Inflation hasn’t stopped Olive Garden diners from ordering endless breadsticks, salads
Sky-high prices at the gas pump don’t appear to be hurting demand for free breadsticks and endless salads at one of America’s favorite Italian eateries Olive Garden.
On Thursday, the Darden Restaurants-owned chain reported a third fiscal quarter same-restaurant sales gain of 29.9%. Outgoing Darden CEO Gene Lee sought to reassure investors on an earnings call about how a new U.S. recession would impact the company.
“I think that it’s going to take a fairly solid recession to really have some impact on the consumer. I think the consumer balance sheet is stronger than it has been previously,” Lee said, adding the employment market being healthy will likely help prevent a recession.
Overall Darden notched a solid earnings day despite inflation nipping away at consumer budgets, sending shares higher by 1%.
LongHorn Steakhouse’s same-restaurant sales rose 31.6% in the quarter. Sales at the company’s fine dining segment surged 85.8%.
Darden’s fiscal third quarter adjusted earnings were $1.93, smashing estimates for $0.98. Total sales of $2.45 billion slightly missed analyst forecasts of $2.51 billion.
What does appear to be weighing on Darden, however, is its own costs as inflation infiltrates its supply chain.
For the full year, Darden sees earnings of $7.30 to $7.45 a share. The company previously expected earnings of $7.35 to $7.60 a share.
“We started the year with a 3% inflation assumption — and pricing closer to 1.5%. And here we are three quarters later, we’re looking at 6% total inflation and our pricing has only gone up by about 1.5%,” said Darden COO and incoming CEO Rick Cardenas on the earnings call.
Lee added labor wage pressure remains elevated.
“So we believe that wage inflation throughout the country is rising — at a pretty rapid rate,” Lee said.
Cardenas will assume the CEO job at Darden on May 30.
Brian Sozzi is an editor-at-large and anchor at Yahoo Finance. Follow Sozzi on Twitter @BrianSozzi and on LinkedIn.
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