Darden Restaurants(DRI) - 2026 Q2 - Earnings Call Transcript

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]