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

Page 2 of 19

And last, we want to successfully migrate Ruth’s Chris under the Darden platform. The team leading the integration is wrapping up the planning stage and we’re about to embark on the hardest part, the actual conversion to new systems and processes. We know that it’s not easy, which is why we plan to complete it in phases over the next nine months to limit disruptions as much as possible. Looking across our entire portfolio, I am pleased with the quarter. Our strategy is working, we continue to grow share, strengthen margins and make meaningful investments in our business while returning capital to shareholders. And while I’m proud of our continued success, there is a larger purpose to what we do, and that is to nourish and delight everyone we serve.

Not just within the four walls of our restaurants, but in the communities that our guests and team members call home. September is hunger action month and we are uniquely positioned to help fight hunger. This marks the 20th anniversary of our Harvest program. Since 2003, our restaurants have collected excess nutritious food that was not served to guests and prepared it for weekly donation to local non-profit partners. Over the life of the program, we have donated the equivalent of more than 113 million meals. And for the past 13 years, we have partnered with Feeding America to help fight hunger. Over that time, the Darden Foundation has donated more than $16 million to support their network of more than 200 food banks. Last week, together with our partners, Penske Truck Leasing and Lineage Logistics, we added 10 more refrigerated trucks for mobile food pantry programs at 10 local food banks.

To date, we have added a total of 35 trucks across Feeding America food banks in 18 states. Our ability to make a difference in the fight against hunger would not be possible without the efforts of our 190,000 team members and their passion to nourish and delight everyone we serve. I’m grateful for everything you do to help make our company successful. Now I will turn it over to Raj.

Raj Vennam: Thank you, Rick, and good morning, everyone. Total sales for the first quarter were $2.7 billion, 11.6% higher than last year, driven by the addition of 77 company-owned Ruth’s Chris Steakhouse restaurants, same restaurant sales growth of 5% and 46 legacy Darden net new restaurants. Our same-restaurant sales for the quarter outpaced the industry by 410 basis points and same-restaurant guest counts exceeded the industry by 430 basis points. First quarter adjusted diluted net earnings per share from continuing operations were $1.78, an increase of 14.1% from last year’s reported net earnings per share. We generated $388 million of adjusted EBITDA and returned approximately $300 million of capital to our shareholders with $159 million in dividends and $143 million of share repurchases.

As we look at pricing and inflation during the quarter, we had total pricing of approximately 6%, which was 300 basis points above total inflation of roughly 3%. Now looking at our margin analysis compared to last year. Food and beverage expenses were 130 basis points lower, driven by pricing leverage. While beef inflation continues to track in line with our expectations, most other categories are seeing slight favorability. As a result, total commodities inflation of approximately 1% was better than our expectations. Restaurant labor was 40 basis points better than last year, driven by productivity improvements. We expected these productivity improvements to start materializing in the second quarter, but we began realizing them sooner. Pricing and labor inflation were roughly equal at 6%.

Page 2 of 19