TRAFFIC OUTLOOK DETERIORATES IN JULY
Darden reported fiscal 4Q results (5/29/22) including solid sales performance at both Olive Garden (+6.5% for the quarter and +4.8% 3-yr. stack) and LongHorn (+10.6% for the quarter and +25.5% 3-yr. stack) while providing a fiscal 2023 consolidated same store sales outlook of +4% to +6%. LongHorn’s sales strength supports the idea that higher income consumers were performing better than OG’s lower income consumers (at least through the end of May).
However, RR’s consumer survey (which measures intentions to eat-out over the next month) reveals a deteriorating sales outlook after showing signs of improvement during the previous 2 months.
Our survey results are ominous given that restaurants continue to benefit from less menu price inflation relative to grocery store price increases. All-the-same, absolute price inflation is punishing, especially for the less affluent as discussed in our Darden call summary.