Darden Doing Swell Without Discount Seekers

Jan 4, 2023 | Corporate Insights, No Bull Economics


Management reported: a spending shift from durable household goods to leisure services, benefitting the restaurant industry; the high-end consumer is doing well & while <$50k consumers have been a little soft over the last 6 months, Darden’s mix from this demo is still above pre-covid levels; and as the <$50,000 demo includes singles & retirees living in multigenerational households, lower-income consumers are in better shape than they appear.


  • Same-store sales grew +7.3% y/y during FY2Q23, outperforming the industry by +3.7% with traffic outperforming by +5.5%. Average weekly sales at Olive Garden were +112% of its pre-covid level.
  • 6.5% price increase during the quarter was well received with a 90% flow-through.
  • A focus on driving core users to Olive Garden (as opposed to promotional users) has been accompanied by a significant reduction in marketing spending & an associated 10-point drop in traffic.
  • To this end, its Never Ending Pasta Bowl LTO was priced +$3 higher than in 2019, generating strong sales despite 75% ad support levels.
  • To Go sales mix was 25% at Olive Garden, 14% at Longhorn, and 13% at Cheddar’s.
  • Digital transactions drove 62% of all off-premises sales during the quarter and 10% of Darden’s total sales.


  • Commodity inflation during the quarter was +13%, partially reflecting crop damage from 2 hurricanes in Florida & 2 hurricanes in Mexico. Food inflation is expected to drop to mid-to-high single digits during FY3Q23 and be closer to flat during FY4Q23 (bringing the FY23 average to +8% to +9%).
Commodities Outlook Third and Fourth Quarter
Commodities Outlook Third and Fourth Quarter
  • Hourly wage inflation is running +8.5%.
  • Each brand is fully staffed at the team member level & manager staffing is at historic highs. While turnover is still elevated from pre-covid levels, it’s getting better. Healthy staffing is driving strong guest satisfaction scores.
  • Utility cost inflation is running low to mid-teens with all other costs running in the low to mid-single digits.
Margin Analysis vs Pre Covid
Margin Analysis vs. Pre-Covid
  • Construction costs & margin pressure has slowed industry development, helping with Darden’s market share.


  • Fiscal 2023 guidance: same-restaurant sales growth of +5% to +6.5%; total inflation of +7%, including commodities inflation of +8% to +9%; and an average annual price increase of +6%.
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