Darden Restaurants, Inc. (NYSE:DRI) Q1 2024 Earnings Call Transcript

Darden Restaurants, Inc. (NYSE:DRI) Q1 2024 Earnings Call Transcript September 21, 2023

Operator: Welcome to the Darden Fiscal Year 2024 First Quarter Earnings Call. Your lines have been placed on listen-only until the question-and-answer session. [Operator Instructions] This conference is being recorded. If you have any objections, please disconnect at this time. I will now turn the call over to Mr. Kevin Kalicak. Thank you. You may begin.

Kevin Kalicak: Thank you, Daryl. Good morning, everyone, and thank you for participating on today’s call. Joining me today are Rick Cardenas, Darden’s President and CEO; and Raj Vennam, CFO. As a reminder, comments made during this call will include forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. These statements are subject to risks and uncertainties that could cause actual results to differ materially from our expectations and projections. Those risks are described in the company’s press release, which was distributed this morning and in its filings with the Securities and Exchange Commission. We are simultaneously broadcasting a presentation during this call, which is posted in the Investor Relations section of our website at darden.com.

Today’s discussion and presentation include certain non-GAAP measurements, and reconciliations of these measurements are included in the presentation. Looking ahead, we plan to release fiscal 2024 second quarter earnings on Friday, December 15, before the market opens, followed by a conference call. During today’s call, any reference to pre-COVID when discussing first quarter performance as a comparison to the first quarter of fiscal 2020. Additionally, all references to industry results during today’s call refer to Black Box Intelligence’s, casual dining benchmark, excluding Darden, specifically Olive Garden, LongHorn Steakhouse and Cheddar’s Scratch Kitchen. During our first fiscal quarter, industry same-restaurant sales increased 0.9% and industry same-restaurant guest counts decreased 4.2%.

This morning, Rick will share some brief remarks on the quarter, and Raj will provide details on our financial results. Now, I’ll turn the call over to Rick.

Rick Cardenas: Good morning, everyone. Thanks, Kevin. We had a strong quarter as we continued to outperform the industry benchmarks for same-restaurant sales and traffic. For the quarter, total sales were $2.7 billion, an increase of 11.6% and adjusted diluted net earnings per share were $1.78. We also opened 10 new restaurants in nine different states during the quarter. Our ability to drive profitable sales growth is a testament to the strength of our business model and adherence to our strategy. We continue to strengthen and leverage our four competitive advantages of significant scale, extensive data and insights, rigorous strategic planning, and a results-oriented culture, while our restaurant teams remain intensely focused on executing our back-to-basics operating philosophy, anchored in food, service and atmosphere.

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Q&A Session

This focus on being growing with the basics continues to drive strong guest satisfaction. In fact, our internal guest satisfaction metrics remain at or near all-time highs across all our brands. Additionally, several of our brands continue to rank number one among major casual dining brands in key measurement categories within Technomic’s industry tracking tool, including LongHorn Steakhouse for food quality and taste, and Cheddar’s Scratch Kitchen for value. Our team members bring our brands to life each day, and we know engaged team members are vital to creating great guest experiences. That’s why our brands are focused on leveraging their unique cultures to strengthen team member engagement. For example, LongHorn Steakhouse created the Grill Masters Legends program that honors Grill Masters, who have grilled more than 1 million stakes throughout their career, which typically takes more than 20 years for a team member to accomplish.

Five Grill Masters Legends were honored during the quarter, bringing the total to 25 team members, who have received this recognition. Also during the quarter, Yard House completed its first Best On Tap competition. Known for having more than 130 beers on-tap, Yard House tested its bar tenders from every restaurant, giving them the opportunity to showcase their beverage knowledge, parting expertise and service skills. Congratulations to this year’s winner, Alyssa Hurley from the Yard House in Willow Grove, Pennsylvania, who was named Best On Tap. Programs like these give us an opportunity to celebrate team members who play a critical role in the guest experience and who serve as torchbearers for their brand culture. One of the most significant ways our brands drive culture is through their annual leadership conferences, which provide the opportunity to get in front of every general manager and managing partner across all our restaurants to discuss the plans for the year and generate excitement among our operators.

I was pleased to see the high levels of engagement and strong alignment on what our restaurant teams must do to continue creating exceptional guest experiences across each of our iconic brands. To further strengthen our brands, we are focused on highlighting what makes each one unique. That’s why when it comes to marketing, any activity our brands undertake is evaluated through three filters. First, it needs to elevate brand equity by bringing the brand’s competitive advantages to life. Second, it should be simple to execute. We will not jeopardize all the work we have done to simplify operations, which allows our teams to consistently deliver memorable guest experiences. And finally, it will not be at a deep discount. We are focused on providing great value to our guests, but doing so in a way that drives profitable sales growth.

A great example of this activity was the Capital Grille’s, Generous Poor event that took place during the quarter. This specially curated wine experience allows guests to sample award-winning wines that pair with items on the Capital Grille menu. And in the second quarter, Olive Garden is bringing back Never Ending Pasta Bowl, which brings to life its competitive advantage of Never Ending Abundant Craveable Italian food. Olive Garden’s eClub members received a special invitation to begin enjoying NEPV this week. This guest favorite returns for everybody on Monday and will be offered at the same price point as last year. Turning to Ruth’s Chris. Since the day, we announced the completion of the acquisition, we have been guided by three key objectives.

First, we want to preserve the team member experience and the brand’s unique culture. Ruth’s Chris has many long-tenured team members and we are committed to ensuring this is a people focused process. The team is engaged and we have strong buying across the executive and operations leadership levels, all of which helps ensure a smooth transition. Next, we want to maintain and even strengthen the guest experience. Ruth’s Chris is an incredibly strong brand and it ranks as one of the top brands across multiple metrics within Technomic’s industry tracking tool. We now expect to realize more synergies than we originally anticipated and we plan to reinvest some of them in the guest and team member experience. Raj will provide more details during his remarks.