Date post: | 13-Jun-2015 |
Category: |
Food |
Upload: | the-motley-fool |
View: | 1,246 times |
Download: | 2 times |
Can Olive Garden Save Darden Restaurants?
Olive Garden is the biggest kid on Darden’s block
• It had Q4 sales of $926 million, which accounted for 56% of Darden’s revenues from continuing operations of $1.6 billion.
• Its 828 restaurants in U.S. and Canada represent 58% of restaurateur’s total locations .
56.322.9
20.8
Darden RestaurantsRevenue Contribution
by Concept
Olive GardenLong Horn SteakhouseSpecialty Group
Rebirth of a brand
• Darden says Olive Garden chain provides foundation for all future growth
• New “brand renaissance” program to enhance position with millennials and multicultural households
• Will use platform for renewed same-restaurant sales growth and margin expansion
• Greater emphasis placed on fresh ingredients, presented simply, with sense of Italian flair
But we’re in a new era of fast-casual dining
• Consumers are looking for fresh ingredients, customizable menus, and pleasant atmosphere
• Fast-casual chains like Chipotle Mexican Grill and Panera Bread are where growth is happening
• Segment unit growth outpaced rest of industry in 2013, expanding total locations by 6% compared to 1% decline at casual, midscale, family, and fine-dining restaurants
• Everyone from pizzerias to beer-and-wing joints wants to copy experience
That makes organic growth hard to come by
• Same-restaurant sales at Olive Garden are on downward spiral
– Q4 Revenues fell 2.7%– Comps fell 3.5%
• Trouble exacerbated by traffic falling by similar rates
Dec 11
Feb 12
Apr 12Jun 12
Aug 12Oct
12
Dec 12
Feb 13
Apr 13Jun 13
Aug 13Oct
13
Dec 13
Feb 14
Apr 14
-14
-12
-10
-8
-6
-4
-2
0
2
4
6
Darden Restaurant Olive Garden Comps &
Traffic
TrafficComps
Olive Garden’s competitive moat is drying up
Olive Garden is still the premier Italian dining experience, with over 800 locations, but it’s spawned legions of copycats:
• Bloomin’ Brands (Nasdaq: BLMN) has 241 Carrabba’s Italian Grill restaurants
• Brinker International (NYSE: EAT), 45 Maggiano’s Little Italy• Ignite Restaurant Group (NYSE: IRG), 177 Romano’s Macaroni
Grill
That means more similar-style restaurants fighting for shrinking piece of restaurant industry’s pie
Mama mia! Everyone’s into the sauce!
Italian dining theme’s popularity makes it difficult for anyone to grow.
Olive G
arden
Carrab
ba's Ita
lian Grill
Maggia
no's Little
Italy
Romano's M
acaro
ni Grill
-6
-5
-4
-3
-2
-1
0
1
-5.6
-1.8
0.2
-4.1
Calendar Year 2014 Q1 Comps (% Chg.)
Digital improvements are comingDarden promises additional enhancements will help brand renaissance, including a redesigned website:
• National launch of “online To Go,” where orders are placed online for pickup at nearest restaurant
• Can be prepaid online and discount coupons used• Favorite orders can be saved• Orders can be placed days in advance
Will add tabletop tablets just like Chili’s and Applebee’s
The new logo
Updated interiors
Foolish takeaway
• Investors have time to see if changes work.• Management is placing big bet on Olive Garden and track
record isn’t the best.• Darden also faces shareholder revolt over Red Lobster sale.• Although stock trades at about 1x sales, it’s also nearly
33x earnings, a steep premium to rivals and better-run concepts.
• Taking a wait-and-see approach to the fallout over Red Lobster’s sale is the prudent course of action.
Leaked: Apple's next smart device (warning, it may shock you)Apple recently recruited a secret-development "dream team" to guarantee its newest smart device was kept hidden from the public for as long as possible. But the secret is out, and some early viewers are claiming its everyday impact could trump the iPod, iPhone, and the iPad. In fact, ABI Research predicts 485 million of this type of device will be sold per year. But one small company makes Apple's gadget possible. And its stock price has nearly unlimited room to run for early-in-the-know investors. To be one of them, and see Apple's newest smart gizmo, just click on the link below!