NEW YORK -- Darden Restaurants Inc. is struggling to revive sales at its flagship Olive Garden and Red Lobster restaurants. A key sales figure fell at the chains during the latest quarter, and the company issued a profit forecast that fell short of Wall Street expectations.
The Orlando, Fla.-based restaurant operator has been reworking the menu and pricing to reverse declining sales at Olive Garden, which is its biggest chain and accounts for almost half its revenue. The 10 percent rise in Darden's net income for the quarter came primarily from the opening of new locations, including those for its smaller specialty chains.
Revenue at Olive Garden restaurants open at least a year fell 1.8 percent in the quarter. At Red Lobster, the figure fell 3.9 percent. The metric is an indicator of health because it strips out the effect of newly opened and closed stores.
Darden attributed the drop at Olive Garden in part to its "Taste of Tuscany" promotion, which it said didn't emphasize value enough at a time when diners are watching their budgets and have so many more casual dining options.
Olive Garden's menu "failed to keep pace with guest expectations that started to evolve much faster than they had in the past," said Andrew Madsen, Darden's president and chief operating officer.
Executives noted that a new promotion starting next week – two meals for $25 – will go back to underscoring value. A new core menu and advertising campaign are also slated for next year.
"We're making progress on our efforts to elevate the guest experience at Olive Garden, and over the next 12 months guests will see more and more of the improved food, service, value and advertising we've been developing," CEO Clarence Otis said in a prepared statement.
For 2013, Darden forecast a profit of $3.86 to $4 per share, which fell short of Wall Street expectations of $4.06 per share, according to FactSet. Given the expectations for a slow economic recovery, the company forecast sales at established restaurants to grow just 1 percent to 2 percent.
Based on the long-term prospects for its brands, however, the company plans to accelerate growth in its fiscal 2013, with about 100 net new restaurants. The company had 89 more restaurants at the end of the quarter than it did a year earlier.
For its fiscal fourth quarter, Darden reported net income of $151.2 million, or $1.15 per share, in line with Wall Street expectations. That compares with $137.4 million, or 99 cents per share, a year ago.
Revenue was $2.07 billion for the three months ended May 27, up from $1.99 billion a year ago but shy of the $2.11 billion analysts were expecting, according to FactSet.
At Red Lobster, the company noted that a $1 price hike for its popular "Festival of Shrimp" wasn't well received.
Madsen said company research suggested consumers would be "largely indifferent" to the higher $12.99 price for the special of any two shrimp dishes. But the softer sales during the promotion proved the hike "turned out to be too aggressive," he said.
Sales at the company's LongHorn Steakhouse restaurants open at least a year climbed 3 percent. The figure rose 2.8 percent at The Capital Grille and Bahama Breeze and 1.9 percent at Seasons 52. The company also acquired 11 Eddie V's restaurants in the quarter.
Darden raised its dividend to 50 cents per share from 43 cents. The new quarterly payment will be made Aug. 1 to shareholders of record July 10.
On Friday, Darden shares closed down 35 cents at $50.04.
Denny's may be known for its gut bomb menu items such as the <a href="http://www.huffingtonpost.com/2011/09/01/dennys-mac-n-cheese-patty-melt_n_945390.html" target="_hplink">mac n cheese patty melt</a>, but survey participants were not so enthused with the offerings.
A stack of big fluffy pancakes is not enough to persuade people to vote IHOP #1. Instead, participants voted it number 16.
15. Ruby Tuesday
Ruby Tuesday's was called out for having the healthiest menu choices, but that wasn't enough to make it a favorite chain.
14. TGI Friday's
With a somewhat similar menu to Ruby Tuesday, TGI Friday's also did not stack up so high.
0.7% thought Chili's fajitas, quesadillas and other offerings were worthy of the number one spot.
Noticing a pattern here? Applebee's only fared a tad better than its competitors.
11. Golden Corral
Just edging into the top 10 is Golden Corral, perhaps not the best known chain, but definitely a player. Based on this survey, it seems as if buffets are still popular, and Golden Corral was considered the best value.
10. Longhorn Steakhouse
Longhorn Steakhouse may not be the next Peter Luger's, but it makes enough diners happy enough.
9. Red Robin
We can't help wondering if the catchy Red Robin jingle contributes to the chain's success.
8. Cracker Barrel
Cracker Barrel has almost a cult following of fans craving Southern-inspired fare.
7. Outback Steakhouse
Those bloomin' onions apparently keep bringing diners back. Oh, and the steaks.
6. Red Lobster
Endless shrimp and cheap lobster make one happy casual diner.
Massive portions of Italian food are enough to give this chain the number 5 spot.
4. PF Chang's
PF Chang's was the only Chinese food chain to break the Top 17.
3. Olive Garden
Never-ending breadsticks and pasta bowls are perhaps enough to warrant a bronze medal.
2. Texas Roadhouse
The surprising silver medalist, Texas Roadhouse, is known for its Americana fare.
1. Cheesecake Factory
The Cheesecake Factory captured 7.3% of the vote share, which was more than double the second place finisher, Texas Roadhouse. Perhaps people are digging the new <a href="http://www.huffingtonpost.com/2011/08/01/cheesecake-factory-debuts_n_915201.html" target="_hplink">Skinnylicious menu</a>. This is the second year in a row that the Cheesecake Factory has nabbed the number one spot.