Darden sees need for "affordability" at Olive Garden

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(Global Markets) - Darden Restaurants Inc's (DRI.N) Olive Garden chain, which generates almost half of the company's revenue, posted its first rise in quarterly same-restaurant sales in more than a year, but executives warned that customers are still worried about spending.

Much of the improvement at Olive Garden came from factors beyond its control, like mild winter weather. An earlier Lenten season also helped give a give a boost to sales at Darden's Red Lobster seafood chain.

Chief Executive Clarence Otis told analysts on a call that "the need for affordability continues" at Olive Garden.

Concerns about gas prices and the job market are among the factors that are still weighing on customers' minds, he and other Darden executives said on the call.

Darden shares were down 3.1 percent to $50.24 in morning trading.

Sales at Darden's next two largest chains, Red Lobster and LongHorn Steakhouse, also rose, and the company benefited from what Otis said was a "moderating" rise in the cost of food as well as an increase in the number of diners coming through the doors of its major chains.

Sales at Olive Garden's U.S. restaurants open at least 16 months were up 2 percent during the third quarter, with the biggest rise coming in February, which was unusually mild across much of the country.

Darden had not reported a quarterly rise in Olive Garden same-store sales since the period ended November 28, 2010.

At Darden's main three chains, U.S. same-restaurant sales were up a combined 4.1 percent. At Red Lobster, which generates a third of overall sales, they rose 6 percent.

The Christian season of Lent landed in Darden's third quarter this year but was in its fourth quarter a year earlier. Red Lobster schedules its LobsterFest specials during the Lenten season, when some Christians avoid meat.

The company, which has reworked menus and increased promotions at the Italian-themed Olive Garden chain, affirmed its forecast for growth in its full-year earnings per shares from continuing operations of 4 percent to 7 percent. Darden sees U.S. same-restaurant sales at its main three chains to be up 2.5 percent to 3 percent this year.

Darden's smaller chains include The Capital Grille and Bahama Breeze.

Earnings at the Orlando, Florida-based company were $164.1 million, or $1.25 per share from continuing operations, for the third quarter ended February 26, up from $151.2 million, or $1.08 a share, a year earlier. That beat Wall Street forecasts by a penny, according to Thomson Global Markets I/B/E/S.

Overall sales rose 9.3 percent to $2.16 billion, above the $2.14 billion Wall Street was expecting.

(Reporting By Phil Wahba in New York and Lisa Baertlein in Los Angeles; Editing by Gerald E. McCormick and Mark Porter)