Olive Garden, Red Lobster Sales Up, Traffic Steady

2009 July 29

by Brendan Miller

Sales in the casual dining segment were hurting before the recession and now their sales are in a complete free-fall.
Darden Restaurants (DRI), however, reported on June 23 that its fiscal fourth-quarter sales were up 8.2%, to $1.98 billion. The company’s two main brands are Red Lobster and Olive Garden.
Darden did see same-restaurant sales at Olive Garden and Red Lobster slide 0.6% last quarter. But, according to the Knapp-Track measure, which monitors restaurant sales and traffic trends nationwide, U.S. same-restaurant sales for other similar chains fell 6.7% in the same time period.

Chris Armbruster, a senior research analyst at Al Frank Asset Management, attributes Darden’s success to good management that has changed its menu with the times, while keeping up advertising. Darden’s chains have pulled customers from more expensive rivals, while holding on to the company’s “core customers,” says Armburster, whose firm owns shares.

Darden restaurants have positioned themselves as good value for the price. All-you-can-eat bread sticks and salad creates a perception of lots of value for the money even though many menu items reach the $15 mark. While chains like Red Robin have pulled all their advertising in the recession, Darden has increased advertising and is now reaping the benefits. Furthermore, Darden’s creative has tapped into the current consumer mindset of “connecting” and coming together as a families and communities. Not only are they talking “value” in their advertising their also talking about bring families together and connecting more deeply, which is resonating with consumer even more right now. No wonder their sales are up and market share is growing.

[youtube]http://www.youtube.com/watch?v=VgNEpbfkqzo&NR=1[/youtube]