NEW YORK — If the free breadsticks and unlimited soup and salad aren't enough, Olive Garden is hitting the gas on other promotions to get customers through its doors.
Darden Restaurants Inc., which has been struggling to hold onto customers in recent years, said deal offers like "2 for $25" dinner special helped drive up customer traffic at its flagship Olive Garden and Red Lobster chains in the latest quarter. The company said it will keep stressing the affordability of its food in the year ahead to attract more diners.
The strategy raises concerns among some investors, who worry that it's a short-term fix that only hurts profit margins. Shares of Darden fell $1.11, or 2.2 percent, to close at $50.12 Friday.
But in a call with analysts, CEO Clarence Otis said that boosting customer traffic is a priority for the company, even if it means sacrificing profit margins for a time.
"We need to do what we need to do," Otis said.
Darden's struggles to hold onto customers partly reflect the shifting restaurant industry. Casual dining chains were hit hard by the economic downturn, which made people more careful about eating out. Competitors like Applebee's, which is owned by DineEquity Inc., responded by rolling out a "2 for $20" deal during the depths of the recession. But Darden has conceded that it was slow in emphasizing value. Since 2008, its customer traffic is down about 8 percent.
At the same time, casual dining chains are also contending with changing eating habits. So in addition to underscoring value, Darden is also trying to update its menu choices to better reflect the type of food people want.
Last year, for example, it began adding lighter dishes to the Olive Garden menu. The company said they're already capturing about 10 percent of orders and that it plans to add more such options going forward.
For the quarter, Darden said net income fell 12 percent on rising costs and expenses. It earned $133.2 million, or $1.01 per share, compared with $151.2 million, or $1.15 per share, a year ago.
Removing costs and purchase accounting adjustments tied to its acquisition of Yard House USA Inc., earnings were $1.02 per share, 2 cents shy of Wall Street estimates.
Revenue climbed 11 percent to $2.3 billion, topping the $2.27 billion Wall Street expected.
Comparable sales at its Olive Garden, Red Lobster and LongHorn Steakhouse restaurants rose 2.2 percent, helped by an uptick in customer traffic.
Sales at The Capital Grille locations open at least a year rose 4.5 percent. The metric climbed 4.3 percent at Eddie V's and 1 percent at Seasons 52. These restaurants are part of Darden's specialty restaurant group.
For the year, Darden earned $411.9 million or $3.13 per share. Adjusted earnings were $3.22 per share.
Annual revenue increased 7 percent to $8.55 billion.
Darden said that it expects fiscal 2014 adjusted earnings per share to be up between 4 percent and 6 percent. Revenue is anticipated to climb 6 percent to 8 percent, including an additional quarter of sales from Yard House. That implies earnings of $3.35 to $3.41 per share on revenue of $9.06 billion to $9.23 billion.
Wall Street had been looking for earnings of $3.19 per share on revenue of $8.52 billion.
The company, based in Orlando, Fla., also raised its quarterly dividend 10 percent, to 55 cents per share.
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Hot Artichoke-Spinach Dip
<strong>What Olive Garden Says:</strong> A blend of artichokes, spinach and cream cheese. Served with Tuscan bread. <strong>What We Say</strong>: Artichoke spinach dip is awesome, but it definitely isn't an Italian creation. We get why Olive Garden wants it on the menu -- who <em>doesn't</em> like hot, creamy dips -- but this is more of a <a href="http://www.huffingtonpost.com/2012/07/12/best-worst-spinach-dip-chain-restaurants_n_1663190.html">chain restaurant staple</a> than something you'll find across the pond.
Chicken & Gnocchi Soup
<strong>What Olive Garden Says:</strong> A creamy soup made with roasted chicken, traditional Italian dumplings and spinach. <strong>What We Say: </strong> You can definitely find gnocchi in Italy, but it is usually a standalone dish with sauce and definitely isn't something served in soup. Gnocchi is pretty rich on its own, so it hardly needs creamy broth and chicken to accompany it.
Tour of Italy
<strong>What Olive Garden Says: </strong>Homemade lasagna, lightly breaded chicken parmigiana and creamy fettuccine alfredo. <strong>What We Say:</strong> You'll get blank stares if you say the word "fettucine alfredo" to Italian, despite the dish's popularity, stateside. Likewise, chicken parmigiana is everywhere in the U.S. but not nearly as ubiquitous abroad. Flickr: <a href="http://www.flickr.com/photos/caseyflorig/4737219624/">Casey Florig</a>
Moscato Peach Chicken
<strong>What Olive Garden Says:</strong> Grilled chicken breasts with a moscato wine and peach glaze served with spinach, tomatoes and curly mafalda pasta in a creamy parmesan sauce with a touch of pancetta bacon. <strong>What We Say:</strong> Moscato is an Italian sweet wine, so Olive Garden sort of gets some points there, but there's just way too much going on here to think that this is actually based on an Italian dish.
Chicken & Shrimp Carbonara
<strong>What Olive Garden Says:</strong> Chicken and shrimp with bucatini pasta in a parmesan cream sauce with pancetta bacon and roasted red peppers, baked and topped with seasoned breadcrumbs. <strong>What We Say:</strong> Carbonara is typically made with pancetta, egg, cheese and black pepper. While U.S. restaurants will sometimes use a cream sauce in place of raw egg for food safety reasons, we're not sure where the red peppers come from. Italians probably wouldn't put additional proteins in a carbonara.
Grilled Pork Veneto
<strong>What Olive Garden Says:</strong> Tender boneless pork ribs topped with a sweet red wine glaze, served with tomato and mozzarella ravioli topped with roasted garlic tomato sauce and alfredo. <strong>What We Say:</strong> We're not sure why the northeast region of Veneto has been tacked onto this dish title. Grilled pork is hardly a standout of that region, nor is all the other dish accoutrements. But hey, sure, let's just throw a random Italian region on a dish name. Why not?