Darden’s systemwide sales grew 14.2 percent to $2.60 billion in Q4, driven by an 11.7 percent rise in same-store sales year-over-year. That breaks down to Olive Garden (+6.5 percent), LongHorn, (+10.6 percent), fine dining, (+34.5 percent; Eddie V’s and Capital Grille), and other business (+18.5 percent; Bahama Breeze, Yard House, Seasons 52). For the entire fiscal year, the group’s sales rose 33.8 percent to $9.63 billion, fueled by a 30.9 percent increase in same-store sales: Olive Garden (+24.1 percent), LongHorn (+28.1 percent), fine dining (+62.7 percent), and other business (+42.4 percent).
In terms of total sales, segment profit, and average weekly sales, each concept garnered better numbers in Q4 and fiscal 2022 than it did prior to COVID.
Darden achieved these results with higher-than-expected inflation in the background. The company saw just over 6 percent inflation for the year, more than doubling its 3 percent projection. In the fourth quarter, hourly wage inflation grew 9 percent and commodity inflation increased 12 percent.
Despite these pressures—and the fact that Darden took 3 percent pricing in 2022, well below inflation—the company achieved a restaurant-level EBITDA margin of 19.9 percent in Q4, 40 basis points above pre-COVID levels. For the whole year, it earned a margin of 15.9 percent, nearly 200 basis points higher than pre-pandemic comparisons.
Cardenas noted that because of rising costs facing consumers, sentiment is at its lowest point in several decades. But the group refuses to overreact; instead it will rely on scale and media messaging to convey differentiated value. Cardenas pointed to current commercials highlighting Olive Garden’s Alfredo sauce—the highest-rated ad it’s had in years.
The CEO isn’t sure whether a recession is coming, but if the moment comes, he believes Darden is well-equipped to handle it because of pre-COVID staffing levels, low management turnover, and pricing below the competition. The key, Cardenas said, is to not overreact and create a long-term issue, and that means no deep discounting.
“I think we are better prepared than most of the people we compete with because of the margin differential that we have versus them and what we have done over the last few years to simplify our menus and what we have done to make sure our restaurants are fully staffed,” the CEO said.
In fiscal 2023, Darden projects total sales of $10.2 billion to $10.4 billion and same-store sales growth of 4-6 percent. Inflation is expected to be 6 percent, and the company will price under that at 5 percent. Capital spending will be between $500 million and $550 million.