Darden’s Sales Climb Even as Lower-Income Diners Stay Home

Olive Garden owner Darden has seen a drop in lower-income diners patronizing its restaurants.

The company, which also owns Longhorn Steakhouse, on Thursday (March 21) reported earnings that showed sales up 6.8% for the quarter, driven primarily by its recently-acquired Ruth’s Chris Steakhouse chain.

However, a recurring theme during the company’s earnings call was pullback among lower-income consumers.

“We’re clearly seeing consumer behavior shifts,” CEO Rick Cardenas said, noting that transactions from households with incomes higher than $150,000 were up year over year, while transactions from households with $75,000 were considerably lower.

“And at every brand, transactions fell from incomes below $50,000. Similar to Q2, this shift was most pronounced in our fine dining segment,” Cardenas added.

During the question-and-answer portion of the call, the CEO was asked if Darden was considering promotions it had done in the past, like dinners for two or targeted coupons, to bring back lower-income consumers.

Cardenas replied that “deep discounting, couponing, a lot of promotions was kind of a Darden pre-COVID. This is the Darden post-COVID, which is when we’re talking about marketing, being things that elevate brand equity that are easy to execute and they’re not at a deep discount.”

He said that doesn’t mean the chain will shy away from things like the Never-Ending Pasta Bowl at Olive Garden, but he called those “everyday” values.

And while higher-income consumers were dining more at the company’s chains, Cardenas did note that there were “a few signs of some consumers trading down within our brands.”

As PYMNTS wrote recently, higher-income consumers are showing signs of strain under a range of economic pressures.

The recent PYMNTS Intelligence study, “New Reality Check: The Paycheck-to-Paycheck Report – Why One-Third of High Earners Live Paycheck to Paycheck,” found that close to half of consumers earning more than $100,000 per year were living paycheck to paycheck as of January 2024. The study also found that 36% of consumers who earn more than $200K reported the same.

“This lack of financial safety net results in changes to how they spend” PYMNTS wrote. “While 60% of shoppers overall cut back on nonessential purchasing, 56% of high-income consumers did the same, and 28% of consumers in this group have switched to purchasing lower-quality products.”

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