Olive Garden delivered strong sales growth for Darden Restaurants, Inc. in the second quarter, even as it continued to struggle with Cheddar's Scratch Kitchen.
Olive Garden same-restaurant sales increased 3.5 percent during the three months that ended Nov. 25, it reported Tuesday.
But the challenges at continued at Cheddar's Scratch Kitchen, which Darden bought 20 months ago and has turned in dismal results ever since. Cheddar's same-restaurant sales were 4 percent lower than the same period a year ago.
Darden CEO Gene Lee said Cheddar's results were disappointing and that the restaurant chain is still working to get properly staffed. Turnover among Cheddar's employees has been high and others have quit after Darden's purchase.
Lee has worked to institute his "back to basics" philosophy at Cheddar's that has led to success during the last four years at Olive Garden. But he said results aren't showing yet financially for Cheddar's.
"We have put a manager at the host stand, a manager in the dining room and one in the kitchen," Lee said. "We found that has led to improved guest satisfaction scores and in time we should see better team member and manager retention."
Darden has shifted some senior leaders from other restaurants to help Cheddar's. Bahama Breeze president John Wilkerson moved to the head of Cheddar's in July. Chief operating officer and former Olive Garden president Dave George has been working with Cheddar's since January.
Olive Garden's strength was well enough to overcome weakness at Cheddar's as the company turned in better net earnings of $115.6 million. Earnings per share of 92 cents beat Wall Street analysts expectations by a penny, according to Yahoo Finance.
Revenue came in at $1.97 billion for the quarter, 4.9 percent better than the same period a year ago.
It was a mixed report for Darden, which had strong growth at its flagship restaurants, but struggled at others.
LongHorn Steakhouse, Capital Grille and Eddie V's all turned in same-restaurant sales growth.
Yard House, Seasons 52 and Bahama Breeze recorded negative same-restaurant sales numbers.
Overall same-restaurant sales increased 2.1 percent across the eight brands.
Olive Garden's sales growth came from a 1.9 percent pricing increase and 2.4 percent came from menu mix. One concerning trend was a 0.8 percent drop in traffic for the quarter, the company reported.
Darden executives will discuss the results at 8:30 a.m. today in a call with investors.
Darden's stock (NYSE: DRI) fell 4.2 percent in trading Monday in a down day on Wall Street, but has also dropped 16 percent since it reached an all-time high of $119.38 on Sept. 11.
