Olive Garden's promotions and menu upgrades are paying off for parent company Darden Restaurants, which raised its fiscal 2019 outlook on Thursday and beat analysts' earnings estimates.
Shares of the company rose 5 percent in morning trading. Darden's stock, which has a market value of $14.14 billion, is up more than 22 percent over the last year.
Olive Garden, which accounts for roughly half of its revenue, saw same-store sales growth of 4.3 percent, largely due to menu mix. CEO Gene Lee told analysts on the conference call that customers reacted positively to its promotions and its chicken alfredo entree. The restaurant had record-breaking sales profit for the month of December, thanks to its Oven Baked Pastas and Never Ending Pasta menu items. Other menu improvements, like changes to its wine offerings, are also resulting in higher checks.
Olive Garden has also been focusing on its off-premise business. For example, on Valentine's Day, off-premise dining jumped by 20 percent compared to the same day last year.
"Our strong top-line results exceeded the industry this quarter resulting in significant market share gains," Lee said in a statement.
Here's what the company reported compared with what Wall Street was expecting, based on a survey of analysts by Refinitiv:
- Earnings per share: $1.80, adjusted, vs. $1.75 expected
- Revenue: $2.25 billion vs. $2.24 billion expected
- Same-store sales growth: 2.8 percent vs. 2.2 percent expected
Excluding items, Darden earned $1.80 per share, beating the $1.75 per share expected by analysts surveyed by Refinitiv. Helping its bottom line were the results of improving labor performance in its new restaurants and overall labor productivity.
With one quarter left in fiscal 2019, the company raised its full-year outlook. It now expects total sales growth of 5.5 percent, on the high end of the prior range of 5.0 percent to 5.5 percent. Darden also raised its earnings per share to a range of $5.76 to $5.80 from a prior outlook of $5.60 to $5.70 per share.
"I think that the consumer is really strong at this point," Lee said, citing the restaurant industry's 3 percent growth.
Net sales rose 5.5 percent during the third quarter to $2.25 billion, topping expectations of $2.24 billion.
Overall, the Orlando-based company reported same-store sales growth of 2.8 percent, topping estimates of 2.2 percent. Executives said that Darden also outpaced industry same-store sales growth of 0.8 percent.