Darden Restaurants Inc Q3 2025 Earnings Call Summary

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

Question: Jon Tower - Citi - Analyst : I'm just curious, I appreciate all the color on the quarter-to-date across the brands. I'm curious if you could maybe speak to whether you believe that the improvement you're seeing is more related to your own brands or the industry. And specifically, you mentioned on the last earnings call that you had started to see improvement in visits and guests making between [50,000 to 100,000] a year. I'm just curious how that played out in your fiscal third quarter and perhaps what's happening quarter to date to the extent, if you can provide some color?

Question: David Palmer - Evercore ISI - Analyst : Just a follow-up on that. To what degree do you think there was a flu impact in the quarter? But then separately, when it comes to Casual Dining, one of the things we're noticing is it's holding up remarkably well given what we're seeing in other segments within restaurants. I don't know if you're noticing that in your own insights work and thinking about reasons for that. I mean, I'm not sure we can make too much sense of 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. MARCH 20, 2025 / 12:30PM, DRI.N - Q3 2025 Darden Restaurants Inc Earnings Call And then lastly, I just wanted to ask you about your plans on M&A. Are they shifting now that you're further along with Ruth's and seeing what's happening with perhaps some valuations elsewhere?

Question: Eric Gonzalez - KeyBanc Capital Markets Inc. - Analyst : Maybe a quick one on the Uber partnership. I think you mentioned at the end of the fiscal year, you'd be launching a more expansive awareness campaign that included TV advertising. I know you said it'd be partially funded by Uber. But can you level set our expectations on whether we should expect a meaningful uptick in advertising spend? And regarding your risk contributions, I'm sure you don't want to give specifics, but I was wondering how long that subsidy will last?

Question: Eric Gonzalez - KeyBanc Capital Markets Inc. - Analyst : Is there anything you can tell us about '26 and the implications there?

Question: Brian Bittner - Oppenheimer & Co., Inc. - Analyst : Raj, as it relates to the EPS guidance for fourth quarter, the range implied, I think based on our math, it seems to imply flattish operating margins. So is that correct? And if so, it just seems a tad conservative with the comp sales being over 3%. So can you unpack the operating margins in the fourth quarter for us a little bit more?

Question: Brian Bittner - Oppenheimer & Co., Inc. - Analyst : Okay. And just my follow-up on Olive Garden delivery. Last time you spoke with us, you talked about delivery mixing as about 1.5% of sales in the initial pilot units. Of course, that was with no marketing support. Now you have delivery fully rolled out across your asset base. Can you update us on any additional learnings and/or surprises, particularly now that you have some digital marketing support, some awareness around the channel? Just any incremental update on that would be awesome. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MARCH 20, 2025 / 12:30PM, DRI.N - Q3 2025 Darden Restaurants Inc Earnings Call

Question: Sara Senatore - BofA Global Research - Analyst : Just I guess two questions, one sort of a follow-up. The first is, if you could just talk about bringing back the Buy One, Take One. Is that a response to something you're seeing in the operating competitive environment? Or I think in the past, recently you've talked about just kind of increasing the pace of news. So just trying to understand if things have changed and that's what's prompted that. And then my second question is actually maybe not a follow-up. It's about the new prototypes for some of these other businesses. I know you said that they were performing above plan, but are the volumes consistent with the standard larger prototypes? Just as we think about accelerating unit growth, does that translate into a consistent level of accelerating revenue growth?

Question: Brian Harbour - Morgan Stanley - Analyst : The Olive Garden kind of sales momentum you talked about, is -- Rick, I mean, you cited the Uber mix for some of the pilot stores. But is that a material part of it yet for the overall system? Would you attribute it more to just some of the menu news so far? I mean, how would you kind of characterize what has driven Olive Garden in recent months?

Question: Brian Harbour - Morgan Stanley - Analyst : Okay. Great. Raj, can you talk a little bit more about inflation and just -- I guess I was surprised that sort of on the food side, that was still favorable in the quarter. We have seen some items move back up. But what specifically is driving in the fourth quarter? How does that kind of shape how you think about -- as we enter '26? I know you're not going to talk about that yet. But are you seeing pretty stable labor inflation? Do you think that, that could perhaps ease a bit? Or where are we on that front?

Question: Dennis Geiger - UBS Equities - Analyst : Rick, I wanted to ask a little bit more on value at Olive Garden and specifically maybe the customer value stores for the brand that you've seen. Any kind of notable uptick just in recent months as you've kind of leaned in on some attractive price points on new items, et cetera. Anything to highlight there, especially in the environment that we're in?

Question: Dennis Geiger - UBS Equities - Analyst : That's helpful. And then just on Uber, just anything on incrementality. Recognizing it's very early days, but have you kind of observed anything or have any additional thoughts maybe on what incrementality may look like, even though it's early days?

Question: David Tarantino - Robert W. Baird & Co., Inc. - Analyst : Raj, I was hoping you could tell us what Darden's exposure to potential tariffs might be, I guess, how would you frame up that exposure? And if you are exposed on some ingredients, do you have a plan to address that if the tariffs actually go into play?

Question: Jeffrey Bernstein - Barclays Capital Inc - Analyst : Rick, I was just wondering if you could give some bigger picture perspective. I mean, there's been concerns that the inclement weather and the holiday shifts the last few months may be masked a slowdown in underlying consumer spending, which I don't think would surprise too many people with consumer confidence falling. And historically, that's closely correlated to restaurant sales. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MARCH 20, 2025 / 12:30PM, DRI.N - Q3 2025 Darden Restaurants Inc Earnings Call But to the contrary, I think it's encouraging to hear you noted continued improvement in March. I'm just wondering broadly for yourselves or the industry, why do you think that is? It seems like there's lots of noise, lots of headlines, D.C. and otherwise, that would have been a headwind for the industry. And I think most were bracing for that type of commentary from you guys. So I was wondering why you think trends have actually gotten better more broadly? And then I had one follow-up.

Question: Jeffrey Bernstein - Barclays Capital Inc - Analyst : Understood. And then just on the Fine Dining segment, once again, well ahead of expectation. Do you see that coming from any particular brand? Or what does that tell you about the high end and corporate consumer spending relative to the other income brackets? Is there anything unusual to note there? Or is that just a rebound perhaps on the higher income?

Question: Tyler Prause - Stephens Inc. - Analyst : [This is Tyler Prause here on for Jim]. A bit of a follow-up to Eric's question. I was going to see if you could talk higher level about how the marketing program might be different than, say, pre-COVID times. Any color about change in mix regarding linear TV, connected TV, social media or influencer marketing would be helpful. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MARCH 20, 2025 / 12:30PM, DRI.N - Q3 2025 Darden Restaurants Inc Earnings Call

Question: Tyler Prause - Stephens Inc. - Analyst : Great. That's super helpful. And just one kind of follow-up to the tariff question. Again, very early, but could you add any incremental color about your exposure to kitchen equipment sourcing or building material exposure will be helpful.

Question: Lauren Silberman - Deutsche Bank - Analyst : Congrats on the recent performance. If I could just start with the same-store sales guide for the fourth quarter above 3%. Is that where you're currently running and you assume current trends hold? Or are you embedding any change in comp as Olive Garden launches Buy One, Take One, delivery and then just given the compares to the rest of the quarter? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MARCH 20, 2025 / 12:30PM, DRI.N - Q3 2025 Darden Restaurants Inc Earnings Call

Question: Lauren Silberman - Deutsche Bank - Analyst : Okay. Fair. And then on LongHorn, the Steakhouse category has been very strong for a while now. Are you seeing any changes in underlying demand for the category, changes in consumer behavior? Mentioned quarter-to-date outperformance gap to the industry has accelerated. What do you think is driving that?

Question: Danilo Gargiulo - Bernstein - Analyst : Rick, can you give us some comments on improvement of speed of service that you were mentioning a couple of quarters ago as a potential traffic unlock? And where are you in the journey? And can you give examples of maybe new opportunities that you have identified? Or do we just need some change management to inflect positively?

Question: Danilo Gargiulo - Bernstein - Analyst : Excellent. And then speaking of progress, it was a very successful rollout Uber Direct. And now you're considering Cheddar's. So strategically, what parameters are you considering to select which brands may eventually potentially partner with Uber? And again, strategically, what would you need to see in order to potentially consider the Uber platform as a marketplace as opposed to just partnering through Uber Direct?

Question: Peter Saleh - BTIG - Analyst : I just wanted to come back to the Uber Eats conversation. You mentioned 40% to 50% incrementality. And I recognize it's still early, but can you comment on these customers, are they spending more? Are they spending less? Is it the same? Just trying to understand their behavior given the incrementality that you're seeing. And then I have a quick follow-up as well. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MARCH 20, 2025 / 12:30PM, DRI.N - Q3 2025 Darden Restaurants Inc Earnings Call

Question: Peter Saleh - BTIG - Analyst : Great. That's very helpful. And then just on the labor side, just curious if you can comment a little bit on availability, if you've seen any changes in availability and the ability to hire new team members recently. Has anything changed on that front?

Question: Jeff Farmer - Gordon Haskett - Analyst : At the beginning of the call, you did point out that rather large divergence between the average segment same-store sales and guest counts versus sort of the median same-store sales and guest counts. I'm just curious what your read through is on the divergence and what's causing that pretty outsized divergence.

Question: Jeff Farmer - Gordon Haskett - Analyst : Okay. That's helpful. And then just one unrelated question. You touched on it, but consumer confidence diving, falling, however you want to sort of phrase it. And you pointed to a casual dining consumer that doesn't seem to be too impacted yet. So from my perspective, that's fairly surprising in the context of basically 20 years of segment precedent. So given that sort of more resilient casual dining consumer than you might expect in sort of an increasingly challenging consumer backdrop, what do you think is driving that demand resilience beyond consumer just wanting to get out of their house? What is driving that demand resilience from your perspective?

Question: John Ivankoe - JPMorgan Chase & Co. - Analyst : Two questions, if I can. First, as we're increasingly in personalized digital marketing, does it make sense for the brands to kind of subtly introduce some promotions? I'm going to use the word discounting, but call to action for specific customers that can only be used by that specific customer is kind of the first point. And I don't know if you want to bring the sub-$50,000 household customer back specifically, but maybe something targeted to them or other types of customer cohorts that you think you have opportunity. So that's the first question. And then secondly, and I think it's related, Olive Garden margins have gotten to be very strong. I mean, certainly, if we were to go back, Rick, 5, 10, 20 years ago, probably stronger than we thought they would be. So what's really the fair earning concept level margin for the Olive Garden business? I mean, if sales dictated, I mean, would you take it all the way to 25%, for example? Or does it make sense to start to think about reinvesting in the customer and employee experience to drive profitability more through volumes?

Question: Gregory Francfort - Guggenheim Securities LLC - Analyst : I had a follow-up to Sara's question just on the smaller box formats at Cheddar's and Yard House. You used to open up, I think, 5 to 10 stores a year at those brands a few years ago. You're opening up only a couple. Do you think you can get back there? And is that something that can happen in the next couple of years? And do you think that changes the unit growth algorithm at all? Just your thoughts on that.

Question: Jim Sanderson - Northcoast Research - Analyst : I wanted to go back to the quarter performance sales mix for the $12.99 price point given the addition of the Manicotti LTO that, I think, competed with some of the premium-priced LTOs you also introduced. I wanted to see how that impacted sales mix.

Question: Jim Sanderson - Northcoast Research - Analyst : Okay. So that went down a bit. I think it was around 10% in the past. So you had the consumer shift up a little bit. Is that the right way to look at it?

Question: Jim Sanderson - Northcoast Research - Analyst : All right. And then on the $14.99 promotion, could you remind us how that's comparing to what was in the marketplace last year? And what gives you confidence that, that $14.99 is the right price point for that promotion?

Question: Brian Vaccaro - Raymond James & Associates, Inc - Analyst : I just wanted to piggyback on Jeff's question just about the average versus median performance. And I guess if we can, if we could set aside the impact of the big outlier, do you think we're also seeing a broader widening between the winners and losers in the category? And if so, I'm curious what do you contribute that to? I'm kind of just thinking about the question of are the benefits of consistently delivering a good experience sort of snowballing with the consumer? Or is there any evidence that the underperforming players are cutting even deeper and sort of on that kind of negative feedback loop? Or maybe there's something to mention on sort of the change versus independents front? And I have a quick follow-up. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MARCH 20, 2025 / 12:30PM, DRI.N - Q3 2025 Darden Restaurants Inc Earnings Call

Question: Brian Vaccaro - Raymond James & Associates, Inc - Analyst : Just back on the fiscal fourth quarter guidance as well. I just don't want to get too prescriptive on the March trend, but I guess as you think about the next few months, is there anything we should be mindful of as it relates to comparisons or calendar shifts? Or any other context you wanted to put around kind of how you came up with the above 3%? And I understand it's a choppy volatile environment, there's a lot of uncertainty, maybe it's just conservatism. But just any incremental color on that fiscal fourth quarter guide.

Question: Christine Cho - Goldman Sachs - Analyst : So I had a quick follow-up on the Buy One, Take One deal. So could you remind us the impact the deal had on traffic or check size five years ago when you last ran the promotion? And if successful, would this be something you would consider on a more longer-term basis or consider rolling out in some of your other brands as well?