What Does Darden's Success Say About The Industry So Far This Year?
Posted by Jeff Schacher
on Tuesday, March 27th, 2012
Darden released new numbers last Friday and it appears like smooth sailing for one of the key performers in the restaurant industry. The big news is the 9.3% improvement over the prior year's quarter. So does this report and significant increase represent a judgement on the health and improvement of the restaurant sector? Well, that's the big question. Is Darden an early indicator of how the overall restaurant will fare this year? In two words, probably yes.Just like any pundit on an issue, the hard part is making a mistake on a prediction, so I won't go as far to say that things are going to be roses and blue skies. However, the improving economy has some momentum and Darden's report is clear on that point. Not only is there momentum, but a strong desire by consumers to get past the recession fatigue.From my reading, one of the FIRST activities people want to do after a recession is eat out. If that trend continues, we could possibly see initial short-term growth in 2012. And if Darden is any indication, then the time to begin any marketing campaign might be now. Other data suggests the same and almost mirrors Darden's successes. The Consumer Confidence Index measures the degree of optimism on the state of the economy that consumers are expressing through their activities of savings and spending.Think of it as a gut check with a whole lot of statistical modeling to back it up. Now, when we take in the report for Darden and compare it to the Consumer Confidence Index, you might see why I think the state of the restaurant industry is on the improving track. However, with what we've been through, a "probably yes" answer to the aforementioned question about Darden's growth and the state of our industry makes sense. Naturally, all economies are local and as an operator or manager, you've got to take in what your market is telling you. But pay close attention... Sometimes growth and improvement in operations (profit) is available only to those that invest and take advantage of it!