Third quarter worries Olive Garden owner Darden
Darden Restaurants, struggling to draw more customers into its Olive Garden and Red Lobster restaurants, said Friday that its third-quarter profit could fall below Wall Street's expectations and cut its outlook for the year.
The Orlando-based chain has tried to revamp menus and marketing for its flagship chains. But revenue at Olive Garden, Red Lobster and LongHorn Steakhouse locations open at least one year is expected to fall 4.5 percent in the quarter ending Feb. 24, indicating those efforts have yet to pay off.
The company's priority is re-establishing customer traffic momentum at the three restaurant chains, CEO Clarence Otis said in a statement. "We recognize there is still more to do to further address affordability and to improve other important aspects of the guest experiences we provide."
Otis said the first half of the fiscal third quarter was "encouraging," but higher payroll taxes and rising gas prices, along with severe winter weather, sent sales sliding in February.
Darden Restaurants Inc. said net income from continuing operations in December-February period will be $1 to $1.02 per share, below analyst expectations of $1.12 per share, according to FactSet.
Darden, like other restaurant chains, has been dealing with tougher competition due to the growing popularity of chains such as Chipotle Mexican Grill and Panera Bread. They offer food that's a step up from fast food but not as expensive as a sit-down restaurant.
To combat this, at Olive Garden, the company rolled out an updated advertising campaign and introduced more light and affordable dishes. At Red Lobster, it added options for people who don't like seafood.
But so far these changes have not sparked a turnaround. In January Darden replaced the president of Olive Garden in an effort to improve results.