Olive Garden owner: PPACA backlash is a concern

Analysts predicted slightly higher earnings of 27 cents per share, according to FactSet.

Earlier this month, the company had warned that revenue would fall 2.7 percent at U.S. restaurants open at least a year for its three biggest chains; it fell 3.2 percent at Olive Garden, 2.7 percent at Red Lobster and 0.8 percent at LongHorn Steakhouse during the quarter. The figure is a key metric because it strips out the impact of newly opened and closed locations.

Darden has about 2,000 locations in North America; roughly 1,500 of them are Olive Garden and Red Lobster restaurants. The company plans to scale back slightly on new openings, with about 95 new locations planned for the year, down from 100 to 110. The figures do not reflect locations for Yard House, one of the company’s smaller chains.

Darden also said it is retooling its strategy to attract diners with more promotional deals and continuing efforts to update the image of its flagship chains and appeal to younger diners in their 20s and 30s, who increasingly prize fresh, high-quality ingredients. The problem is that many of those same diners also want cheaper prices and convenience, reflecting the rise of chains such as Chipotle Mexican Grill Inc. and Panera Bread Co., which offer food that’s a step up from traditional fast-food for slightly higher prices.

In addition to those shifting tastes, Darden and other casual dining chains such as Applebee’s are dealing with customers who are being more careful about where and how often they eat out in the weak economy.

To address the “affordability many guests need right now,” Darden plans to dial back on its efforts to build revamp the image of its chains for now and increase the frequency of promotions that underscore value, said Drew Madsen, the company’s chief operating officer. He declined to specify the exact nature of the revamped strategy, however, noting that the element of surprise is critical in a “highly competitive” industry that is once again expected to see only modest growth in the year ahead.