Beef Prices Are Driving Food Inflation, Says Olive Garden Owner

Sales at Darden Restaurants, whose properties include Olive Garden, Longhorn Steakhouse, and the recently acquired Ruth’s Chris Steakhouse, reported a rise in fourth quarter sales but warned that rising beef prices will cut into into its revenue in the coming year.

Sales rose 4.6% compared to the year ago quarter, the company said in its earnings report released Thursday. But the company warned that it expects to see inflation in the coming year, driven mostly by higher beef prices.

In projections shared with shareholders in a Thursday earnings call, the company predicted 3% to 4% inflation over the next year, two thirds of that coming from higher commodity prices and the rest comin from labor costs. “Other commodities were stagnant or deflationary,” company CFO Raj Vennam told shareholders.

Beef prices are rising especially quickly compared to other foods. The commodity cost $4.95 per pound in May, the last month for which statistics were available, up 4.3% compared to April, according to the US Bureau of Labor Statistics.

Darden, however, said it expects to see beef inflation in the double digits over the next year, but that that most other commodities will see significantly lower inflation or decrease in price.

Vennam said he expects hourly wage inflation at Darden that to rise "in mid single digits and salary inflation to be close to that."

"Some of that is a function of how we choose to pay people," he said. "Our merit increases are above the industry average because that's a type of investment we make to help us sustain the types of performance we want."

Neither Vennam nor Darden CEO Rick Cardenas, who also took questions from shareholders, discussed whether higher costs would result in higher menu prices.

Overall, inflation — which skyrocketed at the height of the coronavirus pandemic — has cooled in recent months. Consumer prices rose only 4% in May compared to May 2022, and were up only .1% from April, according to figures published by the Bureau of Labor Statistics.

Food costs are more volatile. Prices for food were up 6.7% in May compared to May 2022 and up .2 percent from April.

Darden also raised its quarterly dividend by 8%, to $1.31 per share.