Dive Brief:
- Darden CEO and Chairman Gene Lee will retire as CEO effective May 29, according to a press release. Lee, who has led the company for seven years, will serve on the board of directors as executive chairman until the company’s 2022 annual meeting of shareholders. He is expected to stand for re-election to the board and continue in his position as chairman in a non-executive capacity.
- Rick Cardenas, currently president and COO at Darden, has been elected as CEO and member of the board, effective May 30. He has been with Darden since 1984 when he worked as an hourly team member before joining the restaurant support center team in 1992.
- The announcement of Lee's retirement comes as the company posted strong same-restaurant sales of 34.4% for fiscal Q2 2022, compared to a negative 20.6% in same-restaurant sales in fiscal Q2 2021.
Dive Insight:
With Darden's sales showing signs of recovery, Lee's retirement comes at a good time for the company. During his tenure, Darden's revenues increased by over $2 billion and market capitalization increased about three times to nearly $20 billion, Charles M. Sonsteby, Darden's lead independent director, said in a statement.
"Gene has successfully led the company through significant change and unpredictability — most recently during the COVID-19 pandemic — with an unwavering focus on our guests and our team members," Sonsteby said.
Over the last two years, Darden has invested $200 million in its team members and accelerated its commitment to increase minimum hourly wages for team members to $12, which includes tips, effective Jan. 1, Lee said in an earnings release, adding that the company expects team members to earn an average of $20 per hour. In March 2020, the company also added paid sick leave for its hourly employees.
Darden's to-go sale also continued to make up a sizable chunk of overall sales despite the return to dine-in, especially with its digital platform, which makes it easier to visit, order, pay and pick up, Cardenas said on Friday during the company's fiscal Q2 2022 earnings call. Off-premise sales made up 28% of total sales at Olive Garden and 15% of sales at LongHorn Steakhouse, Cardenas said. Digital sales made up 60% of off-premise sales during the quarter and 11% of Darden's total sales.
Average weekly sales were also up 7% compared to pre-pandemic and the company's EBITDA margin was 14.7% during the recent quarter, CFO Raj Vennam, said Friday. Combined with business model improvements and strong sales, margin is up 270 basis points compared to pre-pandemic, he said. In 2020, for example, the company implemented more technology to improve ways for guests to order inside and outside of the restaurant and focused restaurant-level operations by improving the guest experience through streamlined menus and improved processes and procedures.
"This is the right time for this transition," Lee said Friday during the earnings call. "Our company is in a clear position of strength, and this is the right time for me and my family. I'm excited for Rick, who's been a tremendous partner over the last seven years as one of the best strategic thinkers I’ve worked alongside. Our brands have tremendous opportunity ahead of them and Rick is the perfect person to lead Darden into the next chapter."
Given Cardenas' decades-long history with the company, it's unlikely the company's future strategy will change dramatically under his leadership.
"I was incredibly fortunate to work with each of Darden CEOs," Cardenas said. "I have a strong appreciation for the legacy of leadership I have inherited by upholding our commitment to operational excellence and maximizing the power of the Darden platform. We will continue to execute our strategy to drive growth and shareholder value."
