.6% increase over 2020. The concept also saw same-store sales increase 9.9%, 16% and 15.5% in March, April and May, respectively.

COO Rick Cardenas attributed LongHorn’s success to investments over the past five years and improved perception of value.

“They went from the middle of the pack to No. 1 [in industry rankings], and so I think LongHorn’s performance is just a combination of a lot of hard work over a long period of time,” he said. “I also want to acknowledge that the whole steakhouse segment is on the move. The overall steakhouse segment outperformed the other segments. And I believe the segment has high value perceptions. So they’re definitely getting the segment lift, but they’ve also done a great job and they’re performing at an extremely high level.