Darden Restaurants Inc Q1 2025 Earnings Call Summary

The following is excerpted from the question-and-answer section of the transcript.

Question: Brian Bittner - Oppenheimer & Co., Inc. - Analyst : Thank you. Good morning. As it relates to the Uber partnership, I'm just curious, have you guys conducted an analysis on how impactful this could be for Olive Garden once fully rolled out? And are there plans or options to add more partners, or will this be an exclusive partnership for some period of time?

Question: Brian Bittner - Oppenheimer & Co., Inc. - Analyst : Okay, thank you. And my follow-up, just on the sales side, what's driving the improvement in September? And I'm just curious, on Olive Garden, you've talked about taking less price in the industry and that you want to showcase more price points in advertising. But you've seen some great success by some of your peers that are striking gold with creative promotions. I'm just curious how you're thinking about promotions moving forward and the opportunity to use that lever. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. SEPTEMBER 19, 2024 / 12:30PM, DRI.N - Q1 2025 Darden Restaurants Inc Earnings Call

Question: Brian Bittner - Oppenheimer & Co., Inc. - Analyst : Thank you, Rick.

Question: Brian Harbour - Morgan Stanley - Analyst : Yes, thank you. Good morning. Maybe just also on Uber, so is there no pilot at other brands contemplated in '25? Do you think that that would perhaps come in '26, or how would you treat kind of the rest of Darden?

Question: Brian Harbour - Morgan Stanley - Analyst : Okay, great. Thank you. Rick, can you maybe just talk a little bit more also about kind of the service opportunity, kind of that focus on speed and pace of meals? What specifically do you think could change there? What -- is that more of lunch comments or sort of like shoulder-period comment? How would we kind of see that over time?

Question: Brian Harbour - Morgan Stanley - Analyst : Thank you.

Question: Jon Tower - Citi - Analyst : Great. Thanks for taking the questions. Just to hammer home more on Uber Eats. I am curious if you could speak to plans for advertising the option for delivery. And specifically, do you plan to advertise on the Uber Eats platform for the brand? And then I've got a follow-up.

Question: Jon Tower - Citi - Analyst : Got it. And just a quick follow-up on that, and then another question. In terms of Uber, is this contemplated in guidance, this relationship, for fiscal '25? And then the question is on the time improvements that you mentioned earlier, do you think this will require greater investment in technology and/or staffing at the stores?

Question: Jon Tower - Citi - Analyst : Just on the tech and -- or the improvement on time (multiple speakers) --

Question: Jon Tower - Citi - Analyst : Great. Thanks for taking the questions. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. SEPTEMBER 19, 2024 / 12:30PM, DRI.N - Q1 2025 Darden Restaurants Inc Earnings Call

Question: Eric Gonzalez - KeyBanc Capital Markets Inc. - Analyst : Hey, thanks for the question. You talked a little bit about the price point advertising in Olive Garden. You're still spending well below what you used to spend in the past. So I'm just curious what your thoughts are on maybe increasing the level of spend to put a bit more pressure on your competitors?

Question: Eric Gonzalez - KeyBanc Capital Markets Inc. - Analyst : Okay. And then if I could just ask about fine dining. I'm just curious what's driving the big downtick in that business and maybe when you expect that business to recover?

Question: Eric Gonzalez - KeyBanc Capital Markets Inc. - Analyst : Got it. Thanks. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. SEPTEMBER 19, 2024 / 12:30PM, DRI.N - Q1 2025 Darden Restaurants Inc Earnings Call

Question: Jeffrey Bernstein - Barclays - Analyst : Great. Thank you very much. Rick. My first question was just following up on the sales trends for both yourself from the industry. I think you talked about the July weakness and improvement since then. And we know that Olive Garden has that catalyst of the earlier launch of the Never Ending Pasta Bowl. But I just wanted to see the trends of the other brands since July. Would you assume that's just the broader industry, and therefore, all your brands have seen improvement? And so I'm just wondering what do you think was the industry shock of July and maybe your confidence that the worst is behind us? And then I had one follow-up.

Question: Jeffrey Bernstein - Barclays - Analyst : Understood. And then just following up on the promotional activity. Obviously, the peers have been more aggressive. You've avoided that. The earlier launch of the Never Ending Pasta Bowl, it seems like it's an indication of your desire or willingness to better compete. But like you said, it's still profitable. But then I think you mentioned some LTOs -- or some more LTOs in the second half of fiscal '25. So I'm just wondering specifically what that might entail, whether it's -- you're talking about Olive Garden or other brands. Because again, I know you mentioned you're not going to compromise the long-term health for the short-term benefits. But just trying to get a sense for what that could entail in terms of an uptick in LTO activity in the back half of the year. Thank you. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. SEPTEMBER 19, 2024 / 12:30PM, DRI.N - Q1 2025 Darden Restaurants Inc Earnings Call

Question: Jeffrey Bernstein - Barclays - Analyst : Thank you, Rick.

Question: David Palmer - Evercore ISI - Analyst : Thanks. Good morning, and congrats on this delivery test and getting this done in the -- with the parameters you wanted, which included the menu prices being the same as your everyday menu. I wonder what will that delivery fee be upon checkout that you're seeing as a consumer, given that your menu prices will be the same? Will that fee get you back to a margin equivalent to a takeout order? And I have a quick follow-up.

Question: David Palmer - Evercore ISI - Analyst : Just to follow up, I just wanted to get your latest thinking and latest diagnosis about Olive Garden relative to the industry, which, of course, is a contrast to LongHorn, which is still actually on an accelerated basis outperforming. Is there anything that is clear to you in the customer satisfaction scores that you're seeing that is telling about an opportunity with Olive Garden? And what are your insights telling you -- maybe it's something having to do with the category that you're in and the trade-off to at-home versus what we see in steak, for example. But any thoughts there that might inform your strategy? And thanks.

Question: David Palmer - Evercore ISI - Analyst : Thank you.

Question: David Tarantino - Robert W. Baird & Co., Inc. - Analyst : Hi, good morning. Rick, I had a question about the Uber Eats or, I guess, Uber Direct relationships. So my question is on the decision to make this solely a first-party relationship and not offer Olive Garden on their marketplace. And I guess, I think most brands source most of their delivery orders from the marketplace and not first party. So just wondering why that decision. And would you ever be open to a deal that puts your brands on their marketplace?

Question: David Tarantino - Robert W. Baird & Co., Inc. - Analyst : Great. Makes sense. Thank you.

Question: Chris O'Cull - Stifel Nicolaus and Company, Incorporated - Analyst : Thanks. Good morning, guys. Raj, Olive Garden segment margin looked slightly below, I think, 2019 levels, and maybe it was down obviously year over year. Can you talk about what drove that result? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. SEPTEMBER 19, 2024 / 12:30PM, DRI.N - Q1 2025 Darden Restaurants Inc Earnings Call

Question: Chris O'Cull - Stifel Nicolaus and Company, Incorporated - Analyst : No, that makes sense. And then I know you're still targeting earnings growth, I guess, call it, 6% to 8% for the year. But is there anything we should be thinking about in terms of earnings cadence over the balance of the year?

Question: Chris O'Cull - Stifel Nicolaus and Company, Incorporated - Analyst : Perfect. Thanks, guys.

Question: Jim Salera - Stephens Inc. - Analyst : Yes, good morning. Thanks for taking my question. I wanted to ask on -- if you had a sense for what percentage of your Olive Garden guests already have the app downloaded? Because it sounds like the opportunity for incrementality from the delivery offering is really going to come from kind of existing Olive Garden guests. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. SEPTEMBER 19, 2024 / 12:30PM, DRI.N - Q1 2025 Darden Restaurants Inc Earnings Call Do you have a sense for what the penetration of the app is already? And do you have any plans for kind of in-restaurant activation, whether it's the waiters or the waitresses or somebody encouraging people to download the app at the restaurant?

Question: Jim Salera - Stephens Inc. - Analyst : Okay. And then if I missed this, I apologize. But can you guys just give us the traffic check and mix components for Olive Garden and LongHorn for the quarter?

Question: Jim Salera - Stephens Inc. - Analyst : Okay, great. Thank you. I'll hop back in with you.

Question: Jake Bartlett - Truist Securities - Analyst : Great. Thanks for taking the question. Rick, since all the changes since COVID, I think a question for investors has been, what stays around? What are the big changes you made? What remains? And what called my attention was some of the add-backs on the menu. You mentioned kind of adding a couple of items back at Olive Garden. The question is, is the menu simplification kind of reversing here a little bit? Are you going to be making efforts to take items off as you add old ones back? What's the message here with kind of the menu and your commitment to the simplification? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. SEPTEMBER 19, 2024 / 12:30PM, DRI.N - Q1 2025 Darden Restaurants Inc Earnings Call

Question: Jake Bartlett - Truist Securities - Analyst : Great. I appreciate that. Another question or follow-up is on pricing and on some of the inflation that you're seeing. Last call, you mentioned 2.5% to 3% pricing for '25. I think the first quarter here was at 2.5%. So is that the right way to think about pricing for the rest of the year, that it remains at the lower end of that range? And then the other part of the question is on the operating cost inflation. You reiterated your guidance for inflation. But when I look at the commodities outlook, things look to be a little bit better. Beef is now low single-digit inflation; produce is flat. There's just -- the items that changed got a little bit better for you. So is it fair to say that your cost environment, inflation environment, is a little bit better than you previously expected, but you're going to be on the more conservative side for pricing? How should we look at those factors?

Question: Jake Bartlett - Truist Securities - Analyst : Great. I appreciate it.

Question: Katherine Griffin - BofA Global Research - Analyst : Hi. Thank you. This is Katherine Griffin, on for Sara. The first question is on the steak category. Rick, I think you spoke to your -- all the businesses accelerating. But I'm curious about that performance in the context of the broader steak category because it seems that that's slowed in recent weeks. Is that a fair assessment?

Question: Katherine Griffin - BofA Global Research - Analyst : Right. Okay.

Question: Katherine Griffin - BofA Global Research - Analyst : Right. I guess, the other question was more about the -- relative to the broader category, but it sounds like it hasn't slowed. So yeah, thank you for clarifying. And then the second question is just on the like curbside mix. I think you said that there's a phased rollout across locations that have the curbside to-go. So have you quantified how much -- how many of your stores have to-go? And like what would cause that maybe to change?

Question: Katherine Griffin - BofA Global Research - Analyst : Great. Thank you.

Question: Gregory Francfort - Guggenheim Securities LLC - Analyst : Hey, thanks for taking my question. My question is, can you just remind us maybe when the pricing -- I think you said 1.9% in the quarter -- when that rolls off? And I'm just curious how you're thinking about pricing going forward. Your menu actually does not have massive differences in price points across regions. I'm curious how you balance maybe spreading that out a little bit with kind of advertising some of these national price points more aggressively to the customer. Thanks.

Question: Gregory Francfort - Guggenheim Securities LLC - Analyst : Thank you.

Question: Jeff Farmer - Gordon Haskett - Analyst : Thanks. I appreciate that it's late in the call, so I'll try to be quick here. Can you guys just shed some light on that Olive Garden customer income cohort that's historically responded or, I would say, I guess, who's historically or currently responding to Never Ending Pasta Bowl? Just the bigger picture question there is if that's giving you any relief with that lower-income consumer cohort.

Question: Jeff Farmer - Gordon Haskett - Analyst : Thank you for that. And just as a quick follow-up, in terms of thinking about Olive Garden's diminished market share over the last couple of quarters, do you think that not fully capturing that individual or small party delivery opportunity has contributed to that diminished market share dynamic?

Question: Jeff Farmer - Gordon Haskett - Analyst : So yeah, just quickly -- 100% fair -- I should have worded that diminished market share; outperformance is what I should have said. So fair.

Question: Jeff Farmer - Gordon Haskett - Analyst : Thank you for the response. Thank you.

Question: Danilo Gargiulo - Bernstein - Analyst : Thank you. You were mentioning that the greater political uncertainty may have affected the consumer sentiment specifically in July. Can you make comments on how you think these tighter migration controls that we're hearing from both parties actually might be affecting labor costs for your brands? And what do you expect the labor cost to be in '25? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. SEPTEMBER 19, 2024 / 12:30PM, DRI.N - Q1 2025 Darden Restaurants Inc Earnings Call

Question: Danilo Gargiulo - Bernstein - Analyst : Great. And can you make also some comments on the actions you're taking to maybe address some of the challenges that you're seeing in the fine dining segment?

Question: Danilo Gargiulo - Bernstein - Analyst : Excellent. Thank you.

Question: Lauren Silberman - Deutsche Bank - Analyst : Hey, guys. Appreciate the time. So there's obviously increased demand for value across the industry. With Never Ending Pasta Bowl, are you seeing a higher mix or take rate than you've seen historically on the promo just given that demand for value? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. SEPTEMBER 19, 2024 / 12:30PM, DRI.N - Q1 2025 Darden Restaurants Inc Earnings Call

Question: Lauren Silberman - Deutsche Bank - Analyst : Great. And then just one follow-up on the delivery side. So Olive Garden off-premise already in the mid-20% range without delivery. Any additional color on how you're thinking about the potential incrementality to off-premise delivery and how much this can add

Question: Lauren Silberman - Deutsche Bank - Analyst : Great. Does the pilot include 100 restaurants? Is that what you're saying?

Question: Lauren Silberman - Deutsche Bank - Analyst : Got you. Thank you very much.

Question: Andy Barish - Jefferies - Analyst : Hi, guys. Yeah, I just wanted to maybe finish up on Never Ending Pasta Bowl. Just kind of moving it up, how do you see the life cycle kind of that promotion as it starts to lap the year-ago launch? And I guess, with the new sauce, do you expect things to continue? And then also just some color on the comparisons from a year ago. Does October and November get a little bit tougher than September?

Question: Andy Barish - Jefferies - Analyst : Thank you.

Question: John Ivankoe - J.P. Morgan Securities LLC - Analyst : Hi. Thank you. When you look at Olive Garden performance over the last couple of quarters, what really distinguishes in your mind kind of the better markets from the slower markets? Maybe even within those markets, what kind of distinguishes a better store than a store that's not as performing as well? I mean, can we -- is it income driven? Is it demographics driven? Or are there may be certain areas of the country where you have a lot more incremental competition? Is there a way for us to kind of look below the averages and say, hey, here's kind of a class of underperforming stores? And more interestingly, do you have anything, yourselves, any tools that you can do to pull some of the underperforming stores closer to average or above average?

Question: John Ivankoe - J.P. Morgan Securities LLC - Analyst : Thank you.

Question: Jim Sanderson - Northcoast Research - Analyst : Thanks for the question. I wanted to go back to the discussion on pricing. I think that you had taken down your create-your-own pasta promotion price point by about 4% over the summer. Just wondering if you could tell us a little bit more about how that worked out in the quarter and whether you expect to feature more discounted promotions going forward similar to what we saw over the summer.

Question: Jim Sanderson - Northcoast Research - Analyst : Just a quick follow-up. When you did normalize that price point back to $12.99, did you notice any consumer reaction, good or bad?

Question: Jim Sanderson - Northcoast Research - Analyst : Understood. Last quick question. Can you give us an estimate of the dollar budget for G&A for the year, given you had some exceptional expenses last year, for comparison purposes? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. SEPTEMBER 19, 2024 / 12:30PM, DRI.N - Q1 2025 Darden Restaurants Inc Earnings Call

Question: Jim Sanderson - Northcoast Research - Analyst : Very good. Thank you very much.

Question: Brian Vaccaro - Raymond James & Associates, Inc. - Analyst : Hi. Thanks so much. Just two quick ones for me. On your existing off-premise business at Olive Garden, can you remind us what percent of that is small order takeout versus larger group or catering type orders?

Question: Brian Vaccaro - Raymond James & Associates, Inc. - Analyst : Okay. Great. And just to clarify on your comments on Never Ending Pasta, Rick, did you say that the overall sales mix on NEP was up? Or was that trade-up adding on proteins that was up? I'm just curious, what percentage of your customers end up trading up and adding proteins versus staying at that starting price point?

Question: Brian Vaccaro - Raymond James & Associates, Inc. - Analyst : Perfect. Thank you.