Core Insights - Olive Garden's sales indicate a growing consumer demand for value and pasta offerings [1][6] - Darden Restaurants reported a significant increase in quarterly sales, driven by the popularity of its $13.99 "never ending pasta bowl" special [1][6] Sales Performance - Darden posted $3.1 billion in sales for its fiscal second quarter, slightly exceeding analyst expectations [4] - Adjusted earnings per share were $2.08, just 1 cent below estimates, with same restaurant sales increasing by 4.3% across Darden's portfolio [4] - Olive Garden and LongHorn Steakhouse reported same restaurant sales gains of 4.7% and 5.9%, respectively, both surpassing forecasts [4] Consumer Trends - There is a notable trend of middle to higher-income customers seeking better deals at restaurants, as indicated by Olive Garden's increasing customer base [2][3] - The restaurant industry is witnessing signs of consumer strain, with a focus on value offerings becoming more prominent [3] Future Outlook - Darden plans to continue emphasizing value, including the introduction of lower-priced, smaller portion options at Olive Garden [5] - The company raised its full-year revenue outlook for the third consecutive quarter, now expecting sales growth of 8.5% to 9.3% [5] - Darden maintained its adjusted EPS forecast at $10.50 to $10.70 despite warnings that higher prices could impact profits [5]

Core Insights - Darden Restaurants Inc. reported sales exceeding expectations for its second fiscal quarter, with positive same-restaurant sales across all segments [1] - The company achieved a sales increase of 7.3% to $3.1 billion, with overall same-store sales up by 4.3%, significantly outperforming the benchmark of 1.3% [2] Segment Performance - LongHorn Steakhouse, with 601 units, led the sales growth with a 5.9% increase in comparable sales and improved customer satisfaction scores, particularly in the quality of steaks [3] - Olive Garden, the flagship chain with 936 restaurants, saw a same-store sales increase of 4.7%, driven by the successful promotion of the Never Ending Pasta Bowl [4] Delivery and Customer Engagement - The increase in delivery through Uber Direct contributed 4% to total sales for the quarter, attracting younger, affluent customers who value convenience and order more frequently [5] - The sales boost from delivery allowed Olive Garden to invest in its Lighter Portions menu, which is expected to be available systemwide by January 2026 [6] - Customers ordering from the Lighter Portions section experienced a double-digit increase in affordability perception and higher visit frequency, which is anticipated to enhance traffic over time [7]

Financial Data and Key Metrics Changes - The company generated $3.1 billion in total sales, a 7% increase compared to the previous year, driven by same restaurant sales growth of 4.3% and the addition of 30 net new restaurants [15][16] - Adjusted diluted net earnings per share from continuing operations were $2.08, up 2.5% from last year [16] - Adjusted EBITDA was $466 million, with a restaurant-level EBITDA margin of 18.7% [16][17] Business Line Data and Key Metrics Changes - Olive Garden reported a 5.4% increase in total sales, with same restaurant sales growth of 4.7% and a segment profit margin of 21.8% [18][19] - LongHorn Steakhouse achieved a 9.3% increase in total sales, with same restaurant sales growth of 5.9% and a segment profit margin of 16.2% [19][20] - The fine dining segment saw a 3.3% increase in total sales, with a segment profit margin of 14.8%, impacted by high beef costs [21] Market Data and Key Metrics Changes - The average same restaurant sales for the industry grew 1.3%, while guest counts decreased by 0.4% [4] - Darden's same restaurant sales exceeded the industry benchmark by 300 basis points, with performance in the top decile of the industry [16] Company Strategy and Development Direction - The company plans to open 65-70 new restaurants and has a total capital spending forecast of $750 million-$775 million for the fiscal year [22] - Darden continues to leverage its competitive advantages, including scale and brand portfolio, to manage costs and provide value to guests [6][26] Management's Comments on Operating Environment and Future Outlook - Management acknowledged commodity headwinds, particularly high beef prices, but emphasized a commitment to underpricing inflation to maintain guest value [15][23] - The company expects total sales growth for the year to be between 8.5%-9.3% and same restaurant sales growth of 3.5%-4.3% [22][23] Other Important Information - The company has seen a double-digit increase in affordability perceptions among guests ordering from the lighter portions menu at Olive Garden [9] - Management highlighted the importance of maintaining guest satisfaction and operational excellence during the busy holiday season [29] Q&A Session Summary Question: Impact of lighter portions menu on sales - Management indicated that the lighter portions menu will positively impact sales in the long term, with higher frequency among guests ordering these options [31][32] Question: Labor margin challenges despite sales growth - Management explained that labor margins improved in comparable restaurants, but total Darden level margins were affected by brand mix and the acquisition of Chuy's [34][35] Question: Olive Garden's same store sales guidance - Management anticipates a range of 2.5%-4% for the back half of the year, factoring in macroeconomic uncertainties and potential consumer spending benefits from fiscal stimulus [38][39] Question: Pricing strategy in relation to inflation - Management expects pricing to catch up to inflation by the fourth quarter, with a modest increase anticipated at LongHorn [40][41] Question: Confidence in beef price reduction - Management noted that beef prices peaked in the second quarter and are expected to ease due to increased production and demand changes [44][45] Question: Incrementality of first-party delivery - Management expressed confidence that incrementality from delivery will remain strong as it attracts younger, more affluent guests [50] Question: Marketing strategy for Uber Direct - Management did not conduct marketing for Uber Direct in Q2 but plans to evaluate future marketing efforts based on performance [96]

Financial Data and Key Metrics Changes - Total sales for the second quarter reached $3.1 billion, a 7% increase compared to the previous year, driven by same restaurant sales growth of 4.3% and the addition of 30 net new restaurants [13][17] - Adjusted diluted net earnings per share from continuing operations were $2.08, up 2.5% from last year [15] - Adjusted EBITDA for the quarter was $466 million, with an adjusted effective tax rate of 13.2% [15][17] Business Line Data and Key Metrics Changes - Olive Garden reported a 5.4% increase in total sales, with same restaurant sales growth of 4.7% and a strong segment profit margin of 21.8% [17][18] - LongHorn Steakhouse achieved a 9.3% increase in total sales, driven by same restaurant sales growth of 5.9% and a segment profit margin of 16.2% [18] - The fine dining segment saw a 3.3% increase in total sales, with a segment profit margin of 14.8%, impacted by high beef costs [19] Market Data and Key Metrics Changes - Average same restaurant sales for the casual dining industry grew 1.3%, while guest counts decreased by 0.4% [3] - Darden's same restaurant sales exceeded the industry benchmark by 300 basis points, with performance in the top decile of the industry [14][17] Company Strategy and Development Direction - The company plans to open 65-70 new restaurants in fiscal 2026, with total capital spending projected between $750 million and $775 million [20] - Darden continues to leverage its competitive advantages, including scale and a diverse portfolio, to manage costs and provide value to guests [4][24] - The company is focusing on long-term growth through strategic investments and maintaining a disciplined approach to capital stewardship [24][25] Management's Comments on Operating Environment and Future Outlook - Management acknowledged commodity headwinds, particularly high beef prices, but emphasized a commitment to underpricing inflation to provide value to guests [13][21] - The company expects total sales growth for the year to be between 8.5% and 9.3%, with same restaurant sales growth of 3.5% to 4.3% [20] - Management remains confident in the ability to grow sales and manage costs despite near-term margin pressures [21] Other Important Information - The company opened 17 new restaurants during the quarter, contributing to a total of 30 net new openings for the year [5] - The lighter portion menu at Olive Garden has seen a double-digit increase in affordability perceptions among guests, with plans for a system-wide rollout by January [8][17] Q&A Session Summary Question: Impact of the lighter portions menu on sales - Management indicated that while the lighter portions menu impacts internal metrics like value perception, it is expected to drive higher frequency among guests ordering these items [28][30] Question: Labor margin challenges despite sales growth - Management explained that labor margins improved in comparable restaurants, but total Darden level margins were affected by brand mix and the acquisition of Chuy's [31][32] Question: Olive Garden's same-store sales guidance - Management anticipates same-restaurant sales growth in the back half of the year to be around 2.5% to 4%, factoring in potential consumer spending benefits from fiscal stimulus [35][36] Question: Pricing strategy in relation to inflation - Management expects pricing to catch up to inflation by the fourth quarter, with a modest increase anticipated at LongHorn [38][39] Question: Consumer behavior and traffic trends - Management noted that higher income households are driving traffic growth, while there has been a slight pullback in lower income segments [49][50] Question: Marketing strategy for Uber Direct - Management did not conduct marketing for Uber Direct in Q2 but plans to evaluate marketing efforts in the back half of the year [81][82]