Inflation is eating into profits at Olive Garden’s corporate parent

Inflation is taking a bite out of Olive Garden owner Darden Restaurants, which said its profits are getting chewed up by the rising cost of food and labor.

The Orlando-based company — which also owns chains including LongHorn Steakhouse and Capital Grille — has been reluctant to raise prices, particularly at Olive Garden, even as workers demand higher wages and raw food costs surge.

While consumers are eating out as much as they did before the pandemic – and in some cases more – the restaurant industry is struggling with how to pass along or absorb higher costs.

Darden said in June it has kept price increases at below inflation, but also has quietly axed popular promotions like free pasta refills at Olive Garden.

Olive Garden still offers its “never-ending first course” — soup, salad and breadsticks — but the chain started to cut discounting during the pandemic, executives said on an earnings call in June.

The company’s stock slid 4.4% on Thursday after the company reported that its profit fell to $193 million in the most recent quarter ended Aug. 28 from $230 million a year ago.

Darden’s total sales grew by 6.1% to $2.4 billion in the quarter, but its costs rose more to 9% at its brands, which include LongHorn Steakhouse, Yard House and The Capital Grille.

“I am pleased with the performance of all our brands in what remains a challenging inflationary and uncertain macroeconomic environment,” Darden chief executive Rick Cardenas said in a statement.

“We had a solid quarter,” he added, “and we saw more normal seasonality return to our business, which we did not experience last year.”

Comparable sales at Olive Garden rose by 2.3% in the most recent quarter compared to a 6.5% increase in the previous quarter.