Olive Garden-parent leans on pasta chain in inflation balloon

Darden Restaurants sees 4% inflation during the current fiscal year

Darden Restaurants Inc. is looking for a boost from its Olive Garden chain to help the company navigate the current period of higher inflation. 

The Orlando, Florida-based restaurant operator forecasts total inflation of 4% for the current fiscal year. The company expects the current period, which is the company’s second quarter, to have the highest inflation of the year. 

Ticker Security Last Change Change %
DRI DARDEN RESTAURANTS, INC. 143.47 -2.12 -1.46%

"We think that with this inflation going through, the winners are going to be the ones who provide exceptional value to the consumer," said Darden Restaurants CEO Eugene Lee. "We're trying to position Olive Garden to be that brand."

He added that Cheddar’s Scratch Kitchen was another chain where Darden would be "very cautious with pricing" so that the lower-income consumer feels like they receive "an extremely great value for what they have to pay."

HOMEBUILDERS JOIN CHORUS OF SUPPLY CHAIN WARNINGS

Darden does not break out the average check size at its different restaurants, but said that it expects to raise prices by less than 2% to help offset its rising commodities and labor costs.

The restaurant operator in the current fiscal year sees commodities inflation of 4.5%, and total restaurant labor inflation of 5.5%, including hourly wage inflation of about 7%.

Olive Garden said first-quarter sales rose 38% year over year to $1.09 billion as COVID-19 restrictions were loosened. However, sales were unchanged from pre-pandemic levels, which Darden attributed to a strong promotion two years ago. 

BILLIONAIRE FUND MANAGER GUNDLACH DEBUNKS ‘TRANSITORY' INFLATION

Lee said Darden is looking to add Olive Garden restaurants in more remote 60-mile trade areas where people travel into and out of to make purchases and dine. He thinks Darden can "fairly easily" get to more than 1,000 Olive Garden locations, up from 875 at the end of the quarter.  

Darden Restaurants on Wednesday reported quarterly earnings and revenue that exceeded Wall Street estimates as same-restaurant sales surged 47.5%. The company’s board of directors authorized a new $750 million share buyback program.

GET FOX BUSINESS ON THE GO BY CLICKING HERE

Darden Restaurant shares were up 26% this year through Wednesday, compared with the S&P 500’s 17% gain.