Olive Garden customers can expect menu prices to increase in the near future after the popular Italian restaurant chain has kept price hikes well below inflation in recent years, parent company Darden Restaurants said this week.
Darden CFO Raj Vennam told analysts on the company's earnings call Thursday that Olive Garden menu prices for this year are "to be more in line with inflation" in the 2.5% to 3% range, spread over the next four quarters.
Vennam said Olive Garden has kept pricing "very modest" over the past five years, under-pricing by roughly 20% compared to the overall consumer price index (CPI), which he said rose by close to 23% during that same time frame.
"We feel like we've done a lot of work on keeping prices low and we're going to continue to do that," he reiterated, noting that Olive Garden raised menu prices by around 1% last quarter.
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Olive Garden's same-store sales have fallen for two consecutive quarters, dropping 1.5% last quarter and 1.8% in the one prior. However, Darden's earnings beat Wall Street expectations thanks in part to stronger sales at its LongHorn Steakhouse restaurants.
Darden CEO Rick Cardenas said on the call that consumers right now "are generally concerned about inflation, and they're becoming more concerned about the job market," and noted Olive Garden's sales to customers below the median income were lower last year.
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He said Olive Garden has "taken much lower pricing" than other Darden brands over the past year and the restaurant industry at large over the years.
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"Operators that deliver their brand promise and value will continue to appeal to consumers despite economic challenges, and that's what we're focused on doing," Cardenas said. "We're focusing on giving the consumers that are coming to our restaurants and spending their hard-earned money a great value and a great experience and have them tell others to come back."
