Despite negative comps, the chain's traffic was near the top of the industry in Q4.

Olive Garden, like others in the restaurant industry, is noticing pullback from lower-income consumers amid constant inflation.

The difference is, the casual-dining chain isn’t in the business of responding with couponing or discounts.

“We’re not going to do things to buy sales, even with the increasing discounting our competitors are doing,” CEO Rick Cardenas said during Darden’s Q4 earnings call. “You know, our best way to drive sales is our focus on a back-to-basics operating philosophy and our guests telling others what a great value they have when they come to our restaurants. And just remember, we do have levers to pull. We do have more marketing to pull if we want to, but our focus is on profitable sales growth.”

Olive Garden’s guest count ranked near the top quartile in the restaurant industry. The brand’s traffic was 60 basis points better than the industry in Q4 and 530 basis points better on a two-year stack. Foot traffic dipped 5.4 percent in January and 3.2 percent in April, but rose 4.1 percent in February, 4.5 percent in March, and 2.4 percent in May, according to Placer.ai data. The dip in January can be attributed to unusually colder weather and the decline in April can be traced to Easter shifting to March.

The company’s same-store sales dipped 1.5 percent year-over-year, but that’s with just 1 percent pricing—reflecting its strategic focus on providing value without resorting to aggressive discounting. Its 22.8 percent segment profit margin continues to lead the industry as well. “I mean that’s just really high. That would be aspirational for a lot of brands in this industry,” Cardenas said, regarding the profit margin.

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The chain’s marketing strategy has remained consistent by focusing on core brand equities and everyday value rather than heavy promotions. The brand has allocated a small but steady increase in marketing expenses for fiscal 2025, emphasizing profitable sales growth over short-term gains through discounting. This approach aligns with Olive Garden’s strategy to highlight its value proposition, such as the “Create Your Own Pasta” deal at $12.99, which offers both price certainty and an attractive dining experience with unlimited first courses​. The brand’s efforts have been recognized, with guest satisfaction and value ratings reaching new highs this fiscal year.

Transactions from households with incomes below 75,000 were lower than last year; the decrease was more pronounced for those under $50,000. However, customers who are visiting aren’t managing their spending like in previous quarters. At Olive Garden specifically, guests aren’t trading down and are more likely to buy add-ons.

“For Olive Garden, in prior slowdowns, Olive Garden outperformed,” Cardenas said. “They outperformed at the same-restaurant sales and at that time they were taking more pricing than everybody else. We outperformed this quarter in traffic and we’ve continued to outperform the industry in traffic for the last many years and we only took 1 percent pricing. What I would tell you is that if we would have taken the pricing that the industry took in the third quarter or in the fourth quarter, I’m sorry, Olive Garden would have been positive and would have performed even more. And so this is a long game for us.”

Cardenas also noted that playing into deep discounting now could lead to a deeper hole in the future.

“Over time, you have to keep wrapping on that. If you do a deep discount and it stays the same way, you have to do even more the next year, you have to do more television,” the CEO said. “And we just think we’d rather do more great food, more great service, and let’s wrap that. And so again, I can’t comment on what other people think is sustainable or not. We just think our business, the way we do it is more sustainable.”

In Q4, Olive Garden earned $1.28 billion in sales, slightly up from $1.27 billion a year ago. On an annual basis, sales were $5 billion, an increase from $4.88 billion in 2023. Full-year same-store sales rose 1.6 percent year-over-year.

Given Olive Garden’s traffic, profit numbers, and optimism, development will continue to be a focus.

“Every time we come up with a target for Olive Garden, we blow past it,” Cardenas said. “So we haven’t really talked about a target for Olive Garden for a lot of years. What we have found over the last five or 10 years is that we can open more Olive Gardens in markets that Olive Gardens are already in, where prior to that, we weren’t doing that as much. Convenience is important to consumers, and we’d rather be a little closer where they live. And so we do believe there’s opportunities to open Olive Gardens for the foreseeable future, and we don’t think we’re near the top of the Olive Garden limit yet.”

The brand finished its fiscal Q4 with 920 restaurants, compared to 905 at the same time last year. That’s followed by LongHorn Steakhouse (525), Cheddar’s Scratch Kitchen (181), Yard House (88), Ruth’s Chris Steak House (80), The Capital Grille (66), Seasons 52 (44), Bahama Breeze (43), Eddie V’s (30), and The Capital Burger (four).

LongHorn was by far Darden’s best performer in Q4 and fiscal 2024. The steakhouse’s same-store sales rose 4 percent in the quarter and 4.7 percent during the year. LongHorn’s comps outperformed the industry by 480 basis points in Q4. Its segment profit margin of 19.1 percent was 50 basis points better than Q4 2023. Quarterly system sales were $762.7 million, up from $711.7 million. For fiscal 2024, it was $2.81 billion, growth from $2.61 billion. The chain is now led by Laura Williamson, who previously served as the chain’s finance leader for the past nine years.

Fine-dining same-store sales (Eddie V’s, Capital Grille) dipped 2.6 percent in Q4 and dropped 2.4 percent in fiscal 2024. Other business (Bahama Breeze, Cheddar’s, Seasons 52, and Yard House) saw comps lower 1.1 percent in Q4 and 0.7 percent in fiscal 2024.

Casual Dining, Chain Restaurants, Feature, Finance