The paragraph is from the Darden Restaurants, Inc. Q3 Fiscal Year 2025 Earnings Conference Call. It introduces the call and participants, including Courtney Aquilla, Rick Cardenas, and Raj Vennam. Courtney Aquilla mentions that the call will include forward-looking statements, which carry risks and uncertainties, and directs listeners to the company's press release and SEC filings for more details. The presentation is available on Darden's website, and certain non-GAAP measurements and reconciliations are included. The company plans to release Q4 earnings on June 20. The paragraph also notes that during the fiscal third quarter, average same restaurant sales for the casual dining industry grew by 0.9%, while guest counts decreased by 1.2%.

The paragraph discusses recent restaurant sales performance, highlighting a decline in median same restaurant sales and guest counts. Despite challenging weather conditions, the company experienced positive same restaurant sales growth across all segments, driven by their strong business model and strategy. Some brands achieved sales records during key holidays, indicating strong guest loyalty. Olive Garden, in particular, saw improved traffic and sales trends after reintroducing popular menu items like Steak Gorgonzola Alfredo and Stuffed Chicken Marsala, and promoting them with special pricing.

Olive Garden has reintroduced their popular Buy One, Take One limited-time offer for the first time since the COVID-19 pandemic, starting at $14.99. This promotion historically boosts traffic and offers early access to eClub members, with broader availability beginning Monday. They've also expanded delivery service through Uber Direct to almost all locations, enhancing customer convenience and sales opportunities. Despite limited initial marketing, delivery orders have steadily increased, maintaining higher average checks compared to curbside pickups. Olive Garden plans to increase delivery awareness with digital activities and a broader campaign, including TV ads, in partnership with Uber by the fiscal year's end.

The paragraph highlights the successful rollout of Uber Direct at Olive Garden and its pilot launch at Cheddar's Scratch Kitchen. It emphasizes LongHorn Steak House's commitment to quality and execution, attributing their success to these efforts and the Grill Master Legends program, which honors team members who have grilled over 1 million steaks. In the third quarter, five new members were inducted into this exclusive group. LongHorn plans to feature popular dishes like grilled lamb chops and fire-grilled corn in the fourth quarter to enhance its food quality. Meanwhile, efforts to open new restaurants and test smaller prototypes aim to create value for shareholders and expand brand potential.

The paragraph discusses the introduction of smaller and more cost-effective restaurant prototypes by Yard House and Cheddar's, which have been successful and maintain brand essence. Additionally, it covers the integration progress of Chuy's into a new human resources platform, with upcoming supply chain and point of sale transitions. It highlights the Darden Foundation's scholarship program, which has awarded nearly 300 scholarships worth $3,000 each to children of Darden team members over three years, emphasizing the company's commitment to supporting its employees and their families.

In the third quarter, the company's earnings results met expectations despite being impacted by unfavorable weather. While there was a negative gap to the industry average in December, January and February saw a positive turnaround, exceeding benchmarks. Winter weather and the Thanksgiving shift negatively impacted sales by a total of 190 basis points, but adjustments showed a 2.6% increase in same restaurant sales for the quarter. Early fourth quarter trends indicate improvement. The company reported $3.2 billion in total sales—a 6% year-over-year increase—attributed to same restaurant sales growth, the acquisition of 103 Chuy's restaurants, and 40 new restaurant openings. Their guest counts and sales ranked in the industry's top quartile. The adjusted diluted net earnings per share rose by 6.9%, with $559 million in adjusted EBITDA. Additionally, $217 million was returned to shareholders through dividends and share repurchases.

In the latest analysis, food and beverage expenses decreased due to effective pricing, despite minor commodities inflation. Restaurant labor costs remained stable, while brand mix changes slightly increased other expenses. Marketing expenses rose as planned, and restaurant-level EBITDA improved to 21.1%, with adjusted G&A expenses remaining flat. Interest expenses increased due to the acquisition of Chuy's, and the adjusted tax rate was 13.4%. Adjusted earnings from continuing operations reached $330 million, 10.5% of sales. Olive Garden and LongHorn both experienced sales growth, with Olive Garden particularly excelling in segment profit margin and outperforming industry benchmarks. LongHorn also grew by opening new restaurants and adjusting for market factors.

In the first three weeks of March, LongHorn reported strong traffic and same restaurant sales growth, outperforming the industry. The third-quarter segment profit margin was 19.4%, an increase from last year. Fine dining sales rose by 3.3%, although same restaurant sales dropped by 0.8% for the quarter. Thanksgiving's shift into the third quarter positively impacted sales but was offset by weather-related negatives. After adjustments, fine dining sales decreased by 1%, improving sequentially. The fine dining profit margin improved by 50 basis points. Another business segment saw a 20.2% sales increase due to acquiring Chuy's, with a profit margin 50 basis points higher than last year. For fiscal 2025, the company revised its guidance, expecting 118.3 million diluted average shares and adjusted diluted net earnings per share of $9.45 to $9.52, excluding $47 million in costs. Fourth-quarter sales are anticipated between $3.23 billion and $3.26 billion, with same restaurant sales above 3% and adjusted earnings per share of $2.88 to $2.95. Looking to fiscal 2026, the company plans to open 60 to 65 new restaurants.

The paragraph outlines the expected financial plans and projections for fiscal 2026, including capital expenditures for new restaurants and maintenance, an anticipated effective tax rate, and the impact of a 53rd week on earnings per share. The speaker expresses confidence in the company's strategy and business model, attributing strong financial results to the team's efforts. During a Q&A session, Jon Tower from Citi asks about brand performance and industry trends. Rick Cardenas responds positively about the brand performance, particularly Olive Garden and LongHorn, without commenting directly on industry trends, and notes the guidance of over 3% same restaurant sales growth for Darden.

In the paragraph, a discussion is taking place about consumer spending trends across different income groups, with a focus on Darden's performance in the casual dining sector. It is noted that while growth among consumers earning between $50,000 and $100,000 has slowed, it is still positive when adjusted for weather impacts. The only income group with negative growth was those earning below $50,000. The question of the flu's impact on the quarter is raised, but the response emphasizes that weather likely had a more significant effect. Casual dining is holding up well compared to other restaurant segments, as dining out remains a primary way consumers indulge. Finally, a question about potential shifts in Darden's merger and acquisition plans is mentioned, though not answered in this excerpt.

The paragraph discusses a company's strategy to enhance customer experience in their dining segments, specifically mentioning the integration of Chuy's and evaluation of capital use for this purpose. It touches on a partnership with Uber involving a joint advertising campaign, partially funded by Uber, set to launch at the end of the fiscal year. Although there won't be a significant increase in advertising spend for the quarter, the campaign is expected to last a few weeks and is included in the company's guidance. Marketing spend is anticipated to grow by 10 to 20 basis points year-over-year.

In the paragraph, Eric Gonzalez asks Raj Vennam about expectations for marketing investments in 2026. Raj responds that while it's still early to predict specifics for 2026, they plan to increase marketing efforts at a measured pace, focusing on return on investment and media efficiency. This improvement in analytics means they may achieve the same impact with less spending. Subsequently, Brian Bittner inquires about the EPS guidance for the fourth quarter, noting discrepancies due to expectations of a low operating margin despite comp sales growth. Raj explains this by highlighting an expected inflation increase to 3% in Q4 compared to the 2-2.2% range in earlier quarters. This inflation rise, with pricing staying below 3%, limits operating profit growth.

The paragraph discusses Olive Garden's progress with its delivery service. Initially introduced as a pilot, the delivery orders doubled week-to-week and now account for about 2.5% of sales in those pilot locations, with other restaurants following a similar trend. The recent rollout across all locations, accompanied by some digital marketing efforts like informing eClub members about the delivery option, has led to an accelerated adoption in non-pilot locations. Overall, the company is pleased with the seamless implementation and growing response to its delivery service.

The paragraph features a conversation involving Sara Senatore from Bank of America and Rick Cardenas about Olive Garden's promotional strategies. Sara asks about the return of the "Buy One, Take One" promotion and whether it indicates changes in the competitive environment. Rick explains that while they previously eliminated difficult and deeply discounted promotions, they've reintroduced some offers like the "Never Ending Pasta Bowl" with a revised approach. This new strategy focuses on brand building through themes of abundance, a key advantage of Olive Garden, without adding many new menu items or offering extreme discounts.

The paragraph discusses reintroducing the "Buy One, Take One" promotion with core menu items and a $6 take-home option, presented at a limited-time price rather than a deep discount. The aim is to drive consumer traffic and reinforce brand familiarity, especially with the take-home offer. Additionally, new restaurant prototypes are performing well with significant sales and traffic, attributed to optimized layouts, like at Yard House, which maintains table numbers but reduces less-used seating to save space.

The paragraph outlines a conversation during a conference call, focusing on developments at Olive Garden. Rick Cardenas addresses Olive Garden's recent sales momentum, attributing it more to menu updates and the reintroduction of fan favorites rather than delivery services. He notes that delivery was only fully rolled out by February and constituted about 2.5% of sales in pilot restaurants by the end of the quarter. Brian Harbour acknowledges this explanation and then shifts the discussion to Raj, inquiring about inflation impacts on food costs, expressing surprise at favorability in this regard during the quarter.

In the paragraph, Raj Vennam discusses the dynamics of inflation, emphasizing a recent shift in commodities, specifically chicken and seafood, moving from slightly deflationary to inflationary in the fourth quarter. Darden has been able to secure favorable contracts, allowing them to purchase chicken below market prices. Labor inflation has stabilized at around 3.5% over the last two quarters, a significant improvement from previous years, aligning with pre-COVID levels. While it's too early to comment on fiscal 2026 commodities, more information will be provided in June. Brian Harbour acknowledges the response, and the operator introduces the next question from Dennis Geiger at UBS.

The paragraph is a conversation involving Rick Cardenas and analysts Dennis Geiger and David Tarantino. Dennis Geiger asks Rick Cardenas about the value perception at Olive Garden, particularly in light of new pricing strategies and menu items like the Manicotti at $12.99. Rick responds that the value scores for Olive Garden have been gradually improving, attributing this to the overall dining experience rather than just pricing. He emphasizes that the unlimited first course adds to the perceived value. Dennis then inquires about the incrementality of services with Uber. Rick notes that it's still early, but they have observed 40% to 50% incrementality without significant advertising, and these figures are included in their guidance. The conversation then shifts to David Tarantino, who is introduced as ready to ask the next question.

In the article paragraph, Raj Vennam discusses Darden's potential exposure to tariffs, noting that 80% of their cost basket is domestically sourced and only 20% is imported. Of the imported portion, some items could be easily switched to domestic sources due to cost advantages. Since Darden isn't the importer of record for these goods, they have negotiation flexibility with suppliers. The company's supply chain team is working on strategies to mitigate risks, including inventory management and alternative sourcing. Additionally, another speaker, David Tarantino, is briefly mentioned expressing appreciation for Raj's insights. Following this, Jeffrey Bernstein from Barclays asks a broader question about the impact of inclement weather and holiday shifts on consumer spending, given concerns that these factors might have masked an underlying slowdown reflected in decreased consumer confidence and restaurant sales.

In the paragraph, Rick Cardenas discusses consumer behavior and sentiment, noting a continued improvement in the restaurant industry despite external challenges and negative headlines. He observes that while consumers might express less optimism, this hasn't significantly impacted their dining out habits as long as their incomes are rising and outpacing inflation. Dining out remains a popular way for consumers to treat themselves, even if they feel restless. The company is focused on providing a great experience and value to diners. However, there has been a slight pullback among guests with incomes below $50,000, largely attributed to weather-related factors in the third quarter. Jeffrey Bernstein also inquires about the Fine Dining segment's performance, which is exceeding expectations, and whether any particular brand is driving this success.

The paragraph discusses changes in consumer spending and marketing strategies at Fine Dining establishments. Raj Vennam notes a positive surprise in Fine Dining performance during the third quarter, with consumers spending more during the holiday season, although persistent check management is observed afterward, suggesting caution about claiming long-term success. Tyler Klaus inquires about differences in marketing strategies compared to pre-COVID times. Rick Cardenas explains that marketing is now more focused on building the brand with a lower marketing budget compared to pre-COVID times. Previously, efforts at Olive Garden involved promoting new items, which was complex for operations. Now, promotions focus more on existing menu items.

The paragraph discusses Olive Garden's recent promotional strategies and marketing mix. It highlights that their promotions mostly feature items already on the core menu or previously offered, adding a sense of urgency by promoting limited-time offers. In terms of marketing channels, traditional TV remains the primary driver, with some exploration of digital methods like connected television. Social media efforts focus on creating viral content with the help of guests. Additionally, the cost impact of tariffs on building materials and kitchen equipment is addressed, with the expectation of a low to mid-single-digit increase in construction costs and no significant impact expected on kitchen equipment costs.

The paragraph discusses the performance of Olive Garden and LongHorn Steakhouse, focusing on their same-store sales guidance for the fourth quarter. Raj Vennam notes that Olive Garden's sales are running ahead of the 3% guidance. Lauren Silberman questions Rick Cardenas about the steak category's strength and any changes in consumer behavior. Cardenas attributes LongHorn's success to investments in food quality and notes no significant change in transaction trends, highlighting weather and Thanksgiving shifts as factors influencing sales. Overall, both brands are performing well, with LongHorn contributing significantly to the positive sales outlook for the quarter.

In the paragraph, Danilo Gargiulo from Bernstein inquires about improvements in service speed as a potential way to increase customer traffic. Rick Cardenas responds by highlighting that the initiative is largely about change management, as it involves altering long-standing practices across different restaurant brands. Each brand is addressing service speed differently, considering their specific dining style, such as fine dining versus casual dining. Rick mentions that they are still in the early stages of this long-term initiative and have observed some initial improvements. They have not yet attributed any increase in customer traffic to these changes but believe that over time faster service will encourage more guests to dine at their restaurants, especially those avoiding casual dining due to lengthy service times.

The paragraph discusses the factors considered by Uber when selecting brands to partner with for delivery services through Uber Direct. Rick Cardenas mentions that they look for brands with food that travels well and already have successful curbside pickup operations. Brands with a higher percentage of sales from to-go orders are more suitable for delivery. While they are currently focused on first-party delivery due to issues with third-party platforms, they are open to considering third-party platforms like Uber Eats if those issues are resolved. Danilo Gargiulo acknowledges the response, and the conversation then shifts to Peter Saleh from BTIG, who wants to revisit the topic of Uber Eats, noting the 40% to 50% incrementality mentioned earlier.

In the paragraph, Rick Cardenas addresses questions about customer behavior and sales trends related to Olive Garden's delivery service through Uber Direct. He notes that it's still early to assess customer spending patterns, but mentions that delivery customers tend to be younger and have higher incomes than dine-in guests, with little overlap between the two groups. Delivery orders result in a total check about 20% higher than typical to-go orders, excluding the delivery fee, and about 12% of delivery sales come from large party catering items. On labor, Cardenas states there have been no changes in availability and that the company continues to attract employees successfully.

The paragraph discusses a noticeable divergence between average and median same-store sales and guest counts, attributed to an outlier brand. Historically, these metrics were closely aligned, but have diverged significantly in recent quarters. Raj Vennam explains that one or two brands are causing this divergence, while Rick Cardenas adds that when benchmarks are discussed, Darden brands are excluded to maintain consistency. Jeff Farmer finds it surprising that despite decreasing consumer confidence, the casual dining segment hasn't been significantly impacted, which is unusual given historical trends over the past 20 years.

In the paragraph, Rick Cardenas discusses the resilience of consumer demand in casual dining despite challenging economic conditions. He attributes this resilience to rising incomes outpacing inflation and a decrease in the cost of essential items like gas, food, and housing, giving people more disposable income. As a result, consumers may choose to spend on dining experiences rather than goods, as they seek value and experiences. However, he acknowledges that this situation could change in the future. Additionally, Patrick Johnson, standing in for Chris O'Cull, asks about the timeline and priorities regarding the rollout of a new POS system. Cardenas responds that the POS pilot is currently being tested in two Olive Garden restaurants.

The paragraph discusses the implementation of a new POS (Point of Sale) system in Olive Garden restaurants and its upcoming rollout to Chuy's. The new system is considered the "heartbeat" of the restaurant due to its modern, versatile code, making it easier to modify and compatible with various hardware. Despite initial slower performance due to minor bugs, employees preferred the new system over the old one. The company aims to deploy it in more Olive Garden locations and begin introducing it in Chuy's by the end of summer.

The paragraph discusses strategies for personalized digital marketing and Olive Garden's financial performance. It suggests that brands might consider offering targeted promotions to specific customer groups, such as households earning under $50,000, though the emphasis is on personalized rather than widespread discounting. Rick Cardenas explains that Olive Garden can often re-engage customers simply by reminding them of the brand without needing to offer discounts. He mentions their "Buy One, Take One" promotion as an example of current efforts but emphasizes they want to avoid general discounting. On the topic of Olive Garden's strong margins, he indicates they are considering whether to maintain high margins or reinvest in customer and employee experiences to boost profitability through increased sales volume.

The paragraph discusses Olive Garden's financial strategy, indicating a recent increase in margins by about 50 basis points due to streamlined operations and menu improvements. Despite these margin increases, the focus remains on improving affordability and driving sales, rather than significantly boosting margins. Investments in food quality, such as adding more chicken and improving Alfredo sauce, are highlighted. The paragraph also mentions that cost efficiencies that are not visible to guests may be used to enhance customer value. Following this discussion, Gregory Francfort from Guggenheim Partners asks about the potential for increased store openings for Cheddar's and Yard House and how that might affect growth strategies, with Rick Cardenas begins responding to the query.

The conversation primarily involves the discussion of growth strategies for Yard House and Cheddar's, as well as performance insights related to Olive Garden's pricing promotions. Greg and Raj discuss their confidence in returning to a higher growth trajectory for these restaurant units, particularly focusing on maintaining unit growth for Olive Garden and LongHorn at existing levels. Jim Sanderson from Northcoast Research inquires about the sales mix impact of Olive Garden's $12.99 and $14.99 price points, including the effect of a promotional item, Manicotti, on sales. Raj Vennam clarifies that the $12.99 items had a low sales mix relative to higher-priced offerings. The $12.99 create-your-own (CYO) offering remained steady at around 9-10% of sales. Rick Cardenas explains that last year, Olive Garden wasn't promoting with specific price points but was focusing on broader advertising campaigns.

The paragraph discusses the performance gap among restaurant chains, with a focus on the importance of operational execution. It suggests that chains that execute well consistently, such as delivering a good customer experience, tend to outperform others, regardless of marketing and promotional efforts. This leads to a widening gap between successful and underperforming brands, especially as consumers become more discerning. Raj Vennam notes that some brands, presumably including their own, fall into the "winners" category due to strong execution within their establishments.

The paragraph discusses the pricing dynamics between chain and independent full-service restaurants, noting that chains generally price their offerings lower than independents, contributing to independents losing market share. Brian Vaccaro asks about the fiscal fourth-quarter guidance, seeking clarification on any factors influencing the over 3% projection, despite a volatile environment. Rick Cardenas responds, acknowledging a confusion between third and fourth quarter discussions and explaining the comparison of different menu promotions over the years, such as "Create Your Own Pasta" versus "Buy One, Take One," and mentions that LongHorn's promotions have remained consistent.

In the paragraph, Rick Cardenas addresses Christine Cho's question from Goldman Sachs about the Buy One, Take One promotion. He explains that the last time this promotion was run was before COVID, and it was one of their best guest-driving initiatives. However, due to the different market environment and the fact that the previous promotion offered a deep discount unlike the current one, it's challenging to compare its impact on traffic or check size directly. Cardenas points out that while Olive Garden offers a similar promotion with its $6 take-home deal, rolling out Buy One, Take One to other brands might not align with their brand equity and operational simplicity.

In the paragraph, Courtney Aquilla concludes the call by informing participants that fourth quarter results will be released on Friday, June 20, before the market opens, with a conference call to follow. The operator then thanks the participants and ends the teleconference and webcast, allowing everyone to disconnect.

This summary was generated with AI and may contain some inaccuracies.