Q1 2024 Darden Restaurants Inc Earnings Call
Music
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.
To ask a question you may press star then one on your touchstone phone 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 Calica. Thank you. You may begin 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 Vinam 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 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 includes 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 15th, before the market opens, followed by a conference call.
During today's call, any reference to pre-COVID when discussing first quarter performance is a comparison to the first quarter of fiscal 2020.
Additionally, all references to industry results during today's call refer to black box intelligences, casual dining, Bensmart, excluding Darden, specifically Olive Garden, Longhorn Steakhouse, and Cheddar Scratch Kitchen.
During our first fiscal quarter, industry same restaurant sales increased 0.9 percent and industry same restaurant guest counts decreased 4.2 percent.
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.
Good morning everyone. Thanks Kevin. We had a strong quarter as we continue 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 9 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.
This focus on being brilliant with the basics continues to drive strong gas 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 Teknomix's industry tracking tool, including Longhorn Steakhouse for food quality and taste and Cheddar 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 Grillmaster Legends program that honors grillmasters who have grilled more than 1 million steaks throughout their career.
which typically takes more than 20 years for a team member to accomplish.
Five Grow Manchester Legends were honored during the quarter, bringing the total to 25 team members who have received this recognition.
Also during the quarter, Yardhouse completed its first Best on Tap competition.
Known for having more than 130 beers on tap, Yardhouse tested its bartenders from every restaurant, giving them the opportunity to showcase their beverage knowledge, bartending 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's 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 brand, 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've 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 Grills 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 Grill 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
Olive Garden's E-Club members received a special invitation to begin enjoying NEPB this week.
This guest favorite returns for everybody on Monday and will be offered at the same price point as last year.
Turning to 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.
Bruce Criss 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 buy-in 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 Teknomic'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.
Raja will provide more details during his remarks.
And last, we want to successfully migrate Ruth's CRIS onto 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 nonprofit 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 am grateful for everything you do to help make our company successful. Now I will turn it over to Raj.
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.
Last 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, full and average 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.
Fashion and 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%.
Restaurant expenses were 10 basis points favorable as leverage from higher sales more than offset Elevator repairs and maintenance expense
Marketing expenses were 20 basis points higher than last year, consistent with our plan, and including impacts from Ruth's Chris.
All of this resulted in rational level EBDOF 19%, 170 basis points higher than last year.
G&A expenses were 110 basis points above last year, driven by three primary factors.
First, higher incentive compensation due to significant growth in sales and EPS for the quarter and wrapping a very low incentive accrual in the first quarter of last year.
Second, approximately $9 million of stock-based compensation expenses
related to the immediate expensing of equity awards for retirement eligible employees.
And third, the addition of root squares.
Impairments were 30 basis points unfavorable to last year.
We're wrapping on a $5 million gain from last year, and we incurred $3 million of impairments related to a handful of closings anticipated for this year.
Interest expense increased 30 basis points versus last year due to the financing expenses related to the Ruthquiff acquisition.
And for the quarter, adjusted earnings after tax was 7.9% of sales flat to last year.
Now turning to our segment
Sales increased at Olive Garden and Longhorn driven by same restaurant sales and traffic growth.
This sales growth, along with labor productivity and higher overall pricing relative to inflation, drove segment profit margin increases of 230 basis points at both Olive Garden and Longhorn.
Fine dining segment total sales increased with the addition of Ruth's Chris company-owned restaurants, but same restaurant sales were negative at both Capitol Hill and ADB's consistent with what we indicated on our earnings call last quarter.
This resulted in lower segment profit margin for fine dining than last year.
As we anticipated, the year-over-year same-rush and sales decline in our fine dining segment was the result of wrapping on a resurgence of demand in the first quarter last year that drove traffic retention to 107% of pre-COVID levels.
Fine dining traffic retention in the first quarter of this year was 100% of pre-COVID levels, more in line with the retention levels for the prior three quarters.
The other business segment increased sales driven by positive same restaurant sales and the addition of Ruth's Crisp, franchised and managed locations royalty revenue.
resulting in 140 basis points of segment profit margin growth.
As a reminder, all of our franchise operating results are included in the other business segment.
Now I would like to provide an update on Ruth's energies.
As Rick mentioned, we've identified more synergies than we had initially expected and are choosing to reinvest some of them in the guest and team member experience at Ruth's Chris.
Previously, we anticipated $20 million in annualized run rate synergies.
We now expect approximately $35 million of gross run rates, energies, and other cost savings.
and we anticipate investing approximately $10 million into the business, resulting in annualized net-run rates energies of approximately $25 million.
And for fiscal 2024, we now expect approximately $12 million of net energy.
Finally, as shared in the press release distributed this morning, we are reiterating our full-year financial outlook for fiscal 2024.
Our outlook still anticipates adjusted, diluted net earnings per share from continuing operations of $8.55 to $8.85.
including Ruth's Chris operating results, but excludes approximately $55 million of pre-tax, transaction and integration related costs.
$55 million of pre-tax, transaction, and integration related costs. And with that, we'll take your questions.
Thank you. We will now be conducting a question and answer session.
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We ask that you please limit yourself to one question and one follow-up question. One moment please while we poll for your questions.
Our first questions come from the line of Andrew Charles with TD Cowan. Please proceed with your questions.
Great, thank you. You know, Olive Garden and Longhorn showed impressive performance in 1Q while fine dining saw headwinds as you previously warned. And, you know, I guess I'm curious what led the decision to keep full year same store sales guidance despite 1Q's strong result? And you know, perhaps seeing something in September that gives you pause and outlook for the balance of the year. I know restaurant investors have been keen that industry data seems to be taking a breather. Thanks.
Hey Andrew, thanks for the question. So let's start with the guidance, right? So as you think about our first quarter performance.
That was actually from a top line perspective. It was pretty consistent with our plan. We were within 10 basis points of our same restaurant's plan we had. So the year from a top line is playing out the way we expected.
So as far as, you know, and so that's really the cusp behind how, why we're not changing the guidance for the year. And now, look, we're one quarter in. There's a lot of uncertainty out there. There's three quarters to go. And we had a range to begin with. And while we outperformed our expectations on the bottom line, we feel like it gives us a little bit of a head start, but it still puts, the point estimate is still within the range we provided at the beginning of the year.
Thank you. Thank you. Our next questions come from the line of Brian Bittner with Oppenheimer & Co. Please proceed with your questions.
Thanks and congrats on strong results. I just want to follow up with Andrew's question a little bit. There is a lot of anxiety.
I think out there regarding how the evolving macro could impact industry sales trends moving forward, specifically for casual dining as...
you know, the benefits of pricing normalize.
Just based on all your insights, do you believe that the current health of the consumer remains?
strongly intact and can you help us understand what weapons you do have to keep traffic within your foliar guidance range of flat to down one and a half if the macro does deteriorate relative to your original expectations.
Hey Brian , this is Rick. You know overall we think the consumers continues to be resilient.
but there seems to be a little bit more selective. We are seeing a little softness versus last year with household incomes above $125,000 and that primarily affects our fine dining brands, but it does affect all of our brands.
Now this could be because the increase in luxury travel, particularly international travel, which you've heard a lot of people talk about.
But as I've said before, many times there is attention to be treating what people want to pay and what they can afford.
and they're going to continue to seek value, not always about low price.
They're making trade-offs, and food away from home is one of the most difficult things they can give up. So, again, what does that mean for our brands?
We believe that operators that deliver on their brand promise and value will continue to appeal to consumers. So we're going to keep doing that. We're going to deliver our promise. We're going to execute.
our brands and we're going to keep doing that and deliver value to our guests.
And I'm confident we're well positioned for whatever we have to deal with, thanks to the breadth of our portfolio and the outstanding team members in our restaurants who are committed to exceptional guest experiences.
you know our marketing programs we told you what we're gonna do with marketing in the prepared remarks it's gonna whatever we do is going to elevate brand equity
Not going to be the deep discount
and it's going to be simple to operate. And if it means that our traffic is at the lower end of our guide, then it's at the lower end of our guide. We're not going to do things that are going to impact us in the long term, just for a short time.
Thanks for that Rick and Raj just my follow-up is on the Kama'a boss they were up 1% in the first quarter which is obviously below your full year guidance of up 2.5% and you did suggest
that some non-beef items have been a bit more favorable. What?
What's driving the reiteration of the two and a half percent commodity guide? Is it just conservatism after one quarter? Is there anything offsetting the recent favorability as we move throughout the rest of the year?
Yeah Brian , so if you think about our inflation expectation for the first quarter, we were about a point better than we thought, mostly driven by, as I mentioned in my prepared remarks, other categories. We are not talking about that higher sovereign position.
The beef is still a lot of uncertainty around beef and you saw from our coverage that we don't have a lot of coverage beyond, especially as we get into the holidays and past. So there's some uncertainty around it. Now, that favorability in the first quarter helps us a little bit. So what that might mean is that we might be a little bit lower in that guidance range we provided of approximately two and a half. So maybe it's a little bit south of that, but there's three more quarters to go and beef is really, I mean, there's a lot of risk with beef, so.
Okay, hey, thanks guys. Thank you. Our next questions come from the line of Eric Gonzalez with KeyBank Capital Markets. Please proceed with your questions.
Thanks and good morning. My question is about the guidance as it relates to Olive Garden. Specifically, I'm curious how you're thinking about the second quarter, which is typically a season-low volume period for the industry. Historically, there's been a bit of a step down in revenue in Olive Garden from 1Q to 2Q, but the last year was a little bit different with the return of the possible. Perhaps you can help us think about how to model that second quarter relative to your guidance and your own expectations, whether you see that.
fiscal second quarter revenue increasing or decreasing sequentially. Thanks.
Look, I think, you know, I think it's a, I don't, we don't expect a huge, you know, you know, quarter to quarter.
sequential change. Obviously we are relaunching now running possible that does help you know and that's part of the reason why we do it in the second quarter is with the back to school and there's a little bit of a lull and a slowdown in the casual dining and that's that's really the time frame and basically that's within our range. I mean I think as we look at last year to this year there's going to be some nuances with respect to pricing being a little bit lower this as we get into the second quarter than first quarter but I don't want to contemplate exactly what it's going to look quarter to quarter.
and that's part of the reason why we do it in the second quarter, is with the back to school and there's a little bit of a lull and a slow down in the casual dining, and that's really the timeframe. And basically, that's within our range. I mean, I think as we look at last year to this year, there's going to be some nuances with respect to pricing being a little bit lower as we get into the second quarter than first quarter, but I don't want to contemplate exactly what it's going to look quarter to quarter. Fair enough. Thanks.
Thank you.
Thank you. Our next questions come from the line of Brian Harbor with Morgan Stanley . Please proceed with your questions.
Yeah, thank you. Maybe just on the Ruth synergies, what were some of the additional things that you found? And then when you talk about reinvesting, would that primarily kind of be in staffing, or are you also referring to kind of food and menu? So where would we kind of see that impact?
Yeah, so root synergies, you know, generally where we're getting them is, you know, between both the entire supply chain as well as in the GNA, right? So we initially started with an estimate as we go through the year, we're finding that, you know, as we are now in the process, we've been able to identify more and it's in both places.
So from an investment perspective, we have a long history of investing in the guest and team member experience across our brands. And so we're investing some of these additional synergies and cost savings in a similar manner, with investments that the Roots guests and team members will notice and appreciate.
Okay, thank you. Raj, also just with your prior comments about kind of G&A for the year and kind of the quarterly progression, is that still kind of valid? It sounds like maybe that piece, some piece of stock-based comp was one time in the first quarter, but could you just comment on kind of the G&A outlook?
Yeah, sure. Yeah, we mentioned a couple things, right? G&A was higher than we expected for the first quarter. Part of that was driven by our performance on the bottom line. I mentioned earlier that while sales were more in line, we did outperform on the bottom line that helped.
that caused a little bit more incentive calm.
and then stock-based comp that is truly a one-time, I mean, that's more of a timing, but it's pulling forward some from future years, right? So, but as we look at the full year, GNA is likely be a little bit higher than what we talked about last quarter. So I think last quarter we talked about close it to 430. I would say at this point it's probably closer to 440.
and stock-based comp that is truly a one-time, I mean, that's more of a timing, but it's pulling forward some from future years, right? So, but as we look at the full year, GNA is likely be a little bit higher than what we talked about last quarter. So I think last quarter we talked about close it to 430. I would say at this point, it's probably closer to 440 on the year.
is truly a one time, I mean that's more of a timing, but it's pulling forward some from future years, right? So but as we look at the full year, GNA is likely be a little bit higher than what we talked about last quarter. So I think last quarter we talked about close it to 430, I would say at this point, it's probably close it to 440 on the year. Okay, thank you.
Thank you. Our next questions come from the line of David Tarantino with Baird. Please proceed with your questions.
Hi, good morning. I was wondering Rick if you could talk about how you're thinking about unit growth for the next several years and...
I know at one point you were trying to push unit growth towards the high end of your annual targets and I'm wondering if that's still...
your desire and perhaps Raj if you could give us an update on what you're seeing on returns and build costs that would be helpful. Thanks.
Hey David, thanks. You know in regards to development and unit growth, we do want to get to the top end of our long-term framework of 3% unit sales growth from new restaurants. You know as we've said in the past, there's still some permitting delays. We're seeing a little less on the utility connections, those kind of things, but it's still taking a little longer to get permits.
We also are being a little selective, especially where inflation and costs have made the economics of the deal a little less attractive, and we generally like to have good margin of error with our projects.
And so we've turned down a few projects that just because costs are a little higher than we wanted them to be. And we've done that in the past and we've been able to get back to those same projects at the costs that are more reasonable for us. So we're willing to wait a little bit to get the cost back more in line.
That said, we believe inflation has peaked and we are starting to receive more bids that are in line with our project budgets, and some even actually below our project budgets.
So that gives us some good feelings for the future. We still believe we have the opportunity to grow close to the high end of our framework, and we are actively building that pipeline.
And David on the returns, we are you know returns are still pretty strong. We are you know any project we approve has to be net present value accretive to us.
And as Rick mentioned, we generally like to have a little bit of headroom within our margin of error as we approve projects.
maybe that buffer is not as high as it used to be, but when we look at actual performance, on average, we exceed our internal hurdles by quite a bit.
And David I'm going to add one more thing. You know if you think about saying that we like to see a little bit of a buffer in our in our net present value over our cost of capital that's because
We have all the capital we need, and so we're gonna be selective in projects. The thing that's gonna keep us from growing way faster than our long-term framework unit growth is having people ready to run those restaurants, and that's what we focus on as well. We're focusing on developing people, and we think we've got a great pipeline of people as well.
We're going to be selective in projects. The thing that's going to keep us from growing way faster than our long-term framework unit growth is having people ready to run those restaurants. That's what we focus on as well. We're focusing on developing people, and we think we've got a great pipeline of people as well. Great. Thank you. Thank you very much.
Thank you. Our next questions come from the line of David Palmer with Evercore. Please proceed with your questions. Thanks. Just to follow up, this was asked before but I'm not sure I quite got the answer.
Given where food costs and roof synergies are coming in, we were surprised that you're not also increasing the low end of your EPS guidance for the fiscal year.
What are the potential offsets to what we're seeing in terms of what looks like upside to your plan on the
we're seeing in terms of what looks like upside to your plan on the EPS and the EBITDOT line.
Yeah, David, I think it's a fair question, but we're just one quarter in, right? So there's nine months to go. There's been mixed data on the consumer. We're trying to understand what's going to happen. So we felt like it was too early to really come off of the range we provided.
As I said earlier, our point estimate from the beginning of the year to now has moved up a little bit. I mean that's because of our performance in the first quarter, but that doesn't mean we're outside the range. So we didn't feel like we're at a place where we needed to change the guidance range. And there's, you know, so to your question around uncertainty, there are a few things. Primary biggest risk is obviously on the consumer, what happens with the consumer.
Second is on the commodities. We're trying to understand what's going to happen, especially with beef. You know, 22% of our basket is beef, so there's some risk there. Now, you know, the.
Pricing in beef has remained pretty high because of the supply being down in the mid single digits. You know, we're starting to see some additional imports that might help on the beef front, but it's too early. So I guess all things considered at this point, we felt like it was prudent to stay with the guidance we provided.
And thank you for that. I know we're not going to give the game plan for the company in terms of marketing and in ways that you might pit it. But I'm wondering, just generally speaking, if we're seeing the industry trend worse than the flattish type.
trend that would be consistent with your guidance given your current gaps and apps. If your traffic is
down more than just modestly, or you see it going that way. How can, how would you adjust? I mean, what are the ways, and Rick said you are not going to go deep discount route, but what ways do you think you would adjust with your major brands? And thank you.
Yeah, David, you're right. We're not going to give you too much information on what we would do, but just understand that we believe that the best long-term health of our business is to keep our strategy of overall pricing below inflation, running better restaurants, and not getting into huge deep discounting to buy guests.
We think that brings in the guests that just come in that are a little bit less core to our business, and we're gonna continue to operate our restaurants to drive one more visit from our core guests. Bundesliga
And if that means that others start doing some heavy discounting, we're going to stick to our strategy. And even if it means that it's a short term, it impacts us a little bit in the short term because we think we'll be better off in the long term if we stay with where we're going.
and even if it means that it's a short term, it impacts us a little bit in the short term, because we think we'll be better off in the long term if we stay with where we're going. Okay, thank you.
Thank you. Our next questions come from the line of Jeffrey Bernstein with Barclays. Please proceed with your question.
Great, thank you very much. Two questions. One, just on the competition, Rick, I know you were pretty clear that you're not keen to start being more aggressive with discounting. It doesn't benefit you long term, but are you seeing any changes in the broader competitive behavior?
I think there are some that are concerned of an uptick in promos and discounting to drive traffic.
especially with the commodity inflation easing. So contrary to your strategy, just wondering what you're seeing across the broader landscape. And then I had one follow up.
Yeah, Jeff, one thing, yeah, commodities might be easing, but labor is still pretty high. It's getting a little bit better, but even if commodities are deflationary, there's still net inflation, at least in our business, and I'm guessing in other businesses too.
That said, we have seen a slight increase.
in promotional activity, but particularly with one bar and grill competitor.
and in the family dining segment. We're really not seeing a whole lot of competitive, increase in competitive activity in, you know, kind of the Olive Garden range and above, other than, as I said, that one bar and grill competitor that seems to be ramping up a little bit.
I'm just said that what I said Olive Garden is usually one of the top brands and share voice so no matter what this competitive activity is and Television activity Olive Garden is usually one of the top few brands and share of voice, but our message is about more more more Come in for Olive Garden for more more food more value more refills And that's what we're talking about And as I said we'll stick to our strategy
And I tell you, that's reinforcing never ending possible. So never ending possible is about never ending craveable but in Italian food at a great value and it's right on our plan. We're doing exactly what we planned for at the beginning of this fiscal year with never ending possible, nothing new.
Gotcha. And then just to follow up, I know earlier you mentioned something about seasonality. I know you were referring specifically to fine dining relative to last year, but as you think about broader casual dining historically, I get the feeling where it's sales slow in September , post maybe a stronger summer and battling now back to school.
But I feel like the past couple of years, there was a lot of pent up demand post COVID and therefore maybe there was no seasonality. People were willing to go out even during this timeframe and therefore less seasonality. I'm just wondering, should we now expect a return to seasonality that maybe could explain if you were to see a slowdown in coming weeks? I'm just wondering how you kind of think about that if seasonality were to return, how you decipher whether it's traditional seasonality or slow and consumer. Any thoughts there around that would be great. Thanks. Yeah, Jeff. We actually do think seasonality is getting back to historic trends. And the data we talked about for fine dining with getting back to kind of 100% of pre-COVID levels, we're seeing the same thing. I'm not saying it's 100%, but the same kind of trends back towards similar trends of pre-COVID levels now, where last year we do think there was a little bit of pent up demand. And so we're going to watch it. We're going to see what happens for the rest of this month and the rest of next month. But it appears like now we're getting much closer to what the seasonal patterns were.
there was no seasonality people willing to go out even during this time frame and therefore less seasonality. I'm just wondering should we now expect a return to seasonality that maybe could explain if you were to see a slow down in coming weeks? I'm just wondering how you kind of think about that if seasonality were to return how you decipher whether it's traditional seasonality or slow and consumer and the thoughts there around that would be great. Thanks. Yeah Jeff we actually do think seasonality is getting back to historic trends and and the the the data we talked about for fine dining with getting back to kind of 100% of pre-covid levels we're seeing the same thing I'm not saying at the hundred percent but the same kind of trends back towards similar similar trends of pre-covid levels now where last year we do think there was a little bit of pen up demand and so we're going to watch it we're going to see what happens for the rest of this month and the rest next month but it appears like now we're getting much closer to what the seasonal patterns were. Thank you.
Yep
Thank you. Our next questions come from the line of Joshua Long with Stevens. Please proceed with your questions.
Great. Thank you for taking my question. When we think about the trends you reported here in the first quarter, understand that the strength was largely in line with what you were expecting. Curious if you could dive into any comments around pacing, geographic performance, day part, day of week, anything there or perhaps sales channel that have been the to-go business for Olive Garden.
Yeah, Josh, I think from a geography perspective, we're seeing more, you know, strength in New England, Northeast, you know, we're seeing some softness or at least below company average in California, Texas and Florida when we look at the entire portfolio. Now brand by brand there's a little bit of variability, but when you look at across our portfolio that's the areas where we're seeing in terms of regional differences. Most others are kind of in between and so kind of close it to the company average if you will. But definitely seeing strength in the Northeast and especially New England area overall. From a day part perspective, we are seeing some, you know, lunch getting better at casual brands. And so that's really it. Outside of that, I don't know that there's any additional color we can provide on the sales detail. That's helpful. Then one point of clarification, Raj, there when we think about maybe California, Texas, Florida being a little bit softer on a relative basis, do we think about that just from a kind of base of comparison? It feels like they were probably stronger over the last couple of years. So maybe it's just a kind of point of comparison. And then maybe Rick, when you think about just that opportunity to drive the marketing and messaging, we totally agree about the opportunity for the balance of operational execution and value to be a big key component in the second.
Yeah, Josh, I think from a geography perspective, we're seeing more, you know, strength in New England, Northeast, you know, we're seeing some softness or at least below company average in California, Texas and Florida, when we look at the entire portfolio. Now, brand by brand, there's a little bit of variability. But when you look at across our portfolio, that's the areas where we're seeing in terms of regional differences. Most others are kind of in between, and so kind of closer to the company average, if you will. But definitely seeing strength in the Northeast and especially New England area overall. From a day part perspective, we are seeing some, you know, lunch getting better at casual brands. And so that's really it. Outside of that, I don't know that there's any additional color we can provide on the sales detail. That's helpful. Then one point of clarification, Raj, there when we think about maybe California, Texas, Florida, being a little bit softer on a relative basis, do we think about that just from a kind of base of comparison, feels like they were probably stronger over the last couple years. So maybe it's just a kind of point of comparison. And then maybe Rick, when you think about just that opportunity to drive the marketing and messaging, we totally agree about the opportunity for the balance of operational execution and value to be, you know, a big key component in the second half of the year. Doesn't sound like you need to lean in or change the messaging, is that correct? I mean, you feel good with how you're communicating that it's about going out of next.
Texas and Florida when we look at the entire portfolio. Now brand by brand there's a little bit of variability, but when you look at across our portfolio, that's the areas where we're seeing in terms of regional differences. Most others are kind of in between, and so kind of closer to the company average if you will. But definitely seeing strength in the Northeast and especially New England area overall. From a day part perspective, we are seeing some lunch getting better at casual brands, and so that's really it. Outside of that, I don't know that there's any additional color we can provide on the sales detail. That's helpful. Then one point of clarification, Raj, there. When we think about maybe California, Texas, Florida being a little bit softer on a relative basis, do we think about that just from a kind of base of comparison? Feels like they were probably stronger over the last couple years, so maybe it's just a kind of point of comparison. And then maybe Rick, when you think about just that opportunity to drive the marketing and messaging, we totally agree about the opportunity for the balance of operational execution and value to be a big key component in the second half of the year. Doesn't sound like you need to lean in or change the messaging. Is that correct? I mean, you feel good with how you're communicating that it's about going out of the next.
but definitely seeing strength in the Northeast and especially New England area overall. From a day part perspective, we are seeing some lunch getting better at casual brands, and so that's really it. Outside of that, I don't know that there's any additional color we can provide on the sales detail. That's helpful. Then one point of clarification, Raj, there when we think about maybe California, Texas, Florida, being a little bit softer on a relative basis, do we think about that just from a kind of base of comparison? Feels like they were probably stronger over the last couple years, so maybe it's just a kind of point of comparison. And then maybe Rick, when you think about just that opportunity to drive the marketing and messaging, we totally agree about the opportunity for the balance of operational execution and value to be a big key component in the second half of the year. Doesn't sound like you need to lean in or change the messaging, is that correct? I mean, you feel good with how you're communicating that and it's about going out of next.
overall. From a day part perspective, we are seeing some, you know, lunch getting better at casual brands. And so that's really it. Outside of that, I don't know that there's any additional color we can provide on the sales detail. That's helpful. Then one point of clarification, Raj, there. When we think about maybe California, Texas, Florida being a little bit softer on a relative basis, do we think about that just from a kind of base of comparison? It feels like they were probably stronger over the last couple years. So maybe it's just a kind of point of comparison. And then maybe Rick, when you think about just that opportunity to drive the marketing and messaging, we totally agree about the opportunity for the balance of operational execution and value to be, you know, a big key component in the second half of the year. It doesn't sound like you need to lean in or change the messaging. Is that is that correct? I mean, you feel good with how you're communicating that it's about going out of next.
From a day part perspective, we are seeing some lunch getting better at casual brands. So that's really it. Outside of that, I don't know if there is any additional color we can provide on the sales detail. John Mascarelli That's helpful. Then one point of clarification, Raj, when we think about maybe California, Texas, Florida being a little bit softer on a relative basis, do we think about that just from a base of comparison? It feels like they were probably stronger over the last couple of years, so maybe it's just a point of comparison. And then maybe Rick, when you think about just that opportunity to drive the marketing and messaging, we totally agree about the opportunity for the balance of operational execution and value to be a big key component in the second half of the year. It doesn't sound like you need to lean in or change the messaging. Is that correct? I mean you feel good with how you are communicating that and it's about going out in the next case.
That's helpful. Then one point of clarification, Raj, there. When we think about maybe California, Texas, Florida being a little bit softer on a relative basis, do we think about that just from a kind of base of comparison? It feels like they were probably stronger over the last couple of years, so maybe it's just a kind of point of comparison. And then maybe, Rick, when you think about just that opportunity to drive the marketing and messaging, we totally agree about the opportunity for the balance of operational execution and value to be a big key component in the second half of the year. It doesn't sound like you need to lean in or change the messaging. Is that correct? I mean, you feel good with how you're communicating that and it's about going out and executing.
club members a little bit more reason to be in the club without giving them a discount to be in the club, then maybe that's going to drive more. So we're still learning and we're looking at digital marketing and other things that we've done and we've learned throughout COVID. And if we do anything, we could use those levers, but not necessarily deep discounts. Thank you. Thank you. Our next questions come from the line of Dennis Geiger with UBS. Please proceed with your questions. Great. Thanks guys. Wondering if you could speak a bit more or a bit to the dining room traffic levels broadly across the portfolio or even at Olive Garden specifically and sort of how you think about where those dine-in traffic levels are currently, where they can go relative to the to-go business. Have we normalized or is there still an opportunity to see more dine-in recovery gains on the traffic side at this point? Yeah Dennis, you know, our off-premise has gone quite a bit from where we were before COVID. So from a traffic perspective, yeah, we're probably in that 80s range in terms of traffic relative to pre-COVID at our largest brand in Olive Garden. But from a sales perspective, we're probably closer to where we were before COVID. Now with that said, but part of that is as we talked about, we made a conscious decision to pull back a lot on promotional activity, couponing, and marketing dollars that we spend at Olive Garden. So we're a healthier business and so we like where we are from the, but also it also gives us a sense of where we are from.
And if we do anything, we could use those levers, but not necessarily deep discounts. Thank you. Thank you. Our next questions come from the line of Dennis Geiger with UBS. Please proceed with your questions. Great, thanks guys. Wondering if you could speak a bit more, or a bit to the dining room traffic levels broadly across the portfolio, or even at Olive Garden specifically, and sort of how you think about where those dining traffic levels are currently, where they can go relative to the to-go business. Have we normalized, or is there still an opportunity to see more dining recovery gains on the traffic side at this point? Yeah, Dennis, our off-premise has gone quite a bit from where we were before COVID. So from a traffic perspective, yeah, we're probably in that 80s range in terms of traffic related to pre-COVID at our largest brand in Olive Garden. But from a sales perspective, we're probably closer to where we were before COVID. Now with that said, but part of that is, as we talked about, we made a conscious decision to pull back a lot on promotional activity, couponing, and marketing dollars that we spend at Olive Garden. So we're a healthier business, and so we like where we are from there. But also, it also gives us...
Thank you. Thank you. Our next questions come from the line of Dennis Geiger with UBS. Please proceed with your questions. Great. Thanks guys. Wondering if you could speak a bit more or a bit to the dining room traffic levels broadly across the portfolio or even at Olive Garden specifically. And sort of how you think about where those dine-in traffic levels are currently, where they can go relative to the to-go business. Have we normalized or is there still an opportunity to see more dine-in recovery gains on the traffic side at this point? Yeah, Dennis. Our off-premise has gone quite a bit from where we were before COVID. So from a traffic perspective, yeah, we're probably in that 80s range in terms of traffic relative to pre-COVID at our largest brand in Olive Garden. But from a sales perspective, we're probably closer to where we were before COVID. Now with that said, but part of that is as we talked about, we made a conscious decision to pull back a lot on promotional activity, couponing and marketing dollars that we spend at Olive Garden. So we're a healthier business and so we like where we are from there. But also it also gives us...
Thank you. Our next questions come from the line of Dennis Geiger with UBS. Please proceed with your questions. Great. Thanks, guys. I'm wondering if you could speak a bit more or a bit to the dining room traffic levels broadly across the portfolio or even at Olive Garden specifically and sort of how you think about where those dine-in traffic levels are currently, where they can go relative to the to-go business. Have we normalized or is there still an opportunity to see more dine-in recovery gains on the traffic side at this point? Yeah, Dennis. You know, our off-premise has gone quite a bit from where we were before COVID. So from a traffic perspective, yeah, we're probably in that 80s range in terms of traffic relative to pre-COVID at our largest brand in Olive Garden. But from a sales perspective, we're probably closer to where we were before COVID. Now, with that said, but part of that is as we talked about, we made a conscious decision to pull back a lot on promotional activity, couponing, and marketing dollars that we spend at Olive Garden. So we're a healthier business and so we like where we are from the, but also it also gives us a
Great, thanks guys. Wondering if you could speak a bit more or a bit to the dining room traffic levels broadly across the portfolio or even at Olive Garden specifically and sort of how you think about where those dine-in traffic levels are currently, where they can go relative to the to-go business. Have we normalized or is there still an opportunity to see more dine-in recovery gains on the traffic side at this point? Yeah, Dennis, you know, our off-premise has gone quite a bit from where we were before COVID. So from a traffic perspective, yeah, we're probably in that 80s range in terms of traffic relative to pre-COVID at our largest brand in Olive Garden. But from a sales perspective, we're probably closer to where we were before COVID. Now with that said, but part of that is, as we talked about, we made a conscious decision to pull back a lot on promotional activity, couponing, and marketing dollars that we spend at Olive Garden. So we're a healthier business and so we like where we are from the, but also it also gives us a sense of where we are from.
specifically and sort of how you think about where those dine-in traffic levels are currently, where they can go relative to the to-go business. Have we normalized or is there still an opportunity to see more dine-in recovery gains on the traffic side at this point? Yeah Dennis, you know our off-premise has gone quite a bit from where we were before COVID, so from a traffic perspective yeah we're probably in that 80s range in terms of traffic relative to pre-COVID at our largest brand in Olive Garden, but from a sales perspective we're probably closer to where we were before COVID. Now with that said, but part of that is as we talked about we made a conscious decision to pull back a lot on promotional activity, couponing, and marketing dollars that we spend at Olive Garden. So we're a healthier business and so we like where we are from there, but but also it also gives us
Yeah, Dennis, you know, our off-premise has gone quite a bit from where we were before COVID. So from a traffic perspective, yeah, we're probably in that 80s range in terms of traffic relative to pre-COVID at our largest brand in Olive Garden. But from a sales perspective, we're probably closer to where we were before COVID. Now, with that said, but part of that is, as we talked about, we made a conscious decision to pull back a lot on promotional activity, couponing, and marketing dollars that we spend at Olive Garden. So we're a healthier business. And so we like where we are from the but also it also gives us a sense
our off-premise has gone quite a bit from where we were before COVID. So from a traffic perspective, yeah, we're probably in that 80s range in terms of traffic related to pre-COVID at our largest brand in Olive Garden. But from a sales perspective, we're probably closer to where we were before COVID. Now with that said, but part of that is as we talked about, we made a conscious decision to pull back a lot on promotional activity, couponing, and marketing dollars that we spend at Olive Garden. So we're a healthier business. And so we like where we are from there, but also it also gives us.
So from a traffic perspective, yeah, we're probably in that 80s range in terms of traffic related to pre-COVID at our largest brand in Olive Garden. But from a sales perspective, we're probably closer to where we were before COVID. Now with that said, but part of that is, as we talked about, we made a conscious decision to pull back a lot on promotional activity, couponing, and marketing dollars that we spend at Olive Garden. So we're a healthier business. And so we like where we are from the, but also it also gives us