Darden Restaurants Inc Q2 2025 Earnings Call Summary

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

Question: David Palmer - Evercore ISI - Analyst : Wanted to ask a question on Olive Garden. I know you have a very good high consumer insights team there. Wanted to ask you about what you're seeing with that brand given the fact that the customer satisfaction levels are so high, sort of comparable to the leaders in any segment, Olive Garden is -- seems to be equal to that superiority in the Italian segment. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. DECEMBER 19, 2024 / 1:30PM, DRI.N - Q2 2025 Darden Restaurants Inc Earnings Call I'm just wondering why do you think the sales gap to the industry is not better? Is it -- and in why is that not related to the advertising? I think a lot of people ask about that, the gap right now and your advertising spend to pre-COVID. I think it was down about a half. So any comments on that would be helpful.

Question: David Palmer - Evercore ISI - Analyst : So you don't believe the scale of advertising is a problem? You're comfortable at these levels of advertising spending going forward?

Question: David Palmer - Evercore ISI - Analyst : Thank you very much. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. DECEMBER 19, 2024 / 1:30PM, DRI.N - Q2 2025 Darden Restaurants Inc Earnings Call

Question: Eric Gonzalez - KeyBanc Capital Markets - Analyst : Just on that last point about marketing, I think you mentioned an average -- in January, you're going to bring that to the fan favorites and to the menu. And then your messaging will also include compelling price point. So just putting the pieces together because it sounds like the next quarter might have a little bit of an uptick in advertising?

Question: Eric Gonzalez - KeyBanc Capital Markets - Analyst : Okay. And then just also on Never Ending Pasta Bowl, I think you talked about the strong performance, particularly those weeks that didn't compare against the prior year. So I'm just curious how the promotion played out during the quarter, like how did it do once -- with the longer promo period, how did it do once those easy last weeks kind of [lap] last year?

Question: Eric Gonzalez - KeyBanc Capital Markets - Analyst : That's very helpful. 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. DECEMBER 19, 2024 / 1:30PM, DRI.N - Q2 2025 Darden Restaurants Inc Earnings Call

Question: Jim Salera - Stephens - Analyst : Thanks for taking our question. I wanted to drill down a little bit in LongHorn, in particular, just given some of the commentary you guys had, marketing spend there is really low, but the engagement is very strong. Can you just kind of parse out what's driving the continued strength there maybe relative to some of the trends we've seen in casual? And how should we think about that progressing through the years, especially as other competitors have very prominent marketing that focuses on dollar price points and [got] LongHorn's more of a experiential value.

Question: Jim Salera - Stephens - Analyst : Great. And can you able to just break out of that 7.5% traffic mix price for LongHorn?

Question: Jim Salera - Stephens - Analyst : Okay, great. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. DECEMBER 19, 2024 / 1:30PM, DRI.N - Q2 2025 Darden Restaurants Inc Earnings Call

Question: Peter Saleh - BTIG - Analyst : Congrats on a great quarter. I did want to ask maybe about the Uber eats partnership and the accounting of how you guys are accounting for the delivery in the service charge in the Olive Garden comp and what if anything is reflected in your guidance kind of going forward from the benefit of customers maybe switching from self pick-up to delivery through Uber eats. Is there anything there?

Question: Peter Saleh - BTIG - Analyst : Great. And then just on the unit growth, it looks like it ticked up in -- at least your guidance ticked up by about five units. Any comments on where that's coming from? Is that the inclusion of Chuy's or is there something more? Just trying to understand where the incremental five are coming from?

Question: Peter Saleh - BTIG - Analyst : Thank you very much.

Question: Jeffrey Bernstein - Barclays - Analyst : My first question is just on the fiscal '25 comp guidance. It looks like for the system you tightened it to 1.5%. I think previously you are 1% to 2%. So just two related questions on that. One is, why, with two quarters remaining, would you tighten it such a specific price point? I'm just wondering whether that demonstrates maybe increased confidence that there's going to be a lot less volatility? And second question around that is just what does that assume directionally at least for Olive Garden and LongHorn? And I know with Olive Garden you got much easier competitors, you've got a new value LTO potentially on the come. LongHorn, obviously has a very strong momentum. So I would have assumed maybe both of those brands would be above that 1.5%? Just trying to see if I'm interpreting that correctly.

Question: Jeffrey Bernstein - Barclays - Analyst : Go it. And in terms of the assumption for Olive Garden and LongHorn within there, am I correct to assume that you would think Olive Garden would accelerate from here and obviously, LongHorn has been running well above those ranges. So just trying to get a sense for whether that's the correct interpretation or whether there are some offsets that we're not fully appreciating?

Question: Jeffrey Bernstein - Barclays - Analyst : Understood. And then my follow up is just on the Fine Dining comps, I think it's that they improved sequentially, back at the Thanksgiving and hurricane shifts. I'm just wondering, are there any particular brand leading or lagging, I'm just thinking a lot of questions around maybe the increasing GLP-1 impact that might have an impact on kind of higher end brands. I'm wondering whether you think that's having any noticeable impact at this point.

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

Question: Sara Senatore - BofA Global Research - Analyst : I have a question, actually, I guess, about the broader environment. You mentioned that Fine Dining, I mean that the large casual dining brands were all positive. And then I guess, [polished] casual and fine dining were a bit softer. And yet, one of the things that you're seeing in Olive Garden, for example, is that pricing up through the protein add-on. So it seems like people are willing to pay up for protein specifically, but indulge a little bit. Are you seeing any trade do you think among your brands? Capital Grille to LongHorn or anything like that? Again, you just mentioned the value having the portfolio. And I was just curious if you can draw any or extrapolate some of the performance, which seems to be strongest at the sort of mid-price points, but with a clear desire to -- for some indulgence and positive mix.

Question: Sara Senatore - BofA Global Research - Analyst : Yeah. That's really helpful. Thank you. Just -- and the point about sort of maybe where the middle class is indulging itself as maybe it was briefly at Fine Dining and now it's more kind of trading up at cash (multiple speakers) -- REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. DECEMBER 19, 2024 / 1:30PM, DRI.N - Q2 2025 Darden Restaurants Inc Earnings Call

Question: Sara Senatore - BofA Global Research - Analyst : Right. Okay. Got it. Thank you. But then just a quick follow up. This is more on Cheddar's, comping positively. It seems like it's really hit its stride after maybe getting a little slower off the mark after the acquisition. So I think at one point, the expectation was for a much faster growth -- unit growth out of that brand. Isn't that an inflection point now where we could see that?

Question: Sara Senatore - BofA Global Research - Analyst : Thank you so much.

Question: Andrew Charles - TD Cowen - Analyst : Raj, within the reiterated EPS guidance, can you just help level set the expectations for line items around G&A, interest spends, and depreciation for the year just following the Chuy's acquisition?

Question: Andrew Charles - TD Cowen - Analyst : Okay. That's helpful. And then just on beef, good to see low single-digit inflation outlook, 40% coverage. Talk about the conversations you're having with vendors on this? I mean is this something that you'd like to be more covered on, but it seems like the cost use to be prohibitive and you'd rather go more spot market rather than more covered. I just love to kind of know more of the outlook there beyond what's covered and what would lead you to be more covered there.

Question: Andrew Charles - TD Cowen - Analyst : That's helpful. Thank you.

Question: Andrew Strelzik - BMO Capital Markets - Analyst : I wanted to talk about total inflation for 2025 and perhaps if you could walk us through some of the drivers of that and maybe how you're thinking about margin progression through the back half of the year.

Question: Andrew Strelzik - BMO Capital Markets - Analyst : Got it. And then I just wanted to dig a little bit deeper into Olive Garden's Never Ending Pasta promotion, and how that performs relative to expectations specifically as it relates to the mix of customers that opted to pay extra for the protein add-on and the impact that that had on same-store sales growth in the quarter.

Question: Andrew Strelzik - BMO Capital Markets - Analyst : All right. Thank you very much.

Question: Brian Harbour - Morgan Stanley - Analyst : Just on Uber. I know you say you didn't promote it yet, but was it fairly material at some of the stores where you've rolled out so far, I guess, to the extent you're going to comment. And then is the expectation that you would start to kind of promote it more actively in the fourth quarter? How do you plan to kind of approach leaning into that?

Question: Brian Harbour - Morgan Stanley - Analyst : Okay. Yeah, that's helpful. Thank you. Just -- you quoted pricing for LongHorn. Could you cite what it was for Olive Garden as well? And I think you previously provided some comments just on the rest of the year. Is pricing still kind of what you'd expect for the second half or any change to your plans there?

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

Question: Lauren Silberman - Deutsche Bank - Analyst : Congrats on the quarter. So really strong performance, particularly at Oliver Garden and LongHorn. Can you just talk about the cadence through the quarter? And any color on what you're seeing in December the Thanksgiving shift. So that's created some noise. So just trying to understand what you're seeing in terms of underlying trends?

Question: Lauren Silberman - Deutsche Bank - Analyst : Great. Thank you. And then I just wanted to follow up on the LTOs that you'll be promoting in January. Clarifying, you'll be promoting these three items, Stuff Chicken Marsala, Steak Gorgonzola, and then a third classic at a specific price point. And any color about how you're thinking about the price point and what's compelling given some of the promos out there in the industry?

Question: Lauren Silberman - Deutsche Bank - Analyst : Great. And it's all three of those menu items?

Question: Lauren Silberman - Deutsche Bank - Analyst : It will be all three menu items that are promoted at a price point? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. DECEMBER 19, 2024 / 1:30PM, DRI.N - Q2 2025 Darden Restaurants Inc Earnings Call

Question: Lauren Silberman - Deutsche Bank - Analyst : Great. Thanks so much.

Question: Jon Tower - Citi - Analyst : Rick, I know in previous calls, you talked about the idea of speed of service across the brands, particularly Olive Garden as being an area where you feel like there's still room for improvement. I'm just curious, you could give us any sort of update on where you are on progress there and perhaps leaving that into some of the technology you had spoke to earlier in terms of upgrading the infrastructure around the point of sales? And if you think that will be a bit of an unlock to help expedite the speed across the system.

Question: Jon Tower - Citi - Analyst : Great. I appreciate that. And then maybe just in terms of the marketing side, I know you touched on it a little bit earlier, but I'm just curious where the connected TV piece comes into this. And specifically, you'd mentioned the idea of Cheddar's maybe building some brand awareness. I'm curious if that's weaved into it. And just speaking broadly about connected TV versus traditional linear TV. Can you give us a gauge of the cost differential between the different spend channel, so connected versus linear? If there's any significant savings you can drive utilizing that relative to traditional TV?

Question: Jon Tower - Citi - Analyst : Got it. Thanks for taking the questions.

Question: Dennis Geiger - UBS - Analyst : Great. Thanks for the encouraging color on Uber Direct. Encouraging also that the rollout, I think, it's a little bit faster than we had thought previously. I'm just curious, relative to the full-year guide and Uber Direct if there is anything embedded there, I feel like previously that there was no expectation for any contribution. Rick, I said -- I know you said you're not commenting on the marketing. And as of now, you're kind of assuming not incremental. So just is anything embedded from Uber in the guide for this year or not yet?

Question: Dennis Geiger - UBS - Analyst : That's great, encouraging. Thank you. Just wondered if I could sneak it in. As it relates to menu innovation and just going forward as we look ahead, how do we think about that? Will we see more menu innovation from Olive Garden specifically going forward than the last few years? Is there a shift in all there as we think about the longer term?

Question: Dennis Geiger - UBS - Analyst : Great. Thanks, Rick.

Question: Gregory Francfort - Guggenheim - Analyst : Thanks for the question. Rick, this might be a little bit out of left field, but One of the things, I guess, we've seen recently from maybe outside of restaurants is a lot of major retailers being able to have a step function, a major step function in processing customer data, operational data, AI feels like it's playing a role in that. Do you feel like that's relevant to Darden? Are you seeing this internally at Darden? And I guess, what sort of competitive moats do you think this helps create? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. DECEMBER 19, 2024 / 1:30PM, DRI.N - Q2 2025 Darden Restaurants Inc Earnings Call

Question: Gregory Francfort - Guggenheim - Analyst : Thanks for that perspective. Thanks, Raj.

Question: Danilo Gargiulo - Bernstein - Analyst : When we look at the labor market, especially for maybe the back half of '25 into 2026, if the [title] immigration policies were to be implemented maybe the restaurant labor pool might be shrinking and this may be driving the [sales] up. So understandably, you have a better employment proposition than peers, and you've demonstrated that over the years. But assuming that some of that impact might also be affecting. Are you planning to considering to pass on any cost increases on to consumers? Do you think that consumers can absorb that? Or are you going to be continuing with much more prudent pricing actions going forward?

Question: Danilo Gargiulo - Bernstein - Analyst : Great, Rick. And building on your comments, given the shift in not only political environment, but also the consumer sentiment, as you mentioned earlier. So in light of that, looking into 2025, what is the one item that you're most excited about? And what is the one item that you're watching more closely because maybe you have some concerns about?

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

Question: David Tarantino - Robert W. Baird & Co., Inc. - Analyst : Just a quick question on the CapEx guidance. So it stepped up quite a bit versus the midpoint of the range that you had last time, and I suspect some of that's related to Chuy's. Could you just elaborate on why the big step-up? And then whether you think that is a good run rate for us to think about kind of growing from going forward?

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

Question: Rahul Krotthapalli - JPMorgan - Analyst : Any -- just a broader industry customer, I have a follow-up. Any preliminary thoughts from your vantage point and what a potential product deregulation versus previous years would mean for the industry, particularly casual dining space as it relates to, say, M&A or actuating development pipeline, given your guide up on permitting, et cetera. And also any comments around specific policies for pay or taxes on tip credits that you foresee?

Question: Rahul Krotthapalli - JPMorgan - Analyst : Got it. And a quick follow up. What are your thoughts on having a fast casual brand within the portfolio over time. Your comments on Cheddar's were very helpful. But I'm just curious, why not tap into M&A to address this sooner given the shifts we see in the industry overall as more younger customers seem to gravitate towards this model and who will eventually be a part of the demography interacting with your brands?

Question: Rahul Krotthapalli - JPMorgan - Analyst : Appreciate the insight, Rick. 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. DECEMBER 19, 2024 / 1:30PM, DRI.N - Q2 2025 Darden Restaurants Inc Earnings Call

Question: Jake Bartlett - Truist Securities - Analyst : Thanks for taking the question. Mine was on labor efficiencies. And if we look at your labor cost per operating week, it's been trailing your wage inflation that you've been quoting. I'm thinking a little bit of a narrower difference this quarter. But I'm wondering, is there kind of a some more significant efficiencies that you gained at some point last year that you're going to start to lap and so maybe we shouldn't expect labor (inaudible) lead to lag so much? And then could you talk about other opportunities you have for driving efficiencies? I know improved retention is helpful, but anything else and then I have a follow up.

Question: Jake Bartlett - Truist Securities - Analyst : Great. And then the follow up was on the selling as a percentage of sales. And I think the past commentary that I have here is you expect a couple [tens] higher in '25. It was about 30 basis points higher as a percentage of sales in the second quarter. I'm wondering, is that being we thought, should we think about 30 to 40 basis points versus maybe 20 basis points of an increase in '25 at this point?

Question: Jake Bartlett - Truist Securities - Analyst : Great. I appreciate it. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. DECEMBER 19, 2024 / 1:30PM, DRI.N - Q2 2025 Darden Restaurants Inc Earnings Call