Darden Restaurants(US:DRI)2024-09-19 17:01Financial Data and Key Metrics Changes - In Q1 2025, the company generated $2.8 billion in total sales, a 1% increase from the previous year, driven by the addition of 42 net new restaurants, despite a negative same-restaurant sales decline of 1.1% [21] - Adjusted diluted net earnings per share from continuing operations were slightly below last year at $1.75, with adjusted EBITDA of $392 million [21][23] - The company delivered industry-leading margins, generating more adjusted EBITDA than the prior year, highlighting the durability and cash generation of its business model [20] Business Line Data and Key Metrics Changes - Olive Garden's total sales decreased by 1.5% due to negative same-restaurant sales of 2.9%, underperforming the industry benchmark by 40 basis points [24] - LongHorn Steakhouse saw total sales increase by 6.5%, driven by same-restaurant sales growth of 3.7%, outperforming the industry by 620 basis points [24] - The Fine Dining segment's total sales increased by 2%, but same-restaurant sales were negative, reflecting challenges in the fine dining category [25] Market Data and Key Metrics Changes - The industry experienced a same-restaurant sales decrease of 2.5% and guest counts decreased by 5.4% during the fiscal first quarter [4] - The company's same-restaurant sales were 140 basis points better than the industry, and same-restaurant guest counts exceeded the industry by 160 basis points [21] Company Strategy and Development Direction - The company continues to focus on its four competitive advantages and a back-to-basics operating philosophy, emphasizing culinary innovation, attentive service, and engaging atmosphere [5][6] - A new partnership with Uber for delivery services is being piloted at Olive Garden, aiming to enhance the takeout experience while maintaining competitive advantages [16][18] - The company plans to highlight value through marketing, including limited-time offers, while avoiding deep discount promotions that could harm long-term health [55][57] Management's Comments on Operating Environment and Future Outlook - Management noted a significant step down in traffic beginning with the 4th of July holiday, but sales trends rebounded in August, resulting in flat same-restaurant sales for that month [20] - The company is confident in its ability to navigate challenging environments and believes its long-term strategy remains effective [26] - Management acknowledged the need to improve service speed and meal pacing to meet changing consumer expectations [11][36] Other Important Information - The company reaffirmed its guidance for the fiscal year, taking into account actual performance year-to-date and ongoing initiatives [25] - The acquisition of Chuy's is on track to close in mid-October, with expectations that it will be neutral to adjusted earnings per share for the fiscal year [26] Q&A Session Summary Question: Impact of Uber partnership on Olive Garden - Management expects significant incrementality from the Uber partnership, with a two-year exclusive agreement, but is currently focusing on Olive Garden [28][29] Question: Sales improvement in September - Management noted that September saw improvements in sales, attributed to overall industry trends and internal strategies [30] Question: Service speed and meal pacing - Management emphasized the need to improve service speed to meet consumer expectations, indicating that this is a long-term initiative [35][36] Question: Advertising plans for delivery - Management does not plan to advertise on the Uber Eats platform but will utilize other marketing channels to promote delivery options [40] Question: Fine dining segment challenges - Management indicated that the fine dining segment is facing challenges due to changing consumer spending patterns and competition [48][49] Question: Olive Garden's competitive position - Management believes Olive Garden is not losing guests to discounting competitors, but rather is focusing on highlighting its value proposition [66]