ORLANDO, Fla. (AP) — Darden Restaurants said Thursday that its net income fell 37 percent in the latest quarter, as revamped menus and new ad campaigns failed to draw more diners into its Olive Garden and Red Lobster chains.
The Orlando, Fla., company had warned of a drop in sales earlier this month, blaming failed promotions and bad publicity tied to its test of limiting health care costs for workers.
The decline in traffic comes despite the company's efforts to revamp the menus and marketing for its flagship chains. At Olive Garden, the company rolled out an updated advertising campaign and introduced more light and affordable dishes. At Red Lobster, it added options for people who don't like seafood.
But the company said revenue at U.S. restaurants open at least a year fell 2.7 percent for its three biggest chains during the quarter; it fell 3.2 percent at Olive Garden, 2.7 percent at Red Lobster and 0.8 percent at LongHorn Steakhouse. The figure is a key metric because it strips out the impact of newly opened and closed locations.
At its specialty restaurant group of smaller chains, the figure rose 0.7 percent.
In cutting its forecast for the year earlier on Dec. 4, Darden had said that it was hit by a publicity backlash from a move intended to gauge how the company could mitigate an expected rise in costs tied to new health care regulations. Starting in 2014, big employers such as Darden will be required to provide health insurance to full-time workers. The company had tested hiring more part-time workers and replacing full-time workers who left with part-time workers at some restaurants.
For the period ended Nov. 25, Darden Restaurants Inc. earned $33.6 million, or 26 cents per share. That's down from $53.7 million, or 40 cents per share, a year ago.
Analysts predicted slightly higher earnings of 27 cents per share, according to FactSet.
Revenue climbed 7 percent to $1.96 billion from $1.83 billion, meeting Wall Street's forecast, as the company opened additional locations.