Darden Restaurants Inc Q2 2026 Earnings Call Transcript

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

Question: Brian Bittner - Oppenheimer & Co Inc - Analyst : Good morning, and happy holidays, and congratulations on solid top-line results. First question is on the lighter portions menu and the strategy as you rolled that out to 100% of the Olive Garden restaurants here in January. How impactful do you think this will be to sales just based on what you've seen so far? Is it something that we're actually going to be able to identify here from the outside? Or is it more of an impact to internal metrics, like value perception, et cetera?

Question: Brian Bittner - Oppenheimer & Co Inc - Analyst : Thanks for that. And my follow-up is on labor, in the margins on labor. Over the last couple of quarters, you've seen some labor margin deleverage despite growing comps over 4% the last couple of quarters. What do you attribute this to? Because historically, you've been able to better leverage labor margins on this type of comps. Is there any specific investments going into labor or mix issues within the brands worth pointing out? And how are you thinking about the ability to maybe better leverage labor margins moving forward?

Question: Brian Harbour - Morgan Stanley - Analyst : Yeah. Thanks, good morning, guys. Raj, can you maybe just talk more about the beef piece in what kind of gives you the confidence that that starts to come down by 4Q?

Question: Brian Harbour - Morgan Stanley - Analyst : Okay. That's helpful. With first-party delivery, is 4% of sales, is that kind of where you expected to be at this point? Or I guess what else do you think could continue to push that higher, if you, in fact, want that? Are you still seeing sort of sequential increases in delivery mix?

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

Question: Jeffrey Bernstein - Barclays Services Corp - Analyst : Great. My first question is just on the comp commentary. Just I think, Raj, you mentioned that the favorable gap to the industry improved through fiscal 2Q. I was wondering whether you would assume or you are assuming that that continues. Maybe you have some quarter-to-date third quarter numbers. But your assumption for the back half of the year in terms of maybe a further widening of that gap? And then I had a follow-up.

Question: Jeffrey Bernstein - Barclays Services Corp - Analyst : Understood. And then the follow-up is just on the Uber addition. It sounds like Yard House is next up, third in line there for -- behind Olive Garden and Cheddar's. I think you mentioned it's not likely to be as meaningful of a contributor as it is more of a bar type concept. But just wondering where LongHorn sits or where -- I know you don't dictate it, so where perhaps management of LongHorn specifically think about it. It would seem like that's the next big brand that could have more of a meaningful contribution, but offsetting that, I know often discuss that maybe their food doesn't travel as well. So just wondering your updated thoughts in terms of whether LongHorn could add 1P delivery.

Question: Sara Senatore - Bofa Merrill Lynch Asset Holdings Inc - Analyst : Thank you. I was interested just on the topic of value. It sounds like that's resonating even actually in Fine Dining. You talked about these sort of combos and these -- and the $55 at Ruth's. I guess, are you bringing in different customers to the -- across the brands? I mean I know you mentioned maybe some softness in below $50. But if I just think about while the pricing may be up low single digits, there's presumably some negative mix and the sort of entry-level price points are lower across -- it sounds like across maybe all your brands. So are you seeing different customers come in for that? Or is it just more increasing frequency among the customers you do have as you offer these kinds of very accessible price points? LSEG STREETEVENTS | www.lseg.com | Contact Us consent of LSEG. 'LSEG' and the LSEG logo are registered trademarks of LSEG and its affiliated companies. DECEMBER 18, 2025 / 1:30PM, DRI.N - Q2 2026 Darden Restaurants Inc Earnings Call

Question: Sara Senatore - Bofa Merrill Lynch Asset Holdings Inc - Analyst : Right. Understood. And then just on a follow-up, Raj, you mentioned, I think, the demand has declined about 14% in November for beef. I guess -- do you -- are there certain kind of rules of thumb about what that would mean for beef prices? Just as I think about it, it seems like this is the first time we've really seen like retail demand pull back. So just trying to understand how that translates into kind of the market prices for beef.

Question: Peter Saleh - BTIG LLC - Analyst : I just wanted to follow up on the conversation around the marketing efforts around Uber Direct. I think you guys mentioned you didn't do any marketing this quarter. Can you just talk about that decision? And what's the game plan in the back half of the year? Are you planning on increasing marketing around that effort? Any thoughts on that would be helpful.

Question: Peter Saleh - BTIG LLC - Analyst : Great. And then just following up, my last question, on tariffs. Is there any sort of update on the impact there, tariffs, on either commodities or on development costs? I think in the past, you had mentioned there was maybe a slight impact on development cost from tariffs. Just any update on that front would be helpful too.

Question: Jon Tower - Citibank Cameroon SA (Douala Branch) - Analyst : Maybe going back the small plates that you're rolling out now and getting it done by January. I'm just curious, have you tested any [media] behind it? What's your intention behind doing that? Obviously, you're seeing a bit of negative mix now that you've rolled it out to some of the stores. So how are you thinking about communicating it to guests? And obviously, there could be some pressure on the business if you were to market it to them. So how are you thinking about the trade-off there?

Question: Jon Tower - Citibank Cameroon SA (Douala Branch) - Analyst : Okay. And is this something that will be available to delivery, so 1P guests as well?

Question: Jon Tower - Citibank Cameroon SA (Douala Branch) - Analyst : Okay. Cool. And then just on the unit growth update, it's nice to see you guys taking up the numbers by another 5 potentially for the year. Can you just give us some color on where you're seeing those numbers or what brands it's coming from? And then is this just a pull forward from what you were thinking for fiscal '27?

Question: Jon Tower - Citibank Cameroon SA (Douala Branch) - Analyst : Happy holidays.

Question: Jeff Farmer - Gordon Haskett Capital Corp - Analyst : With all the pushes and pulls, how are you guys thinking about the fiscal '26 restaurant level margin versus fiscal '25?

Question: Jeff Farmer - Gordon Haskett Capital Corp - Analyst : Okay. And then with your top line exceeding expectations for the second consecutive quarter, I appreciate that there's some incremental costs or greater than expected costs that you guys are incurring. But are there areas where you're increasing reinvestment relative to prior expectation with that better top line performance?

Question: Dennis Geiger - UBS AG - Analyst : I just wanted to ask the latest on the operational efforts or the speed of service efforts. I know it's a longer-term initiative that you've touched on previously. But just any updates on the implementation of that or how you're thinking about the plan?

Question: Dennis Geiger - UBS AG - Analyst : Great. Just to follow up on that. I know the genesis of the plan is to improve the customer experience, et cetera, more so than table terms, I believe. But an obvious benefit over time if this goes well, presumably is your table terms move notably and maybe there's a traffic benefit that you see from this? Is that fair? LSEG STREETEVENTS | www.lseg.com | Contact Us consent of LSEG. 'LSEG' and the LSEG logo are registered trademarks of LSEG and its affiliated companies. DECEMBER 18, 2025 / 1:30PM, DRI.N - Q2 2026 Darden Restaurants Inc Earnings Call

Question: Andrew Barish - Jefferies - Analyst : Could you give us just kind of a Cheddar's brand update? And not a lot of call out there, I imagine there's some pressure just given the success of some big bar and grill concepts right now. But just kind of where that stands and what you might look at as a key for more unit growth there?

Question: Andrew Barish - Jefferies - Analyst : Appreciate it. And then Raj, can you just go through -- I missed some of the Olive Garden, the components of same-store sales?

Question: Christopher O'Cull - Stifel, Nicolaus & Company Inc - Analyst : Rick, is there a plan to take the smaller portion approach with any of the other brands?

Question: Christopher O'Cull - Stifel, Nicolaus & Company Inc - Analyst : Okay. And then just based on the company's research on GLP-1 usage, do you see a need to make any additional changes beyond the smaller portions to kind of accommodate these consumers?

Question: Andrew Strelzik - Bank of Montreal - Analyst : I wanted to ask about your comments that the (inaudible) delivery was tracking with the broader off-premise business. Does that surprise you at all? I mean it's supposed to be a different guest, it's as incremental as it is earlier in the life cycle. Just kind of curious for your perspective on that.

Question: Andrew Strelzik - Bank of Montreal - Analyst : Okay. All right. And then just curious on the change in CapEx, guys. Is that all the new units? And with the updated new unit guide, you're close to the low end of your updated range? What's the realistic time line to start pushing kind of higher towards the higher end of that range?

Question: Danilo Gargiulo - Sanford C Bernstein & Co LLC - Analyst : Stepping back and looking at the long term, you have been outperforming the industry for quite some time. And I was wondering if you were to decompose this outperformance versus the industry, which cohorts are you winning the most? And I don't mean just by income level, but also maybe occasions, age. And as you're maturing your brands, how do you see this outperformance to continue?

Question: Danilo Gargiulo - Sanford C Bernstein & Co LLC - Analyst : And then I want to follow up on your comment on GLP-1. Specifically, I think your brands have enough flexibility within your menu to offer different options for consumers and solve different needs. I was wondering if you can comment also on how the spending behavior is changing, not just on the (inaudible) mix, but also on the eating behavior, whether you see like a greater mix of protein, fewer desserts and sides? And what's your best estimate on how this is going to be evolving over time? And how would be impacting the overall spending behavior in the industry?

Question: Gregory Francfort - Guggenheim Securities LLC - Analyst : Raj, can you just maybe give us an update on where turnover sits either for Olive Garden or your total system for labor? And do you think we're in a different environment now than we were over the last few years? And what that might look like going forward?

Question: Brian Vaccaro - Raymond Jame - Analyst : I just had a question on Olive Garden. And Rick, you spoke to the strength of Never Ending Pasta. I was just curious, was the sales mix up on NEP year-on-year? And are you seeing any changes in the mix, kind of the entry-level price point versus the higher tiers? And could you comment also just on the lighter portions? I think the sales mix was running mid-single digits last time we heard. Have you seen that increase the longer it's been in the market?

Question: Brian Vaccaro - Raymond Jame - Analyst : All right. That's helpful. And then Raj, just a quick one on G&A, if I could. It came in lower than we were expecting here in the current quarter. I know there's quarter-to-quarter volatility. But could you just give a quick update on what -- where you see G&A shaking out within your fiscal '26 guidance?

Question: James Sanderson - Northcoast Research - Analyst : Just wanted to follow up on the lighter portions at Olive Garden. Anything to call out that's notable about the demographics of the consumer that is purchasing the slight portion, whether by gender, household income, daypart, anything like that?

Question: James Sanderson - Northcoast Research - Analyst : Right. And just another quick follow-up. Anything to comment on with respect to holiday bookings? Are they exceeding your expectations for the current time frame, maybe in line? Just anything you would provide as a test on how the consumer is behaving?

Question: John Ivankoe - JPMorgan Chase & Co - Analyst : So the question is on immigration broadly, and I was hoping we could touch on a couple of maybe related topics to that. Firstly, I heard the comments, obviously, that labor inflation is now running lower than even it was pre-COVID. So that must mean that your supply of labor overall is very good. But I wonder if there's anything happening kind of below the surface that maybe in certain restaurants, certain pockets LSEG STREETEVENTS | www.lseg.com | Contact Us consent of LSEG. 'LSEG' and the LSEG logo are registered trademarks of LSEG and its affiliated companies. DECEMBER 18, 2025 / 1:30PM, DRI.N - Q2 2026 Darden Restaurants Inc Earnings Call that labor markets have kind of turned over, but you've just been able to replace the people that perhaps would have left or maybe gotten competed away? So that's kind of the first question. And then secondly, make a comment, if you can, in terms of pockets of demand. I think I remember you're using the word that there may have been some ripples of kind of demand being affected in various markets. So I wanted to see if there was a change there. And then the third point, there's a comment made on beef packers that maybe were constraining some supply. I wonder -- and this just actually came into mind when you said, that if there may be kind of an immigrant worker situation on the packer side, if that could potentially be a leading indicator for other types of industry. So just overall your view on those broadly important topics.

Question: Hyun Jin Cho - Goldman Sachs - Analyst : Follow-up to the earlier question, the casual dining outperformance. With many other segments kind of playing catch-up on value, could you kind of talk about your plans to better communicate value to consumers? Any new or expanded marketing approaches you are planning for the back half? And additionally, I think, Rick, you mentioned that you have no imminent plans to market the lower portion size menus. But what will make you or mind?