Shop Talk

Check Out Line: Never-ending bowl of sales?

Check out what Americans like to eat. Apparently, it may be an endless bowl of pasta.

Olive Garden owner Darden Restaurants posted a weaker-than-expected increase in same-store sales in the most recent quarter.

But the 1.1 percent increase was better than what the restaurant industry has shown overall and sales at Olive Gardens open at least 16 months rose 2.7 percent.

Chief Executive Clarence Otis said Olive Garden saw increased traffic in July and August.

“We believe that the concept’s current Never-Ending Pasta Bowl promotion is helping keep the brand’s top-line momentum solid, and we look for same-store sales to show modest sequential acceleration in fiscal Q2,” Janney Capital Markets analyst Mark Kalinowski said in a research note.

Mmmmm!!!! Endless pasta!!!! Now if only we could get the company Longhorn Steakhouse to offer endless filets, we’d be all set.

Also in the basket:

Diners say Olive Garden, Papa John’s are tops

Papa John’s and Olive Garden got top marks in their respective restaurant categories in the University of Michigan’s 2010 American Customer Satisfaction Index, while McDonald’s and Chili’s Grill & Bar were laggards.

Papa John’s took the lead in the limited-service category from Domino’s Pizza. Notably, this year’s win for Papa John’s came as Domino’s was getting a sales bump from its reformulated pizza recipe and crowing about how its new pies were beating rivals in taste tests. 

Papa John’s earned an ACSI score of 80 (out of 100), up from 75  last year. Little Caesar, Pizza Hut and Starbucks each made gains versus 2009 and were close behind with scores of 78. Domino’s score of 77 was flat from a year ago. 

McDonald’s, which has outperformed most other quick-service restaurants, was the only major fast-food company to post a decline. Its score fell to 67 from 70 last year. 

“Price was behind much of the improvement, but new products also contributed,” said Claes Fornell, a professor at the University of Michigan’s Stephen M. Ross School of Business.

Pizza Hut offered any pizza for $10, while Papa John’s combined similar pricing promotions with what customers perceive as high quality products.  

“As increasingly frugal consumers have made price more salient, McDonald’s has acquired more customers. These newcomers seem less satisfied, and were it not for the economy some of them would rather eat somewhere else,” Fornell said.

Check Out Line: Have a helping of earnings

Check out the latest raft of earnings and outlooks kicking off the holiday-shortened week in the consumer world.

Kraft Foods, which makes Oreo cookies and Velveeta cheese, posted quarterly revenue that fell short of expectations, but said its recent acquisition of British chocolatier Cadbury would accelerate long-term growth.

Abercrombie & Fitch posted a lower profit as the retailer of casual yet trendy clothes for teens and college-age youth grappled with a prolonged U.S. sales slump.

Fossil, which sells watches, jewelry, leather goods, sunglasses and apparel, posted a better-than-expected profit and offered a full-year outlook above analysts’ expectations.

Darden Restaurants, owner of the Red Lobster and Olive Garden chains, raised its profit outlook for the year, citing improving consumer traffic.

“The signs of sales and traffic improvement we began to see late in the second quarter and discussed during our December conference call with investors continued into January and February,” Chief Executive Officer Clarence Otis said in a statement.

Also in the basket:

Shift FROM thrift? Are diners trading up?

After a much heralded “shift to thrift” during what has become the longest and deepest recession since the Great Depression, diners are now saying they plan to spend less money at cheap fast-food chains and more at some pricier eateries like Darden‘s Red Lobster and Olive Garden chains, Chipotle and Maggiano’s Little Italy from Brinker. 

“Trading up is supported by fewer customers saying they’re ordering less expensive items, skipping beverages and choosing less expensive restaurants,” RBC Capital Markets analyst Larry Miller wrote in a client note. Miller regularly polls diners about their spending plans. 

“Confidence in the economy is improving and those planning to spend more at restaurants cited better job security and less need to save money,” said Miller, who added that consumer spending plans at Starbucks were also ”less bad.”

Are you trading up on food — or anything else — after trading down?

Best deals for restaurant meals

When it comes to getting the most bang for a buck at sit-down restaurants, Olive Garden, Cracker Barrel, Golden Corral, Applebee’s and Chili’s get top marks, according to 5,000 diners recently polled online by BrandIndex.

Brands with the worst perceived value were Ground Round, Benihana, Bahama Breeze, Landry’s Seafood House and Hooter’s.

Sit-down restaurants have been discounting heavily as consumers cook more meals at home and “trade down” to lower-priced fast-food chains to save money amid a long recession that has sent U.S. unemployment to a 26-year high.

BrandIndex is owned by market research company YouGov.

Here is the full list of results:

(A score can range from 100 to -100 and is compiled by subtracting negative feedback from positive. A zero score means equal positive and negative feedback.)

CASUAL DINING — VALUE SCORES (July 10, 2009)

Disappearing restaurant deals?

Whether it is “value menus,”  Applebee’s two dinners for $20 deal or Ruth’s Chris Steak House’s “Summer Classic” three-course meal for $39.95, restaurant operators long have been depending on specials to woo customers during a long recession that has driven unemployment to a 26-year high.

Now, one high-profile restaurant executive says he has seen some rivals’ deep discounts disappear over the last few weeks.

“We see a little bit of pull back from some of the more significant offers,” said Clarence Otis, chief executive of Olive Garden and Red Lobster parent Darden International Inc.

Darden has specials of its own. For example, the company’s Red Lobster chain plans to repeat its “Lobsterfest” promotion during the the pre-Easter season of Lent,  when many Catholics eat fish on Fridays. Still, Otis said his company is careful to make sure its discounts reap financial rewards.

“We don’t know that a lot of folks who did discounting got much for it,” in terms of driving diners into restaurants, he said.

Have you seen your favorite discount disappear?

(Photo\Reuters)

Less fried frozen fish, more endless shrimp

Frozen seafood is never as tasty as fresh, a problem Red Lobster, whose menu hosts various fried frozen fish dishes, is trying to overcome.

Following a quarter of disappointing sales at its Red Lobster restaurant chain, Darden is trying to change the ”perception that the menu at Red Lobster is primarily comprised of frozen seafood prepared in a fried manner and not having a lot of interesting innovation, flavor profiles, culinary expertise,” said Darden’s CEO Clarence Otis on a call with analysts.

In other words, fried frozen fish lacks the flavor of fresh produce.

To change that, “the menu that’s coming out late in the second quarter is really designed to maintain or increase appeal of current users, which is important, but also address those concerns about, this is frozen, fried seafood without any interesting flavor profiles,” Otis said.

Darden also offers fresh lobsters, which customers can pluck from a tank in some of its restaurants,  but people ate less lobster over the summer as high per-pound prices turned off consumers already pressured by skyrocketing gas and grocery prices. 

Now that per-pound lobster prices have eased, Red Lobster plans to lower prices on some of its lobster dishes. To entice customers who might enjoy Olive Garden’s “endless pasta bowl,” Red Lobster also began three weeks ago to offer ”endless shrimp,” which hopefully has an interesting flavor profile. Darden didn’t mention whether the endless shrimp will be fresh or frozen.

(Photo/Reuters)