The paragraph is an introduction to the Darden Restaurants Fiscal Year 2025 Q4 Earnings Conference Call. The operator welcomes attendees and introduces Courtney Aquilla, the Senior Director of Finance and Investor Relations. Courtney acknowledges participants and introduces key company executives, Rick Cardenas (President and CEO) and Raj Vennam (CFO). She reminds listeners that the call will include forward-looking statements subject to risks and uncertainties and mentions that these are detailed in a press release and SEC filings. A presentation is being broadcast simultaneously on the company's website. Courtney also notes future earnings release plans and shares that industry results are benchmarked using Black Box Intelligence data, excluding Darden, with growth statistics provided for the fourth quarter. The call will continue with remarks from Rick Cardenas and detailed financial results from Raj Vennam, before Rick concludes with final comments.

Ricardo Cardenas reports a strong quarter for Olive Garden, with sales and earnings surpassing expectations, notably on Mother's Day. The revival of the "buy one take one" promotion for the first time in five years significantly boosted sales, alongside robust off-premise growth. This offer, which allows guests to dine and take home a second entree for $14.99, utilized Olive Garden's existing $6 take-home platform efficiently. The promotion helped increase Olive Garden's sales gap over the industry by 450 basis points. Nationwide delivery, catering, and curbside sales also rose nearly 20% year-over-year. A new delivery campaign, backed by 1 million free deliveries funded partially by Uber, doubled restaurant delivery orders in the final weeks of the quarter, achieving the highest guest satisfaction scores ever.

The paragraph highlights the successful management and momentum generated by Dan Kiernan and his team at LongHorn Steakhouse. It emphasizes their commitment to quality, training, and customer satisfaction, with a mention of the 8th Annual Steak Master series won by Tim Crane. LongHorn achieved record-high scores in stake quality and guest satisfaction, with sales reaching over $3 billion and same-restaurant sales increasing by 5.1% for the fiscal year. The paragraph also notes that Cheddar's Scratch Kitchen successfully piloted Uber Direct for delivery, making it widely available and supported by paid media and e-mail campaigns. Additionally, Cheddar's premiered its first 30-second connected television ad during the quarter.

The paragraph highlights that several restaurant brands, including Olive Garden LongHorn, Cheddar's, Ruth's Chris Steak House, and Eddie V's, achieved high guest satisfaction scores. Longhorn and the Capital Grille also received the Employer of Choice Awards for outstanding people practices. The company's adherence to its strategic advantages led to a successful year in fiscal 2025, with strong same-restaurant sales growth and earnings that exceeded expectations. In the fourth quarter, total sales reached $3.3 billion, a 10.6% increase from the previous year, driven by positive traffic growth, the acquisition of 103 Chuy's restaurants, and the opening of 25 new locations, despite closing 22 underperforming ones.

In the reported quarter, the company outperformed industry benchmarks in same-restaurant sales and achieved a 12.5% increase in adjusted diluted net earnings per share, reaching $2.98. Adjusted EBITDA was $582 million, and $215 million was returned to shareholders through dividends and share repurchases. While food and beverage expenses decreased due to lower-than-expected commodities inflation, labor expenses also dropped due to productivity improvements. Restaurant expenses rose due to brand mix changes and the introduction of first-party delivery at Olive Garden. Marketing costs remained stable, while preopening and G&A expenses increased due to new restaurant openings and higher incentive compensation. Interest expenses rose because of the Chuy's acquisition, but tax expenses decreased due to favorable hedging. Overall, the company achieved $352 million in adjusted earnings from continuing operations, equating to 10.7% of sales.

In the fourth quarter, all business segments experienced total sales growth, with three out of four showing increased same-restaurant sales and profit margins. Olive Garden's sales rose by 8.1%, supported by strong same-restaurant sales and 15 new locations, with a profit margin of 23.8%. LongHorn's sales grew by 9.3%, driven by same-restaurant increases and 16 new locations, achieving a 20.1% profit margin. Fine Dining sales increased by 2.3% despite negative same-restaurant sales and lower profit margins. The category is seeing improved traffic from higher-income households. The Other Business segment saw a 22.4% sales boost, partly due to acquiring Chuy's and despite closing 20 restaurants, including 15 Bahama Breeze locations.

In fiscal 2025, the Other Business segment, including Yard House and Cheddar's, achieved a 17.5% profit margin, with positive sales momentum and productivity improvements. The integration of Chuy's is on track, expected to have a neutral EPS impact. Same-restaurant sales grew by 2%, outperforming the industry, while total sales surpassed $12 billion. Adjusted diluted EPS rose to $9.55, with $2 billion in adjusted EBITDA, and $1.1 billion returned to shareholders. Despite some increased expenses, the operating income margin increased slightly. The closure of 15 Bahama Breeze locations is anticipated to slightly benefit earnings. Fiscal 2026, a 53-week year, is expected to see a $0.20 EPS boost from the extra week.

The company anticipates a total sales growth of 7% to 8%, aided by an extra week, with same-restaurant sales increasing by 2% to 3.5% and plans to open 60 to 65 new restaurants. They project capital spending between $700 million and $750 million, inflation at 2.5% to 3%, and an EBITDA of $2.16 billion to $2.19 billion. The effective tax rate is expected to be around 13%, with diluted net earnings per share estimated at $10.50 to $10.70. A 7% increase in quarterly dividends to $1.50 per share was also announced. The long-term financial strategy has been updated to emphasize sales growth while maintaining margins, with new restaurant growth set at 3% to 4% and same-restaurant sales growth at 1.5% to 3.5%. Margin expansion will now be measured by earnings after tax margin. Three main reasons for this change are adjustments in how G&A offsets tax, impacts of current lease accounting guidelines, and consideration of interest from future acquisitions.

The updated framework aims for margin growth to be flat to 20 basis points, contributing 6% to 10% of total shareholder returns. The dividend payout ratio remains at 50% to 60%, while share repurchases will now target a percentage contribution to shareholder returns, aiming for a 4% to 5% contribution. Since 2019, new restaurant growth, same-restaurant sales, and margin expansion have generally met or exceeded targets. The dividend payout is near the top of the range, and share repurchases contributed 1% to shareholder return. Despite issuing 9 million shares in 2020, total cash return was 4.1%. Total shareholder return, including EPS growth and dividend yield, was 11.6%, within the targeted range. Historically, Darden has consistently achieved a 10% or greater annualized total shareholder return over any 10-year period. The company has increased EBITDA by $800 million since 2019 and aims for $1 billion growth by fiscal 2026, maintaining a strong balance sheet with a debt-to-EBITDA ratio of 2.1x.

The paragraph discusses Darden's strategic planning process, emphasizing its role in maximizing the value of their brand portfolio and capturing synergies. Darden recently completed a 5-year planning process to clarify the strategic roles of their brands and develop growth plans moving towards 2030. They decided to close 15 Bahama Breeze locations and are now considering strategic alternatives for the remaining locations, as the brand is no longer a priority. Options include selling the brand or converting the remaining restaurants to other Darden brands to drive shareholder value.

The paragraph discusses Darden's strategic plans, including selling eight Canadian Olive Garden locations to Recipe Unlimited and entering an agreement to open 30 more locations in Canada over the next decade. Darden's international franchising team, led by Brad Smith, is working to expand globally, with 154 franchise locations currently. The acquisition of 74 Ruth's Chris franchise locations has enhanced their franchise business, leading to faster growth. Additionally, new development agreements have been signed in India, Spain, and Asia, indicating promising expansion prospects for Darden's international franchising efforts.

Dan Kiernan is retiring as President of Olive Garden after a 33-year career with Darden, having led Olive Garden successfully for the past 7 years. John Wilkerson, who has rebuilt Cheddar's over the same period, will succeed him, with a 10-week transition period. Mark Cooper will replace Wilkerson at Cheddar's, moving from his current role as President of Seasons 52 and Bahama Breeze. Lorie Kessler, previously in operations at Seasons 52, will become its President. John Martin will oversee Mark and Lorie, Cheddar's, Seasons 52, Yard House, the Capital Grille, Eddie V's, and strategic discussions for Bahama Breeze. Thomas Hall has been named President of Chuy's, following his tenure as Executive VP of Operations for LongHorn.

In the paragraph, it is announced that Tom will now report to Todd Burrows, Group President responsible for Chuy's, Ruth's Chris, Darden development, and international franchising. The company celebrates its 30th year as a publicly traded entity, marked by the CEO ringing the New York Stock Exchange opening bell alongside long-standing employees like Level Rutledge. The CEO highlights the importance of their employees as the company's greatest asset. Eric Gonzalez from KeyBanc Capital Markets congratulates the company on its strong sales results and asks about the success of casual dining chains and the challenges facing smaller chains, particularly regarding affordability perceptions. Ricardo Cardenas appreciates Eric's comments and engages with his questions.

The paragraph discusses the trends and future growth strategy for a casual dining company. Over the past 5-6 years, the company has maintained its pricing below inflation to offer value to consumers, which is now attracting more customers from fast food and fast casual sectors. The conversation between Eric Gonzalez and Rajesh Vennam highlights the company's plan to increase unit growth, with a goal of reaching a 3-4% increase annually over the next five years. Specifically, Olive Garden and LongHorn are expected to open 40 to 45 new locations, Yard House in the mid-single digits, and other brands contributing about 15 new locations initially. They anticipate these other brands to grow their contribution to new openings in the future.

The paragraph discusses the future growth and investment opportunities for Longhorn and Olive Garden restaurants. Longhorn is expected to open 25 to 30 locations annually, while Olive Garden will aim for around 20 openings per year. The conversation shifts to a discussion between Chris O'Cull and Rajesh Vennam about updated long-term financial goals, particularly regarding margins and reinvestment strategies. Vennam explains that the new framework offers a holistic view of financial metrics and implies a focus on sales growth, even if it means lower EBITDA growth initially. David Palmer then inquires about the impact of Uber Direct on Olive Garden's sales, noting a 40 basis point impact on the mix and that Uber accounts for 3.5% of Olive Garden's total sales.

The paragraph discusses the impact of an initiative involving Uber Direct, particularly on Olive Garden's sales and margins. It mentions that the initiative contributed a roughly 2% incremental sales impact for the quarter, with the potential to reach about 5% of total sales, especially during periods with free delivery offers. While the margin remains largely unaffected by this deal, any fees are passed on to Uber, maintaining a neutral impact. The discussion also touches on possible expansion to other brands like Longhorn and Cheddar's, where similar positive results as Olive Garden have been observed, indicating potential for broader implementation. David Palmer inquires about potential hurdles for other brands, and Ricardo Cardenas notes they will continue evaluating this expansion.

The paragraph discusses the company's strategy regarding the expansion of delivery services across its restaurant brands. It emphasizes ensuring a positive delivery experience before adding the service to more brands. For example, eight Cheddar's locations are not offering delivery because they haven't met certain requirements. The company is cautious about introducing Uber Direct, allowing brand leaders to decide if they want to use the service, and indicates that not all brands will adopt it due to logistical challenges such as limited curbside space. Their current focus is on evaluating the performance of Olive Garden and Cheddar's in using Uber Direct, and any expansion to other brands will not occur until the next calendar year.

The paragraph discusses a business's strategic decisions and outlook, featuring a collaboration with Uber through Uber Direct. The company is monitoring the success of this partnership before committing fully to the marketplace. It highlights inflation projections for 2026, with expected increases of 2.5% for food and 3.5% for labor. For fiscal 2026, the company aims to maintain or slightly improve margins, allowing additional revenue to boost earnings or fund reinvestment. It also reports strong business momentum, with substantial growth in the fourth quarter continuing into June, though macroeconomic uncertainties remain a concern for the coming year.

In the discussion, the speakers address their financial expectations for the upcoming year, emphasizing a cautious approach to pricing amid uncertainty. They anticipate starting the year strong, with the first half likely outperforming the second from a year-over-year perspective. Rajesh Vennam outlines an expected mid-2% pricing increase for fiscal 2026, with initial figures close to 2% and increasing to the mid-to-high teens later, depending on inflation. The company remains committed to disciplined pricing despite inflation, sticking to a long-term strategy. Additionally, they intend to focus more on top-line growth rather than just enhancing margins.

The paragraph discusses different strategies that brands, such as Olive Garden, are exploring to enhance affordability and efficiency. Olive Garden is testing ways to lower costs through Uber Direct, while other brands may invest in labor to expedite processes. These are seen as long-term investments to benefit both dine-in and off-premise services over the next five years. Sara Senatore from Bank of America asks about the pressures on the fine dining sector and the potential impacts of leadership changes and acquisitions, like Ruth’s, on managing resources within the portfolio. Ricardo Cardenas responds by mentioning upcoming leadership retirements.

The company has restructured its leadership to position itself for long-term success, with the largest brands, Olive Garden and LongHorn, reporting directly to the speaker, while other brands are managed by two proven leaders, Todd Burrowes and John Martin. Despite challenges faced by Fine Dining during COVID-19, the company believes its size and scale have not negatively impacted this sector. They have strong leadership in Fine Dining with a new president overseeing Capital Grille and Eddie V's. The integration of Ruth's Chris poses some challenges affecting sales but is seen as manageable. The company has decided to remove Bahama Breeze from its portfolio, as it no longer meets the criteria they use to evaluate brand retention, although they see growth potential for Bahama Breeze with a different owner.

In the paragraph, the speaker discusses the investment strategy and consumer demographics related to Bahama Breeze and dining trends. They explain the decision to transition Bahama Breeze to different ownership due to limited investment plans and the consequent growth opportunities for team members. In terms of consumer demographics, fine dining is seeing growth primarily among households over $150k, while casual dining is experiencing growth across most income groups except those earning below $50k. The speaker also highlights that suburban areas are maintaining 95% of pre-COVID traffic levels in fine dining, whereas urban areas have lower levels at around 82%. There is a noted stabilization in fine dining retention compared to pre-COVID levels.

During the discussion, Peter Saleh from BTIG inquires about the customer demographics and behaviors for Olive Garden's Uber Direct delivery service. Ricardo Cardenas explains that the delivery service attracts customers with minimal overlap with dine-in patrons, featuring higher guest frequency and a significant portion of new or returning customers who haven't visited Olive Garden in over a year. Delivery users are typically younger and have slightly higher incomes. On pricing strategy, Olive Garden is considering reinvestments that could involve maintaining prices below inflation and focusing on affordability and enhancing service quality, which includes evaluating price points and labor to meet guest expectations.

The paragraph discusses a company's investment strategy and financial outlook. The company is not expecting massive financial gains but anticipates modest increases, potentially in the tens or twenties of basis points, depending on sales target exceedance. It highlights ongoing investment in pricing, which has been long-term, and plans to invest in additional areas. In response to an inquiry from Jake Bartlett about same-store sales guidance for 2026, the company acknowledges current sales momentum but incorporates caution due to potential macroeconomic challenges. The response emphasizes a long-term strategic approach, highlighting past prudent pricing decisions during COVID-19 that have been beneficial. The company's strategy aims for sustainable growth rather than short-term earnings at the expense of long-term success.

The paragraph is a transcript from a financial earnings call discussing a company's financial performance and outlook. The first part addresses an increase in General and Administrative (G&A) expenses for fiscal 2025, attributed to a market run-up affecting mark-to-market accounting, which had a $15-$20 million incremental impact offset by taxes. For fiscal 2026, G&A is expected to be around $500 million, including the impact of a 53rd week, which would reduce to $490 million on a 52-week basis. The second part involves a question about Olive Garden's performance, with details on same-restaurant sales growth, price increases, and a notable 70 basis point increase in catering sales. The discussion also addresses customer traffic and the influence of promotional deals on driving customer frequency and attracting new households.

The paragraph discusses the impact of promotional strategies on Olive Garden's traffic and profit growth. It mentions that Uber delivery contributed slightly to traffic, and catering boosted it further. Promotional activities like "buy one take one" have brought in new guests and increased frequency without negatively affecting profits. Olive Garden has seen a year-over-year segment profit growth of 100 basis points, highlighting their strategic approach to promotions. Looking ahead to 2026, Ricardo Cardenas mentions the company's cautious promotional strategy, suggesting adjustments based on market conditions while maintaining a steady promotional cadence to support gradual recovery.

The paragraph discusses the marketing efforts and strategies for Olive Garden and Cheddar's. It mentions the success of Olive Garden's momentum, partly due to new menu items and promotions, and touches on Cheddar's marketing initiatives, including connected television. The strategy emphasizes continued investment in marketing. Ricardo Cardenas from the company discusses future plans, noting that the first half of the year is expected to perform better in terms of momentum, and efforts will be made to sustain this momentum through 2026.

The paragraph discusses Olive Garden's strategic plans related to its partnership with Uber Direct and its long-term growth outlook. The company is testing initiatives to boost same-restaurant sales through the Uber partnership, which might temporarily affect sales figures, but with a focus on long-term success. The conversation also touches on the expectation of higher inflation over the next five years, which will influence pricing strategies aimed at slightly below inflation levels. Despite this, Olive Garden anticipates growth driven by increased check sizes and the Uber partnership. Improving operational efficiency and maintaining long-term growth are also highlighted as key focus areas.

In the paragraph, Rajesh Vennam and Ricardo Cardenas discuss consumer behavior and brand strategy in the casual dining sector. Vennam notes that higher-income households, particularly those earning between $100k and $150k, are driving growth more than lower-income households, emphasizing income over age as a key factor. Meanwhile, Cardenas explains that LongHorn's success is due to its strategic focus on quality, simplicity, and culture, which allows it to effectively compete despite changes in market focus from margins to top-line growth.

The article discusses the strategic investments made by LongHorn, particularly during the COVID-19 pandemic, with a focus on enhancing the overall experience beyond just food quality, without compromising profit margins. It notes that LongHorn is well-positioned within its category due to its unique consumer appeal. In their long-term framework, they plan to increase marketing investments, outpacing sales growth over the next five years, with specific emphasis on brands like Cheddar's. Additionally, there's an emphasis on improving service speed, which is still in the early stages. The operator shifts to a question from Andrew Strelzik about marketing strategies and service speed for the future, which is addressed by Ricardo Cardenas.

The paragraph discusses the challenges and progress of improving service speed in the restaurant industry. The speaker describes the effort to meet consumer expectations without affecting restaurant margins negatively. They mention that changing the habits of over 100,000 servers will take time but is necessary. Rajesh Vennam highlights that despite speed challenges, these efforts should not lead to a margin drag, but rather maintain flat margins due to expected returns on investments. Later, questions from Brian Vaccaro and John Ivankoe touch on traffic, pricing, and industry growth rates, with Rajesh providing specific figures for LongHorn's performance and discussing the slowing growth of the overall industry.

In the paragraph, Ricardo Cardenas discusses Darden's strong position in terms of accessing and developing new real estate sites, noting improvements over the previous fiscal year and successful efforts to increase potential locations for their restaurant brands like Cheddar's, Yard House, Olive Garden, and LongHorn. He attributes the slowdown in growth more to smaller, independent restaurants rather than large chains like Darden, which has good access to capital. Additionally, in response to a question from Jeffrey Bernstein, Cardenas explains that while Darden has become more comfortable with promotions, focusing on affordability at Olive Garden, they are cautious to ensure that it does not significantly impact profit margins. He notes that recent promotions like "buy one take one" were limited and not a major margin issue.

The paragraph discusses Olive Garden's strategy to enhance affordability by adjusting their menu offerings to include items at different price points, without necessarily needing a promotion. They have tested these changes in some divisions with positive results, boosting their affordability ratings and guest return intentions. The company is confident in their investment decisions, expecting them to yield long-term benefits. When asked about industry competition and discounting strategies, the speaker notes that while one competitor is effectively promoting a value item, it is uncertain how the overall industry will react. Olive Garden is prepared to adapt to any changes in the competitive landscape.

In the paragraph from the article, the discussion focuses on Olive Garden's strategies to enhance profitability and drive restaurant traffic and sales. Danilo Gargiulo from Bernstein inquires about the labor environment in the U.S. and the impact of tightening immigration policies on turnover rates in the areas where Olive Garden operates. Ricardo Cardenas responds that there hasn't been a significant effect on turnover or day-to-day attendance, attributing this to Olive Garden's attractive employment proposition and high retention levels. Gargiulo also asks about Olive Garden's international franchising aspirations. Cardenas explains they have recently begun expanding internationally and have seen promising results in signing franchise partners, with particular interest in markets like India and Spain.

The paragraph discusses the strategic growth and development plans of a restaurant group, with a focus on expanding its Olive Garden brand in India and Spain. The company has partnered with local entities to open 40 restaurants in a part of India and Spain, though it acknowledges there are no guarantees all will open. The group is optimistic about supporting its franchise partners and potentially introducing additional brands in those markets if successful. There's no specific prediction for growth in five years, but confidence in increased profitability is expressed. Additionally, there's mention of a fiscal review involving potential closures of underperforming brands, like Season 52 or Eddie V's, and recent successful promotions with Uber Direct driving delivery service uptake.

The paragraph discusses a Q&A session on a conference call where Ricardo Cardenas addresses a question about the consistency of a 40% to 50% incrementality in sales due to marketing and promotions on TV. He mentions that while the sales incrementality is fairly consistent, offering free delivery may have shifted some customers from pickup to delivery. However, sales for delivery increased with the addition of a TV commercial. The operator then concludes the session, and Courtney Aquilla reminds everyone that first quarter results will be released on September 18, followed by a conference call.

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