The fine-dining segment (Capital Grille, Eddie V’s) saw same-store sales slip 13.8 percent, 11.9 percent, and 5.4 percent in March, April, and May, but managed to grow segment profit to $32.8 million compared to a loss of $9.2 million in the year-ago period. Other businesses (Cheddar’s Scratch Kitchen, Yard House, Seasons 52, Bahama Breeze) witnessed comps drop 14.3 percent, 8.2 percent, and 4.9 percent throughout Q4, but achieved segment profit of $87.1 million, compared to a loss of $44.3 million last year.
Overall, Darden achieved a record restaurant-level EBITDA margin of 22.6 percent—310 basis points above pre-COVID levels—and captured record quarterly EBITDA of $412 million. Darden said the results were driven by reduced labor and marketing expenses as it continues “to focus on simplified operations while also continuing to invest in food quality and pricing below inflation.”
The company’s performance exceeded expectations of leadership. That’s especially true for the growth of off-premises, which Cardenas said is “stickier than we originally thought.” Sales outside the four walls mixed 33 percent at Olive Garden, 19 percent at LongHorn, and 16 percent at Cheddar’s Scratch Kitchen thanks to technology enhancements to online ordering and the introduction of to-go capacity management and the “Curbside I’m Here” notification.
Lee said it’s still too early to tell how the balance of dine-in and off-premises will shake out since consumer behavior hasn’t quite returned to 100 percent normal yet. But the CEO admitted that he was wrong in terms of how much off-premises would remain in the post-COVID environment. One of the reasons he thinks the channel is still so high is because there isn’t that much cannibalization with dine-in, meaning, off-premises customers are using the restaurant as a home meal replacement as opposed to replacing a dine-in occasion.
“I think I'll give the analyst community credit on this,” Lee said. “This was stickier than what we thought. We know we've reached some new consumers here, and the experience is very, very good. And so I think that we don't know where it's going to net out. It's going to net out a lot higher than it was pre-COVID, and I think it's something that's part of our business we will have to pay a lot more attention to as we move forward.”
Sixty-four percent of Olive Garden’s to-go orders were placed online in Q4, and 14 percent of Darden’s total sales were digital transactions. Cardenas said this allows Darden to gather more information about the customer, and gives it the ability to market to them in the future.
“We haven't really done a whole lot of marketing in the last year,” Cardenas said. “Olive Garden has done their TV because we have bought that media already. We've done some digital marketing just to keep the digital marketing moving, but we haven't really started focusing on those new customers and speaking directly to them. And as we start thinking that we need to ramp things up, that's a great source of people to market to now that weren't coming to us before.”