Gadfly's Banjo On Darden: We Don't Need New Olive Gardens

Darden Restaurants, Inc. DRI continues to trade near all-time highs because the company is a standout in the restaurant sector.

Darden, the parent company of several full-service restaurant chain perhaps the most notable of which is Olive Garden, reported its fiscal third quarter results this week which signaled the company may understand the restaurant sector better than its peers.

According to Gadfly's Shelly Banjo, Darden CEO Gene Lee acknowledged the restaurant sector is oversaturated and it's a mistake to continue opening new locations. In fact, Lee isn't following the industry-wide playbook of not talking about the restaurant industry in a negative light.

His exact words were that the Italian-American chain is "getting closer and closer" to full penetration.

Olive Garden A Leader

Banjo noted restaurant sales are lower in nine of the past 10 months on a year-over-year basis. This is due to consumers opting to order in food or buy cheaper items from the grocery store.

Darden likely recognizes this trend and instead of opening new stores it acquired Cheddar's Scratch Kitchen for $780 million. Granted, this could be seen as an attempt to buy growth through M&A instead of doing so organically, but the fact remains "America doesn't need any more Oliver Gardens" and other restaurant chains with declining sales should come to the same conclusions.

See Also:

McDonald's Mobile Ordering Is Now A Reality

7 Best Fast Foods Not Available In The US: Fried Chicken Pizza, Fried Brussel Sprout Patty And More