Darden: Olive Garden Finally Contributes More Than Breadsticks

For well over a year, Darden Restaurants (DRI) has struggled to jumpstart falling sales at its Olive Garden restaurants, which account for almost half of the company’s revenue. In the first quarter, the company finally being seeing some results.

Darden posted 86 cents of EPS, 2 cents ahead of expectations.

Darden has worked to convince consumers that Olive Garden is affordable, offering more deals and changing marketing tactics. Same-restaurant-sales rose 0.3% in the quarter, the first rise after five quarters of declines. Lower food and beverage costs also helped spur profits.

But Darden certainly isn’t out of the woods. Olive Garden’s same-restaurant-sales were flat in August (Hurricane Isaac stripped 0.3% from results, the company said), and traffic to the restaurant fell in both June and August.

In addition, Red Lobster continues to lag, posting same-restaurant-sales decline of 2.6% in the quarter. The company blamed the drop on a difficult comparison with last year’s strong numbers.

“Red Lobster’s sales held up well given the exceptional same-restaurant sales results in last year’s first quarter and its margins expanded, Olive Garden had meaningful sales and margin improvement and LongHorn Steakhouse and the Specialty Restaurant Group continued to have good sales momentum,” said� Chairman and CEO Clarence Otis in a statement.� “We also benefited from our diverse food basket, with a decline in seafood costs on a year over year basis moderating the significant spike in the cost of beef.”

But investors were clearly heartened by the positive changes at Olive Garden. Shares are up 4.5% in morning trading.