Delivery on the way for Olive Garden

by Monica Watrous
Share This:
Search for similar articles by keyword: [Darden Restaurants], [Food Service]
Olive Garden plans to launch delivery of its food.

ORLANDO, FLA. — Add Olive Garden to a growing list of restaurant companies launching delivery. With takeout representing approximately 10% of the Italian chain’s business, up more than 23% over the year-ago quarter, parent company Darden Restaurants is eyeing delivery as a potential growth driver.

For the fiscal year ended May 31, Darden Restaurants, Inc. earned $709.5 million, equal to $5.56 per share on the common stock, up 148% from $286.2 million, or $2.18 per share, the year before. Adjusted earnings per diluted share increased 54%, or 50%, excluding the 53rd week of operations.

Sales for the year increased 7.6% to $6,764 million from sales of $6,285.6 million for fiscal 2014. Excluding the extra week, sales increased 5.6%.

Olive Garden has been working on establishing takeout for 18 months with an initial focus on accuracy and speed, said Gene Lee, chief executive officer of Darden, during a June 23 earnings call with financial analysts.

“Enabling it through web ordering has been a big help,” he said. “We’ve also promoted it. The team is getting ready to implement delivery. We think large-party delivery is a big growth outlet.

“Over time, I expect and the team expects that 20% of Olive Garden’s total sales is going to migrate to takeout, and we think we’re well suited to take advantage of that opportunity.”

Other initiatives under way at the chain include introducing tabletop tablets, which are currently in more than 100 units, developing a loyalty program and leveraging technology to improve wait times.

Olive Garden plans to introduce tabletop tablets in its restaurants.

“One of our goals in Olive Garden, because we do have a lot of overcapacity on the weekend, is how do we improve the wait,” Mr. Lee said. “So one of the technological things we’re doing is we’re putting screens in the lobby, so people can see where they are on the wait. And the initial feedback from that has been really, really positive.”

The improvements appear to be working. The company reported 10 consecutive months of same-restaurant sales growth for the chain.

“The brand had sequential quarterly same-restaurant sales improvement throughout the year and had its first annual same restaurant sales increase since fiscal year 2011,” Mr. Lee said.

Darden’s fourth-quarter earnings advanced to $105.3 million, or 83c per share, up 22% from $86.5 million, or 37c per share, for the prior-year period. Reported net earnings per diluted share from continuing operations for the quarter were affected negatively by impairment losses on certain sale leaseback properties currently booked, severance and other costs with support reduction efforts, and other strategic action costs associated with the evaluation of the company’s real estate portfolio. Adjusted earnings per diluted share from continuing operations increased 156%, or 87%, excluding the extra week.

Sales for the quarter rose to $1,878.3 million, up 14% from $1,650.1 million for the comparable quarter. Excluding the extra week, sales increased 6.3%.

Same-restaurant sales for Olive Garden increased 3.4% for the fourth quarter and 1.3% for the year. Same-restaurant sales for LongHorn Steakhouse climbed 5.2% for the quarter and 4.4% for the year. Darden reported low-to-mid-single-digit growth in same-restaurant sales for the quarter and year for its specialty restaurant concepts, including The Capital Grille, Eddie V’s, Yard House, Seasons 52 and Bahama Breeze.

In addition to the earnings release, Darden announced a strategic plan to separate a portion of its real estate assets into an independent, publicly-traded real estate investment trust. Additionally, the company has listed 75 properties for individual sale leasebacks and expects to retire approximately $1 billion of debt over time with proceeds from the transactions.

Same-restaurant sales for Olive Garden increased 3.4% for the fourth quarter and 1.3% for the year.

“The strategic rationale for our real estate separation creates benefits for both Darden and the future REIT,” Mr. Lee said. “The benefits to Darden include an improved capital structure with no funded debt maturities for 20 years, improved capital allocation that strengthens our return on invested capital, and a strong, conservative financial position that offers solid coverage for market rents.

“The benefits to the REIT are a lower cost of capital than Darden, and the ability to focus on growing a real estate business through broader opportunities beyond Darden. And finally, we expect the market to properly reflect the fair market value of real estate through the higher valuations for real estate companies compared to restaurant operating companies.”

Looking ahead, Darden executives expect to deliver 2% to 2.5% same-restaurant sales growth, new unit openings of 18 to 22 restaurants, and adjusted earnings per diluted share growth of approximately 20% to 25%. The projections do not include the impact of fiscal 2016 real estate transactions and related cash and capital structure activities.

“(Fiscal year 2015) was a year of meaningful transition at Darden, with the election of a new board of directors, as well as my appointment to c.e.o.,” Mr. Lee said. “We have made substantial progress towards our goal of returning Darden to a level of profitable sales growth and value creation our stakeholders expect.”
Comment on this Article
We welcome your thoughtful comments. Please comply with our Community rules.

 

 


The views expressed in the comments section of Food Business News do not reflect those of Food Business News or its parent company, Sosland Publishing Co., Kansas City, Mo. Concern regarding a specific comment may be registered with the Editor by clicking the Report Abuse link.