Q3 2025 Darden Restaurants Inc Earnings Call
Speaker Change: Greetings, and welcome to the Darden Restaurants Inc. Q3 fiscal year 2025 earnings call. At this time, all participants are listening to listen only mode. If anyone could require operator assistance, please press star zero under telephone keypad. A question and answer session will follow the formal presentation.
Speaker Change: Simultaneously broadcasting a presentation during this call which is posted in the Investor Relations section of our website at Darden dotcom.
Speaker Change: There is discussion and presentation include certain non-GAAP measurements and reconciliations of these measurements are included in the presentation. Looking ahead, we plan to release fiscal 2025 fourth quarter earnings on Friday June 20th before the market opens followed by a conference call.
Speaker Change: During today's call I'll reference the industry results refer to black box intelligence casual dining average benchmark, excluding darden during our fiscal third quarter.
Speaker Change: Average same restaurant sales for the industry grew 0.9% and average same restaurant guest counts decreased 1.2%. Additionally, due to a significant divergence between average and median results. We are sharing with the median same restaurant sales for the industry decreased two 3% and median same restaurant guest counts decreased four.
Speaker Change: <unk>, 2%. This represents the largest disparity between average and median observed in recent years.
Speaker Change: This morning, Rick will share some brief remarks on the quarter and Raj will provide details on our financial results and an update to our fiscal 'twenty twenty-five financial outlook now I will turn the call over to Rick.
Rick: Thank you Courtney and good morning, everyone.
Rick: Overall I am pleased with our performance this quarter and proud of how our teams manage their business and controlled what they can control.
Rick: Raj will share specifics, but when you exclude weather impacts which were even greater than last year's challenging weather same restaurant sales.
Raj: Is that all four of our segments were positive.
Raj: Our ability to deliver profitable sales growth in this challenging environment is a testament to the strength of our business model and adherence to our proven strategy, which is anchored in our four competitive advantages and our restaurant teams commitment to being brilliant with the basics.
Raj: Several of our brands set sales records during the Christmas and new year's holidays, as well as on Valentine's day, which reinforces the strength of our portfolio and the guest loyalty. Our teams worked so hard to earn.
Raj: During the quarter Olive garden launched an updated menu featuring fan favorites state Gorgonzola, Alfredo and stuffed chicken marsala. The two most requested entrees at Olive garden fans asked to bring back.
Raj: In January Olive Garden's marketing feature of the return of these favorites along with four cheese Manicotti for just 12 99, plus a three meet Manicotti for a limited time.
Raj: Okay.
Raj: During the six weeks fan favorites was on air Olive Garden's base traffic and sales trends improved significantly.
They also experienced high levels of social media engagement, while preference for both items was strong and grew throughout the duration of the offer.
Raj: The Olive garden team continues to use news to appeal to core guests as well as value seekers in this environment.
Raj: For the first time since before Covid, they are bringing back their signature buy one take one limited time offer.
Raj: With a price starting at 14 99 guests choose from seven entrees for their dining experience and then take a second entree home.
Raj: This has historically been a high traffic driving promotions for olive garden.
Raj: They're U club members are enjoying early access to this offer this week and well it will be available to everyone starting on Monday.
Raj: In the first week of February Olive garden completed their rollout of Uber direct making delivery available in all restaurants, except the six locations that cannot offer a curbside to go.
Raj: Our partnership with Uber direct strengthens olive garden's ability to value their guests time by bringing their favorite dishes directly to their doorstep using olive garden's online ordering platform and leveraging ubers delivery network.
Raj: Additionally, delivery provides olive garden with a meaningful sales building opportunity overtime.
Raj: Without any marketing support during the quarter the volume of delivery orders grew week to week, while maintaining a higher check average than curbside pick up orders.
Raj: In the fourth quarter, the Olive garden team started to drive awareness of delivery with modest digital activity and will fully leverage their earned and owned channels to target their biggest fans.
Raj: This will ensure a smooth transition for the newly launched restaurants and establish a baseline from which they will measure of future marketing efforts.
Raj: They are targeting the end of this fiscal year for a more expansive awareness building campaign, including TV advertising with a compelling and memorable offer partially funded by Uber.
We are pleased with the success of the rollout of Uber direct at Olive Garden, we heard from the operators how seamless it was.
Raj: And just this week, we began to pilot a cheddar scratch kitchen.
Raj: The Chatters team is currently testing it in 10 locations with a plan to deploy it more broadly across their system.
Raj: At Longhorn steakhouse strict adherence to their strategy rooted in quality simplicity and culture continues to drive their momentum.
Raj: The restaurant teams focused on execution to ensure every item they serve meets their high quality standards.
Raj: This includes having industry, leading specifications and ensuring they perfectly season and grill every stake serve to their guests.
Raj: This level of focus continues to pay off resulting in an all time high Stakes real correctly score in the third quarter.
Raj: Longhorns people bring their strategy to life in our restaurants and the Grill Master Legends program is an excellent example of the intersection of quality and culture.
Raj: The program celebrates extraordinary team members, who have drilled more than 1 million steaks over the course of their career, which typically takes more than 20 years to accomplish.
Raj: Longhorn leadership recognizes these legends with a surprise party in their restaurant that includes your family friends and loyal guests.
Raj: During the third quarter. They included inducted five more grill Masters into this exclusive club, bringing the total to 30.
Raj: To further build on their leadership in food quality Longhorn is bringing back grilled Lamb chops and fire grilled corn during the fourth quarter. These.
Raj: These two guest favorites, along with last year's viral sensation Parmesan Crusted Lamb chops will be featured for a limited time.
Raj: Successfully opening new restaurants is a key part of our ability to create value for our shareholders and help our brands reach their potential.
Raj: Working with our development team, we are testing new smaller prototypes for some of our brands.
Raj: These prototypes helped lower construction costs and enabled our brands to build out their new restaurant pipelines, but considering sites. It would have been too small in the past ultimately accelerating new restaurant openings.
Raj: During the quarter yard house and Cheddars. Both open these prototypes and are performing at or above expectations.
Raj: Each one is roughly 20% smaller and cost approximately 15% less to build than their legacy restaurant prototype.
Raj: They also preserve the essence of the brand.
Raj: For example, while it's significantly smaller than new yard house prototypes still features their full menu and offers 90 different beers on tap.
Raj: Now, let me provide a quick update on shoes.
Raj: The planning phase of the integration is complete and the actual work is underway.
Raj: On Monday, she always will convert to our human resources platform, which includes our people management systems payroll and benefits.
Raj: Our platform Streamlines key day to day activities, which improves efficiency and allows managers to spend more time focused on running their restaurants.
Raj: The next major milestone will be supply chain transitions that will take place in phases. Beginning in June followed by the point of sale transition starting in late summer.
Raj: Integration is never easy and I am proud of how the entire cherry's team has remained focused on executing at a high level, while adapting to change.
Every day, we work in pursuit of our shared purpose to nourish into like everyone. We serve.
Raj: One of the ways, we do this for our team members and their families is through our next course scholarship program.
Raj: Recently, the Darden Foundation awarded 98 post secondary education scholarships were $3000 each to the children of Darden team members.
Raj: This is the third year of the program and over that time, we have awarded nearly 300 scholarships, helping team members and their families across the country.
Raj: Yeah.
Raj: To wrap up I'm proud of the focus and commitment our teams continue to display on behalf of our leadership team and the board of directors I want to thank all of our team members for everything you do to nourish and delight, our guests and each other now I will turn it over to Raj.
Raj: Thank you Rick and good morning, everyone.
Raj: Third quarter earnings results were in line with our expectations, even though the top line was impacted by unfavorable weather.
Raj: The quarter started with a negative gap to the industry average in December but turned positive in January and February with both months exceeding the industry benchmark by well over 100 basis points.
Raj: Winter weather and Thanksgiving holiday shift into the third quarter negatively impacted same restaurant sales for the quarter by approximately 100 basis points and 90 basis points respectively.
Raj: As a reminder, a thanksgiving shift helped our fine dining brands are negatively impacted in casual dining.
Raj: After adjusting for these impacts our same restaurant sales were 2.6% for the quarter a sequential improvement from prior quarters.
Raj: For the first three weeks of the fourth quarter, we're seeing improvement in our sales trends.
Raj: Overall, our teams continue to do a great job managing the business through the volatility created by weather.
Raj: In the third quarter, we generated $3 $2 billion of total sales, 6% higher than last year, driven by same restaurant sales growth of 0.7% the acquisition of 132 East restaurants, and the addition of 40 net new restaurants.
Raj: Both our same restaurant sales and same restaurant guest counts for the quarter was in the top quartile of the industry.
Raj: Adjusted diluted net earnings per share from continuing operations of $2 80.
Raj: About $6, 9% higher than last year.
Raj: We generated $559 million of adjusted EBITDA and returned $217 million to our shareholders by paying $164 million in dividends and $53 million in share repurchases.
Raj: Now looking at our adjusted margin analysis compared to last year.
Raj: And beverage expenses was 70 basis points, lower driven by pricing leverage as commodities inflation was less than 0.5% with almost all categories better than our expectations.
Raj: Restaurant labor was flat with productivity improvements fully offsetting the impact of pricing below total labor inflation of approximately three 5%.
Raj: <unk> expenses were 20 basis points higher driven by the brand mix with the addition of choice.
Raj: Marketing expenses were 10 basis points higher consistent with our plan.
Raj: Our restaurant level EBITDA of 21.1% for the quarter was 50 basis points higher than last year.
Raj: Adjusted G&A expenses as a percent of sales were flat to last year.
Raj: Interest expense increased 20 basis points, driven by the financing expenses related to the <unk> acquisition.
Raj: And our adjusted effective tax rate for the quarter was 13, 4%.
Raj: In total our adjusted earnings from continuing operations was $330 million, which was 10.5% of sales.
Raj: In the third quarter all of our segments grew total sales and segment profit margin.
Raj: Total sales for Olive garden increased by 1.5% driven by same restaurant sales growth of 0.6%.
Raj: Olive garden's gap to the industry benchmarks increased significantly following the launch of fan favorite limited time offer outperforming the industry benchmarks by 180 basis points in January and 240 basis points in February.
Raj: They are maintaining their momentum through the first three weeks of March.
Raj: Olive Garden continues to have strong segment profit margin delivering 23% for the quarter, which is 50 basis points higher than last year.
Raj: At Longhorn pulse total sales increased five 1% driven by same restaurant sales growth of two 6% and the additional 14 net new restaurants.
Raj: Longhorn <unk> same restaurant sales growth adjusted for the Thanksgiving shift and rather was 5%.
Raj: <unk> performance in what is traditionally the highest volume quarter.
Raj: Through the first three weeks of March Longhorn has seen strong traffic and same restaurant sales growth further increasing their positive gap to the industry.
Raj: Segment profit margin for the third quarter was 19, 4% 70 basis points of all last year.
Raj: Total sales had fine dining segment increased 3.3%, though the same restaurant sales were negative as you know 0.8% for the quarter.
Raj: Thanks, giving is a busy day for our fine dining brands and the shift of the holiday from the second quarter last year into the third quarter of this year led to a positive sales impact that was mostly offset by the negative weather impacts during the quarter.
Raj: Adjusted for holiday shift and weather impacts fine dining same restaurant sales decreased approximately 1%, which continues the sequential improvement from prior quarters.
Raj: Fine dining segment profit margin of 22, 3%.
Raj: 50 basis points from last year.
Raj: The other business segment sales increased 22%, primarily driven by the acquisition of Chili's.
Raj: Segment profit margin of 15, 4% was 50 basis points better than last year.
Raj: Yeah.
Raj: Turning to our financial outlook for fiscal 2025, we update it.
Raj: Two items in our guidance to reflect our year to date results and expectations for the fourth quarter.
Raj: We now expect $118 3 million diluted average shares outstanding for the year.
Raj: And adjusted diluted net earnings per share of $9 45 to $9 52, which.
Clues approximately $47 million of pre tax transaction and integration related costs.
Raj: All other items remain unchanged.
Raj: For the fourth quarter, specifically, our annual outlook implies total sales of 3.23 billion to 3.26 billion.
Raj: Same restaurant sales go up about 3%.
Raj: And adjusted diluted net earnings per share between $2 88 and $2.95.
Raj: Now looking forward into fiscal 'twenty six we wanted to provide our thoughts on a few items.
Raj: First we plan to open between 60 and 65 new restaurants.
Raj: We expect to spend between $375 million to $400 million of capital for new restaurants, and $300 million $325 million of capital related to ongoing restaurant maintenance refresh and technology.
Raj: We anticipate an effective tax rate between 13% and 13, 5% for fiscal 2020 six and.
Raj: Finally fiscal 2026 will include a 53 week contributing approximately 20 additional diluted net earnings per share.
Raj: In closing I want to commend our teams for their outstanding efforts in serving our guests and their dedication is reflected in the strong financial results we Delaware.
Raj: We remain confident in our strategy and the strength of our business model, which continues to drive our success.
Raj: Now we will open it up for questions.
Speaker Change: Thank you and I'll be conducting a question and answer session if you'd like to be placed in the question queue. Please press star one on your telephone keypad and we ask you. Please ask one question. One follow up then return to the queue, if you'd like to remove yourself from the queue. Please press star two once again Thats Star one and please ask one question one.
Jon Tower: Follow up then return to the queue. Our first question is coming from Jon Tower from Citi. Your line is now live.
Jon Tower: Great. Thanks for taking the question and I'm just.
Speaker Change: I appreciate all the color on the quarter to date across our brands and I'm curious if you could maybe speak to whether you believe that the improvement you're seeing is more related to your own brands or the industry and specifically you'd mentioned on the last earnings call.
Speaker Change: That you'd start to see improvement in visits and guests, making between 50000 to 100000, a year and I'm just curious how that played out in your fiscal third quarter, and perhaps what's happening quarter to date to the extent you can provide some color.
Speaker Change: Hey, John you know quarter to date I'm really pleased with the performance of our brands Olive garden and longhorn have continued to to to perform well and the rest of our brands are continuing to to improve their performance without commenting directly on what's going on with the rest of the industry. It's only three weeks into our quarter, but we.
Speaker Change: Still pretty good about where we are and that's reflected in our guidance of above 3% same restaurant sales growth for the for Darden.
Speaker Change: As it relates to the consumer between 50, and 100 K its not growing quite as much as it was before but it's still growing when you adjust for weather.
Speaker Change: Outside of across all income groups adjusting for weather. The only income group that was negative across our casual brands was below $50000. All of the other things were positive when you adjust out that that bad weather this quarter.
Speaker Change: Great. Thanks for taking the question.
Speaker Change: Yeah.
David Palmer: Thank you next question is coming from David Palmer from Evercore ISI. Your line is now live.
David Palmer: Oh thanks.
Speaker Change: Just to follow up on that to what degree do you think there was a a flu impact in the quarter, but then separately.
Speaker Change: When it comes to casual dining one of the things. We're noticing is it's holding up remarkably well given what we're seeing in other segments within restaurants, I don't know if you're noticing that in your own insights work and thinking about reasons for that if I mean, it I'm not sure we can make too much sense of it.
Speaker Change: And then and then lastly, I just wanted to ask you about your plans on M&A or are they are they shifting now that you're further along with Ruth's and seeing what's happening with.
Speaker Change: Perhaps some valuations elsewhere. Thank you.
David Palmer: Hey, David Let me see if I get all three parts of that question a flu impact you know, we don't really necessarily do a lot of work on them.
David Palmer: Checking on whether I mean, I'm I'm, sorry temperature for people, but we took the temperature and in the community climate stuff. So I can't tell you a flu had a big impact or not maybe it did.
David Palmer: That said I think our bigger impact was weather versus prior year.
David Palmer: When you think about consumers and in casual dining and what's been going on.
David Palmer: No I think there there we have seen that casual dining is holding up a little bit better than maybe some other segments.
David Palmer: And you know dining out continues to be the number one category, where consumers tend to treat themselves and splurge and you actually treat yourself in storage a little bit more in casual dining and fine dining than you do in other segments. So maybe that's what it is we're going to continue to focus on providing an excellent experience and deliver value to our guests.
David Palmer: That choose to dine with us and especially the ones that come into our restaurants.
David Palmer: And if an M&A you know we're just on the process is starting to the chewy is integration work you know and as as we always say, we will continue to talk to our board to figure out what the best uses of our capital there are but we want to continue to focus on on integrating choice.
Speaker Change: Thank you.
Speaker Change: Thank you. Your next question today is came from Eric Gonzalez from Keybanc capital markets. Your line is now live.
Speaker Change: Hi, Thanks for taking the question maybe a quick one on the <unk> partnership I think you mentioned the end of the fiscal year you'd be launching a more expansive awareness campaign that included television advertising.
Speaker Change: I know you said it'd be partially funded by Uber, but can you level set our expectations on whether we should expect a meaningful uptick in advertising spending and regarding your brisk contributions I'm sure you don't want to give specifics, but I was wondering how long that subsidy will last.
Speaker Change: Eric I will say, you know where were spending where were funding more of the total spend for that advertising Uber is but whoever is finding quite a bit of it.
Speaker Change: I wouldn't say, it's hugely meaningful impact on advertising for the quarter. It's really the last couple of weeks of the quarter and we expect it to last just a few weeks and then we'll continue to see what we're gonna do going forward and everything that I. Just told you was contemplated in our guidance for the quarter are men and Raj could probably talk about the marketing spend.
Speaker Change: In total for the quarter.
Raj Men: Yeah, Eric I think we're still going to fall within that 10 to 20 basis points for marketing spend like we talked about.
Speaker Change: In terms of year over year growth.
Raj Men: Okay.
Raj Men: Is there anything you can tell us about 26 and the implications there.
Raj Men: I think we're still early for 26 I think what we said you know if you go back to the comments, we made along the way with respect to marketing over time, we would expect it to grow but at a measured pace, because we're going to be very deliberate and ER and that we're going to just make sure that as we invest in marketing that's actually getting a return on investment and we feel.
Raj Men: Like we have you know over the last year and half two years, even further improved our analytics around it and are in fact doing that stuff media. So maybe sometimes we win it we may not need to spend as much dollars to get the same impact because we were further we're continuing to get better at a more efficient and effective media.
Raj Men: Great. Thank you.
Brian Bittner: Thank you next question is coming from Brian Bittner from Oppenheimer. Your line is that life.
Brian Bittner: Thanks, Good morning.
Brian Bittner: Raj as it relates to the EPS guidance for fourth quarter. The range implied I think based on our math it seems to imply flattish operating margins. So is that correct.
Brian Bittner: So it just seems a tad conservative with the comp sales being over 3%. So can you unpack.
Brian Bittner: The operating margins in the fourth quarter for us a little bit more.
Brian Bittner: Sure Brian So it's a great question, let me start by I really pointing out the biggest dynamic shift what's the big dynamic here is that Q4, our inflation overall inflation is going to be we expect it to be about 3%.
Brian Bittner: If you look at the first three quarters, our overall inflation was in the low twos. It was basically 2% to 2.2 range. So this is a big step up in that part of it is just a function of what we're wrapping on AR, but our pricing is still below 3%. So we're actually have this different dynamic. So yes, that's really the big driver and you're right.
Brian Bittner: Transportation is right in terms of operating profit not not not growing up materially year over year.
Speaker Change: Okay, and just as my follow ups on the Olive Garden delivery last time, you spoke with US you talked about.
Speaker Change: Delivery mixing as about a percent and a half of sales in the initial pilot units of course that was with no marketing support.
Speaker Change: Now you have delivery fully rolled out across your asset base can you update us on any additional additional learnings andoras surprises, particularly now that you have some digital marketing support some awareness around the channel just any incremental update on on that would be awesome. Thanks.
Brian Bittner: Yeah, Brian I'm going to start by saying it's still early.
Brian Bittner: And in our delivery kind of life span are very early but we're really pleased with our pilot and the rollout.
Brian Bittner: You know and as I said I think on the on our prepared remarks and the initial pilot restaurants, the number of orders kind of week to week grew.
Brian Bittner: And are now about double what they were per week when we started.
Brian Bittner: And our.
Brian Bittner: Restaurants that have that weren't in the pilot all the restaurant other restaurants are following that same pattern.
Brian Bittner: And now at the end of the third quarter, our pilot restaurants, we're running around 2.5% of sales and delivery.
Brian Bittner: And the other restaurants, we're following that same pattern.
Brian Bittner: Then we started doing a little bit of marketing just sending some communication to our clubs and that communication Didnt give an offer at just said Hey, do you almost like do you know olive garden delivers and we saw some pretty good response, there and so our non pilot restaurants. The other restaurants kind of came up that curve, a little bit faster and they're pretty close.
Brian Bittner: Two what the pilot restaurants are so we feel really good about the communication.
Brian Bittner: And where we're going.
Brian Bittner: On delivery itself.
Brian Bittner: That will also repeat that the operators have said, it's very seamless for them.
Brian Bittner: Because of the way we piloted our we partnered with Uber, It's essentially our curbside to go for the operators with someone else picking up the food and that's a newer person instead of Uber driver instead of the guests. So it's pretty seamless for our operators. So we feel really good about it.
Brian Bittner: Great. Thank you.
Speaker Change: Thank you. Your next question today is coming from Sara Senatore from Bank of America. Your line is now live.
Sara Senatore: Great. Thank you very much I.
Sara Senatore: I guess two questions one is sort of a follow up.
Sara Senatore: The first one if you could just.
Sara Senatore: Talk about bringing back the buy one take one and is that a response to something you're seeing in the operating competitive environment or you know I think in the past recently, you've talked about just kind of increasing the pace of you know of news and so just trying to understand if things had changed and that's what.
Sara Senatore: Prompted that and then my my second question is actually a follow up it's about.
The new prototypes for some of these other businesses I know you said that they were performing above plan, but are the volumes consistent with the standard larger prototypes, yes, just as we think about accelerating unit growth does that translate into a consistent level of accelerating revenue growth. Thanks.
Sara Senatore: Yeah.
Sara Senatore: Yeah, Sara I would say for buy one take one you know when we eliminated promotions. What we said was we wanted to eliminate promotions that whereas the deep discount they were hard to execute that added new menu items and did all of those other things that made it really more challenging for our restaurants.
Sara Senatore: And you know when we brought back the never ending pasta Bowl, we brought it back into a little bit of different construct we had a little bit of a different price point on it than we had before so it wasn't a deep discount.
Sara Senatore: It's still was brand building because it was talking about abundance, which is one of our whenever olive garden's advantages.
Sara Senatore: And it wasn't a bunch of new items. So it was items that we already have on our menu.
Sara Senatore: And we just gave consumers a reason to come in and that we we kind of took that forward to buy one take one which has been historically, our second best traffic driving promotions.
Sara Senatore: So it fits all of our filters where in the past, but I wouldn't take one didn't it was at a deep discount we added new items to do that.
Sara Senatore: And so this time.
Sara Senatore: We bring them back, but I wouldn't take one with really core menu items as they buy one and our $6 take home items as they take one.
Sara Senatore: At a price point that is not at a huge discount, but it's at a limited time, which is what we want our guests to want to come in so as we were doing all of our core menu advertising that was great to build the brand, but in an environment that guests want a reason to come in more quickly that's where the the kind of limited time.
Sara Senatore: Kim So nothing dramatically has changed in our strategy and it really wasn't because of of things going out in the marketplace. We just believe that this is the right way to communicate our brand at a a that fits all of our filters.
Sara Senatore: And you know in another interesting way gets people to remember that we've got this $6 take home. It just so happens that you get it for you on the buy one take one but it kind of gives people thought in the future on the take home.
Sara Senatore: In regards to the new prototypes.
Really early when we open those prototypes when you open the restaurants are doing significant traffic and significant sales them.
Sara Senatore: So we know that they can do the same kind of sales and traffic that an existing restaurant does so it's not the size of the restaurant.
Sara Senatore: That will that will do anything. So these these restaurants are opening very strongly.
Sara Senatore: And partly because you know there's for example at yard House.
Sara Senatore: We have almost the same number of tables in the in this yard house as we do and others. We just have a few fewer seats because some of those yard houses have a lot of eight type boots that don't really get utilized very well, so they're and they take up a lot of space. So if we eliminate some of the eight type boots and make them, even six tops or four types that are bigger for tops.
Sara Senatore: We still get rough almost the same number of tables.
Sara Senatore: But with with fewer seats and the seats weren't being utilized before still has a big bar still has you know 90 beers on tap.
Sara Senatore: Bill has a kitchen, that's a little smaller because of some things that we did in kitchen design. So we feel really good about the prototypes.
Sara Senatore: And in their sales driving ability.
Speaker Change: Thank you very helpful insights appreciate it.
Brian Harper: Thank you next question is coming from Brian Harper from Morgan Stanley. Your line is now live.
Brian Harper: Yeah. Thanks, good morning, guys.
Brian Harper:
Speaker Change: The the olive garden kind of sales momentum you talked about his.
Speaker Change: Rick I mean, you cited the Uber mix for some of the pilot stores, but.
Speaker Change: Is that a material part of it yet for the overall system would you attribute it more to just some of the the menu news. So far I mean, how would you kind of characterize what has driven an olive garden in recent months.
Speaker Change: Yeah, Brian I would characterize it more about the menu news than the delivery.
Speaker Change: Especially in the quarter because our delivery rollout started you know January ended in February so it wasn't even in most of restaurants in December and Olive Garden had a pretty strong December. So we believe it's more based on the menu and bringing back those two fan favorites with a an addition of manner.
Speaker Change: Cottie starting at price point.
Speaker Change: The two fan favorites were very well received and continue to grow preferences I mentioned no I'll also say our in delivery.
Speaker Change: As I mentioned the pilot restaurants ended the quarter around two and a half per cent of sales and delivery and the other restaurants got pretty close to that as we jumped into marketing, but that didn't happen until Q4.
Speaker Change: Okay, great. Thanks.
Raj Men: Raj could you talk a little bit more about did.
Speaker Change: Inflation and just I guess I was surprised that sort of on the food side that was still favorable in the quarter. We have seen you know.
Speaker Change: Some items moved back up but what what specifically is driving the fourth quarter, how does that kind of shape you know how you think about.
Speaker Change: As we enter 26, I know, you're not going to talk about that yet, but and you know.
Speaker Change: Are you seeing pretty stable labor in place and do you think that that could you know, perhaps ease a bit or where are we on that front.
Speaker Change: Okay.
Brian Bittner: Sure Brian are the biggest dynamic within inflation as you kind of alluded to earlier was that the commodities are shift. So if we look at our Oh.
Brian Bittner: The year first three quarters, I'd say chicken and seafood, what basically slightly deflationary in Q4, what do you expect it to be inflationary.
Brian Bittner: And in fact, our supply chain team has done a great job of get locking in great contracts. You know, we're still buying valley below market on chicken on our contract is actually you know double digit percentage better than the market and so that's what's caused a little bit of a disconnect between what youre seeing in the market and what's what you're seeing at the darden level inflation.
Brian Bittner: Now as we look at our labor has actually been fairly steep.
Brian Bittner: Starting in the last two quarters has been in the 3.5%, which is actually a significant improvement from where we were oh.
Brian Bittner: Back a couple of years right. So it's come down a lot it's been more stable in that mid threes and if you think back to before Covid for multiple years are labor inflation wasn't that range three to mid threes. So I would say, we're happy to see that it's it has stabilized in that range. So I wouldn't say we would.
Brian Bittner: It to get a lot better or a lot worse at this point.
Brian Bittner: But it's it's it's a place we know how to operate with it its at a level that are you know we've operated before.
Brian Bittner: And I you know, it's too early to comment on fiscal 'twenty six commodities are we'll share more in June.
Speaker Change: Great. Thank you.
Brian Bittner: Yeah.
Speaker Change: Thank you. Your next question today is coming from Dennis Geiger from UBS. Your line is now live.
Speaker Change: Great. Thanks, guys, Rick I wanted to ask a little bit more on value at olive garden, and specifically, maybe the customer value scores through the brand if you've seen any kind of notable uptick just in recent months as you kind of leaned in on some attractive price points on new items et cetera anything to highlight there, especially in the environment that we're in.
Speaker Change: Yeah, Dennis value at Olive Garden has had a general kind of rise over time and it's been gradually continued uptick it's not like you took a step change when we added the.
Speaker Change: Manicotti at 12 99, starting at didn't have a step change, but it did we are continuing to see value scores improve.
Speaker Change: But you remember value isn't all about price it's about the experience you've got in the restaurant and our value scores had been growing throughout this time, even with pricing at a at a higher rate, which was because the inflation was higher.
Speaker Change: That's because we continue to operate better in our restaurants guests, we're seeing more value in the unlimited first course, and the more we tell people about it and the more we give them their unlimited first course, the higher evaluating skate.
Speaker Change: That's helpful. And then just a on an Uber just anything on Incrementals, recognizing it's very early days, but have you kind of and sort of anything or have any additional thoughts maybe on what incrementally may may look like even though its early thank you.
Speaker Change: Yeah. Dennis you said you said, it's early and I'm going to continue to say that it's still early.
Speaker Change: But we've been seeing about 40% to 50% of them are incremented already and that's without significant awareness advertising. So.
Speaker Change: You know and and I will say this is contemplated in our guidance, but you know, it's somewhere 40% to 50%.
Speaker Change: Great. Thanks, Rick.
Speaker Change: Thank you next question is coming from David Tarantino from Baird. Your line is that life.
David Tarantino: Hi, good morning.
I was hoping you could.
David Tarantino: Tell us what darden exposure to potential tariffs might be I guess.
How would you frame up that exposure and if you are exposed on some ingredients.
David Tarantino: Did you have a plan to address that if the tariffs actually go into place.
David Tarantino: Yeah.
David Tarantino: Sure sure David So a tariff.
David Tarantino: Obviously tariffs as a top of mind here. So as we think about the situation with tariffs is it's still a very fluid right. I mean, obviously, we're still trying to figure out how this is going to play out, but I think for us as we look at our.
David Tarantino: Cost basket today, as we look at our cost basket about 80% is actually domestic source. So theres really only 20% that's truly a that's a that's a imported I'll start there is a portion that we could switch easily do domestic it's just a function of the price being better or we're going outside.
David Tarantino: Outside but as we look at them.
David Tarantino: Our situation.
David Tarantino: Even part of the.
David Tarantino: If all of the stuff we import we're not the importer of record so pretty much all products are negotiable right. So it would be working with our suppliers our team our supply chain team.
David Tarantino: He's working on our strategies.
David Tarantino: Our strategy is to kind of mitigate risk whether it's through you know initially obviously in the near term inventory management, but in the longer term you know alternate sourcing methods and and just really also further negotiations with vendors and kind of really trying to figure out how to deal with it.
David Tarantino: But hopefully that gives you an idea of the maximum level of exposure.
Speaker Change: Perfect. Thank you.
Jeffrey Bernstein: Thank you. Your next question today is coming from Jeffrey Bernstein from Barclays. Your line is that life.
Speaker Change: Great. Thank you very much.
Speaker Change: Rick I was just wondering if you could give some bigger picture perspective, I mean, there's been concerns with the inclement weather and the holiday shifts the list a few months maybe masked.
Speaker Change: Slowdown in underlying consumer spending, which I don't think would surprise to many people with consumer confidence falling and historically that's closely correlated to restaurant sales, but to the contrary I think that's.
It's encouraging to hear you noted continued improvement in March and I'm, just wondering broadly for yourselves or the industry. Why do you think that is it seems like there's lots of noise lots of headlines D C and otherwise that would have been a headwind for the industry and I think most were bracing for that type of commentary from you guys. So just wondering why you think trends have actually gotten better more broadly and then.
Speaker Change: One follow up.
Speaker Change: Yeah, Jeff you know I think the consumer you know, we we see and hear the same thing you hear and see that consumers are feeling a little less optimistic.
Speaker Change: That said you know as we kind of come out of the third quarter into the fourth quarter and we gave you our expectation for Q4.
Speaker Change: You know.
Speaker Change: People, even if they say, they're they're feeling less optimistic we haven't seen a huge correlation between that and dining out.
Speaker Change: So you know changes in consumer sentiment haven't necessarily translate into material changes in consumer spending and so I think as long as incomes are going up and outpacing inflation I think they're likely to keep spending now where they spend is where they feel like they're going to get a great value for their dollar and get a great experience.
Speaker Change: And consumers are always have said for quite a bit that dining out is the number one category, where they treat themselves and splurge. So if they're feeling a little bit restless, maybe they go out and splurge them. So we're going to continue to focus on providing an excellent experience and deliver value for these guests that choose to dine with us.
Speaker Change: But we did see as I said, a little bit more pullback and guests with incomes below 50000. So there is a consumer out there that's feeling a little bit, but you know I think more of our our third quarter was weather related than anything else.
Speaker Change: Understood and then just on the fine dining segment once again, well ahead of expectation.
Speaker Change: Do you see that coming from any particular brand or.
Speaker Change: What does that tell you about the the high end and corporate consumer spending relative to the other income brackets is there anything unusual to note there or is that just a rebound perhaps on the higher income.
Speaker Change: Yeah.
Speaker Change: Yeah, Jeff I think it's really I'll I'll start by saying you know we were actually.
Speaker Change: To some extent positively surprised by the impact by the but the fine dining performance during the third quarter.
Speaker Change: But you know what we saw was consumers are willing to buy up during the holiday season that fine dining across all our brands, we saw that but we do see we are seeing more persistent check management post holidays. So it's it's you know so I guess, we're not ready to claim victory yet on fine dining it's still there's still a soft.
Speaker Change: Yeah.
Speaker Change: Thank you.
Speaker Change: Thank you. Your next question today is coming from Jim Solera from Stephens. Your line is that life.
Speaker Change: Hi, This is Tyler Krauss on for Jim Thanks for taking our questions I do just follow up to Eric's question.
Speaker Change: He could talk higher level about how the marketing program might be different than say pre COVID-19 times any color about changing mix regarding linear TV connected TV social media Influencer marketing would be helpful.
Speaker Change: Hey, Tyler you know our marketing today is very different than it was pre Covid times I'll start with the biggest one which is our marketing as a percent of sales is much lower and it's now more focused on things that help build the brand.
Speaker Change: Where in the past, especially at Olive Garden, a marketing was a lot more about creating a new item telling people about that item and then it being gone six or six or seven weeks later, which made it really challenging in our restaurants, having to train that having to and our supply chain team having to go find that product and buy that product.
Speaker Change: And having to make sure that we have the right amount of product. So there's a lot more complicated than it is today today, our promotions are more more likely than not.
Speaker Change: A menu item, we already have actually I don't think we've had any promotional items that aren't something that's in our pantry already in the last couple of years I'm. So it's stuff that's either on our core menu or it's things that we've had in the past and now what we've done is inject a little bit of hey come come in because some of this is for a limited time.
Speaker Change: And that just gives people a little bit more motivation.
Speaker Change: In regards to mix you know as as Olive garden continues to to learn more and all of our brands and learned more about digital we're seeing a little bit slightly more mixed and digital at Olive Garden again T. V is still the biggest driver.
Speaker Change: But we've been testing things like connected TV and other things there. So so I wouldn't say mixes dramatically changed and then finally, social we have a really great social media team, but we we make sure that all most of it or all of it is really viral things.
Speaker Change: That things that we'd go out and purchase.
Speaker Change: And so our guests really help us on the marketing and the virus viral nature of what we do.
Speaker Change: Great. That's super helpful and just one kind of follow up to the tariff question. You know again very early but could you add any incremental color about your exposure to kitchen equipments were seeing or building material exposure there would be helpful.
Speaker Change: Yeah.
Speaker Change: You know the building materials our teams did some preliminary work, it's actually pretty consistent with what you hear what you heard from the I think the National Association of Homebuilders.
Speaker Change: That said some of it are you know three plus in a lot of low single digits low to mid single digit impact on the overall cost to build.
Speaker Change: But from a kitchen equipment.
Speaker Change: Right now we don't you know that's part of the overall build equipment because some of that but but there are like I said there is there's a lot of unknown. So we don't see that being at a double digit impact let me put it that way.
Speaker Change: Yeah.
Speaker Change: Okay.
Speaker Change: Thank you next question is coming from Laurent <unk> from Deutsche Bank. Your line is now live.
Laurent: Hi, Thanks, Congrats on the recent performance if I could just start with the same store sales guide for the fourth quarter of about 3% is that where you're currently running and you assume current trends hold or are you embedding any change in comp as olive garden launches violent.
Speaker Change: Take one.
Speaker Change: Delivery and then just given the compares to the rest of the quarter.
Speaker Change: Hey, Lauren.
Speaker Change: So quarter to date, we're actually running in line with what we guided for the fourth quarter. So we said greater than 3% and we're running ahead. We're running ahead of 3% I don't think I want to get into much more than that but.
Speaker Change: [laughter], Okay Fair and then on Longhorn Steakhouse category has been very strong for a while now are you seeing any changes in underlying demand for the category changes in consumer behavior.
Speaker Change: Mentioned quarter to date outperformance gap to the industry has accelerated what do you think is guiding that thank you.
Speaker Change: Yeah, you know, Laura and I I would say that the investments Longhorn has made over time in food quality continues to pay off we haven't really seen a big change a dramatic change in in transactions or traffic or anything else in our steakhouse category. You know I would say that Q3 was a.
Speaker Change: A lot more driven by weather than anything else and actually for longhorn there their Thanksgiving shift was a bigger impact than it would have been for olive garden or other brands. So.
Speaker Change: If you look at if you adjust all of those things out Thanksgiving, whether are really Thanksgiving year over year weather year over year Longhorns. Our same restaurant sales were within about 100 basis points of where they were last year in Q3 versus Q2. So we feel pretty good about where they are and you know as Raj mentioned.
Speaker Change: Our our guide for Q4 has positive three up at least 3% and we're ahead of where we're at that are you know in that range.
Speaker Change: In the first three months three weeks of the quarter and long run as a big part of that.
Speaker Change: Great. Thank you very much.
Speaker Change: Thank you next question is coming from Daniela Godzilla from Bernstein. Your line is that life.
Speaker Change: Well thank you.
Speaker Change: But can you give us some comments on improvement of speed of service that you were mentioning a couple of quarters ago is that potential traffic unlock and what have you in the journey and can you give examples of maybe new opportunities that you have identified but we just need some change management to inflect positively. Thank you.
Speaker Change: He had a new low all of this has changed management to be honest with you because it's changing the way people do things that they've been doing for years.
Speaker Change: As I said previously the speed of service opportunities vary by brand I'm. So each brand is approaching it in a different way that makes most sense for them, including brands and fine dining because that's going to be a very different a.
Speaker Change: Very different.
Speaker Change: Tactic than casual dining.
Speaker Change: But this will be a long term initiative for us. So if you want to use your analogy where in the first inning.
Speaker Change: But we're seeing some improvement and we feel really good about that but this was a long term a chat.
Challenge that that that happened over the long term and in casual dining and in full service restaurants, and we think it's gonna be a long term to improve because again, we have to convince too.
Speaker Change: 200000 people in our in our brands and primarily the the the the teams and are in the front of the house that maybe they have to do some things slightly differently than they have been for many many years. So.
Speaker Change: Change management is going to take us a while but we feel good about the initial progress and we think we'll continue to gain progress we're not attributing any of our traffic yet to any improvement in pace of meal or speed.
Speaker Change: But we think over the long term, it's really going to be for guests to want to come back to dime that maybe don't think they can go to a couch dining restaurant because it takes a little bit too long its a little less about the throughput except for the weekend.
Speaker Change: Excellent. Thank you and then speaking of progress with a very successful rollout.
Speaker Change: But Iraq and now you are considering Saturday, so strategically what kind of meters are you considering to select which brands may eventually potentially partner with Uber.
Speaker Change: And again strategically what would you need to see in order to potentially consider yoga class for them at that.
Speaker Change: Marketplace as opposed to just putting through all right. Thank you.
Speaker Change: Sure the new low yeah. We are as we said we did move over to Cheddars on delivery. You know we look for brands that have food that can travel and they travel well there are already doing a pretty good job with their there on time and accurate to go for curbside.
Speaker Change: And that brands that it won't be a very different experience than what they would get in restaurant and so.
Speaker Change: That's how we think about which brands makes sense for the delivery piece and actually the way another way to think about it is what brands have a higher percent of sales in regular to get because if you've got a pretty low to go as a percent of sales, it's probably not it doesn't make as much sense to do delivery.
Speaker Change: You know as you as you. The second question on the pilot or on what would get us to think about third party.
Speaker Change: You know I'd say, where we're focused right now on first party because it solves the major issues that we have with third party.
Speaker Change: And if the issues that we have with third party, which we've been pretty clear about what they are can be solved that wouldn't that would give them make us think more about being on the third party platforms too.
Speaker Change: But we like the Uber direct platform the way, we have it and it's doing a really good job for us and it's not causing a lot of challenges for our restaurants.
Speaker Change: Thank you.
Speaker Change: Thank you. Your next question today is coming from Peter Saleh from <unk> Junior miners that life.
Speaker Change: Great. Thank you.
Speaker Change: I just wanted to come back to the Uber eats conversation.
Speaker Change: Now you mentioned, 40%, 50% incrementally and I recognize it's still early but can you comment on you.
Speaker Change: You know these customers are they spending more of their spending less is it the same just trying to understand their behavior given the incrementals that you're seeing and then I have a quick follow up as well.
Speaker Change: Yeah, Peter I wanted to make sure everybody knows because when when people say Uber eats some people may start going to the Uber platform. It's Super direct you have to come to olive garden. So.
Speaker Change: It is a delivery, but it is through Uber coming through our through our website and on.
Speaker Change: I guess again still too early I'll keep saying that but the delivery guests are pretty similar to our normal to go guests.
Speaker Change: They're younger they're higher income than our dining guests.
Speaker Change: There's very little overlap between our dining guests and our delivery guests. So are these are incremental occasions.
Speaker Change: For people and maybe occasions for people that wouldn't normally come to olive garden.
Speaker Change: Is as it relates to sales the total check is about 20% higher than a typical to go check and that does not include the delivery fee. So that the food and beverage on delivery is about 20% higher than the food and beverage on a to go order.
Speaker Change: And and the last thing on that is about 12% of our sales from delivery or for large party catering items like pans of lasagne or trays of of Fettuccine Alfredo.
Speaker Change: Great. That's very helpful. And then just on the labor side, just I'm curious if you can comment a little bit on availability, if you've seen any changes in availability and and you know the ability to hire a new team members recently has anything changed on that front. Thanks.
Speaker Change: Nothing's changed on that front, you know, we've got a great employment proposition and people want to come to work for us. So.
Speaker Change: So nothing's really changed yet.
Speaker Change: Thank you very much.
Speaker Change: Yeah.
Speaker Change: Thank you next question today is coming from Jeff Farmer from Gordon Haskett. Your line is now live.
Speaker Change: Thank you.
Speaker Change: At the beginning of the call you you did point out that that rather large divergence between the average segment same store sales and guest counts versus sort of the median same store sales and guest counts I'm. Just curious what's your read through is on the divergence and what's causing that pretty outsized divergence.
Speaker Change: Yeah.
Jeff: Hey, Jeff.
Jeff: So if you look at what's happened and that's really driven by higher I think there's just and I think you probably all know the yeah, you know what we're referring to but it seemed like when you actually look at historically over the last at least the 340 years going back the median and an average you are pretty close there were I'll call. It between 50 basis points at Best and then you started to do.
Jeff: <unk> in the second in our fiscal second quarter and it was even more in the third quarter, but you know, but we're not we don't exclude anything they so when we talk about benchmark, we're still referencing the average, but that's really you can call. It you know one or two brands, causing that.
Jeffrey Bernstein: Okay, Yeah, Jeff I, just wanted to ask but I just wanted to add one thing to that you know whenever we talk about the benchmarks, we talk about the benchmarks excluding darden.
Jeff: So in times of Darden was way outperforming.
Jeff: You wouldn't you would have seen that kind of same divergence. If we included just the total benchmark with darden in it.
Jeff: So it's not like it's just one brand that can ever do it we've been able to do that we've done that too many times, but.
Jeff: We always exclude darden brands in the benchmark.
Speaker Change: Okay. That's helpful. And then just one unrelated question you touched on it but.
Speaker Change: You know consumer confidence diving falling however, you want to sort of phrase it and you're pointing to a casual dining consumer that.
Speaker Change: It doesn't seem to be two Antarctic yet so from my perspective, that's fairly surprising in the context of basically 20 years of a segment precedent. So.
Speaker Change: Given that sort of more resilient than casual dining consumer than you might expect in sort of a a an increasingly challenging consumer backdrop. What do you think is driving that demand resilience beyond a consumer just wanting to get out of their house, what is driving that demand resilience from your perspective.
Speaker Change: I'll start by saying you know the the correlations of consumer confidence and spending is really more since COVID-19. So things may have changed after COVID-19, where people are saying I'm still gonna go out to eat no matter, what now again incomes are still rising.
Speaker Change: Compared to inflation and so we're also seeing some of the core items that people have to buy coming down.
Speaker Change: So if you think about what we said in the past where housing was expensive food food.
Speaker Change: And insurance.
Speaker Change: Those and gas those items are starting to come down, especially gas food and housing. So it's giving people a little bit more disposable income and they may be choosing to spend it on dining out versus buying a good so right now.
Speaker Change: We're still feeling okay about it now that could change, but we still think that consumers want to splurge on something and they splurge on things that that they get a great value for and they get a great experience on but again it doesn't mean that that won't change in the future.
Speaker Change: Yeah.
Speaker Change: Thank you. Your next question is coming from Christopher Combe from Stifel. Your line is that life.
Speaker Change: Great. Good morning, guys. This is Patrick on for Chris Rick I know you mentioned last quarter, you plan to begin rolling out and piloting a new POS system. I was just curious if you could give a bit more color maybe on the timeline the brand priorities around that and just any new capabilities that may be putting into the quiver.
Yeah, Patrick the P. O S pilot is going is out now we're in we went into one restaurant at Olive Garden. We're in our second restaurant at Olive Garden. So we're only into you know if you think about how much P. O S does for a restaurant and how much are P. O S does compared to others. We are P. O S is really kind of the heartbeat of the.
Speaker Change: Right and so there's a lot of things that we have to be little bugs here, we work in and out.
Speaker Change: And so olive garden was the first brand.
Speaker Change: We're working on integrating the Uber direct piece to that because that was late in the game. So we can continue to roll it out at Olive Garden and the next brand that will get the new P. O S is choice.
Speaker Change: We don't have to give them their our old Pos and then the new P. O S. So choose will be next.
Speaker Change: And then some of the benefits of it as it's really some of them are that are kind of here, where the code that they are old P. O. S was written in was so old you have to train people on how to use that code to actually make the change to the P. O S.
Speaker Change: This is a much more current code it's easier to make changes it actually can work on any platform you know so the hardware can be.
<unk> it could be kind of normal Pos terminals you name it.
Speaker Change: It'll be easier to maintain so theres a lot of benefits of it and I will tell you. This that when we put it into the first restaurant at Olive garden, even though for the first few days it was running a little slower as you worked out a couple of Kinks, and we went to the servers and say we were going to go out and we can take this P. O S back out and put the open.
Speaker Change: Back and they all said no.
Speaker Change: And so that tells you how how much better it is for them and so we'll continue to to make it a little tweaks that we need to make to make it.
Speaker Change: Work and find out a little bugs that takes a while but we plan on having it start in chili's towards the later end of the summer and we will have it and more olive garden's before that.
Speaker Change: Great appreciate that color thanks, guys.
Speaker Change: Thank you. Your next question is coming from Johnny Wankel from J P. Morgan Your line is now live.
Johnny Wankel: Hi, Thank you two questions if I if I can first as you know.
Johnny Wankel: And personalized digital marketing you know it doesn't make sense for their brands to kind of subtly introduce some promotions I'm going to use the word discounting, but you know some.
Johnny Wankel: No call to action for specific customers that can only be used by that specific customer is kind of the first point.
Johnny Wankel: Don't know if you want to bring the sub $50000 household customer back specifically, but you know maybe something targeted to them or other types of customer cohorts that you think you have opportunity.
Johnny Wankel: So that's the first question and then secondly, and I think it's related.
Johnny Wankel: Olive garden margins have gotten to be very strong I mean, certainly if we were to go back Rick.
Johnny Wankel: 510, 20 years ago, probably stronger than we thought they would be so.
Johnny Wankel: What's really the fair, earning concept level margin for the Olive garden business I mean, if sales dictated I mean would you take it all the way to 25 for example.
Johnny Wankel: Yeah. It does it make sense to start to think about reinvesting in the customer and employee experience and drive profitability more through volumes. Thanks, so much.
Speaker Change: Yeah. So John Thanks for the questions on the personalized digital marketing Yeah. We we can do a lot with digital in a lot on the marketing front, sometimes we don't even need to give an offer for specific customers. We have a pretty good way to determine what normal customer usage patterns are and as they kind of start.
Speaker Change: Slipping from that usage pattern, we just send them a reminder of our brand and they come back. So we will continue to work on that and if we ever get to a point, where we wanted to do some of those just to test them, maybe we will but we haven't really gone back to telling everybody about some of our great offers and that's what this buy one take one is due.
Speaker Change: So.
Speaker Change: But again, we don't rule anything out we just don't want to get back to the days of just doing a discount for everybody.
Speaker Change: On the Olive garden margins, yes. They are strong they were up I think it was about 50 basis points this quarter.
Speaker Change: And they are much stronger than they were a few years back but I wanted to I wanted to kind of couch that in saying that a lot of the margin was not necessarily things that guests see.
Speaker Change: We streamlined our menu over the years, we made it a heck of a lot easier for our teams to execute and that helped to become much more effective in labor.
Speaker Change: You know we continue to even during that time, John we invested a lot in our food.
Speaker Change: You know by adding 50% more chicken we've improved the Alfredo all of the things that we've done and we believe we'll continue to do that.
Speaker Change: I never say never I don't think that olive garden will get to a 25% margin, we're more likely to do things to help continue to improve affordability to drive more sales.
Speaker Change: And focus on sales building versus margin building it.
Speaker Change: It just so happens that sometimes our margins get go up a little bit, but we'll continue to invest to keep our margins at a more reasonable level than them going way up.
Speaker Change: That said, if we find things that the guests don't see and we can take those costs out we'll continue to do that but will likely put some of that back in so that they get to things that guests see so that they get an even better value.
Speaker Change: That's perfect. Thank you.
Speaker Change: Okay.
Speaker Change: Thank you. Your next question is coming from Gregory Frankfurt from Guggenheim Partners. Your line is now live.
Gregory Frankfurt: Hey, Hey, Thanks for the question I had a follow up to Sara's question just on a smaller box format. The Cheddars in yard House, you used to open up I think five to 10 stores a year at those brands a few years ago, you opening up only a couple do you think you can get back there and is that something that can happen in the next couple of years in India.
Gregory Frankfurt: You think that changes the unit growth algorithm at all just some thoughts on that thanks.
Gregory Frankfurt: Yeah, Greg will get into little bit more detail, but yes, we think we can get back to kind of the growth trajectory for yard house and Cheddars and you know as we've said before we want to get to the high end of our long term framework and unit growth.
Speaker Change: And as Raj mentioned are kind of rough number of units for next year that actually is that our high end of unit growth and so and that's that's with olive garden and longhorn, but you know keeping the same mix as they had before so we'll see how how cheddars continues to do in this pro.
Speaker Change: Total hip and how yard house does but we believe that they can get back to their more historical unit growth.
Speaker Change: Okay.
Speaker Change: Thank you next question is coming from Jim Sanderson from Northcoast Research. Your line is now live.
Jim Sanderson: Hey, Thanks for the question I wanted to go back to the quarter performance sales mix for the $12 99 price point given the addition of the Manicotti L. T O that I think competed with some of the premium priced they'll choose you. All also introduced wanted to see how that impacted sales mix.
Yeah.
Speaker Change: Hey, Jim are the 12 99 was actually a pretty low mix compared to the the higher priced items are I'd say it was in the low single digit percent.
Jim Sanderson: Yourself.
Jim Sanderson: Okay. So that went down a bit I think it was around 10% in the past so you.
Jim Sanderson: Do you have the consumer shift up a little bit to set the right way to look at it.
Jim Sanderson: To be clear I'm, sorry, you were talking about the C Y O 12, 99 compared to the Manicotti 12, 99, so the CIO did yeah. It it's still staying in that 9% to 10% range Yep Yep.
Jim Sanderson: Okay.
Jim Sanderson: Alright, and then on the the 14 99 promotion and could you remind us.
Jim Sanderson: How that's comparing to what was in the marketplace last year and what gives you confidence that that 14 99, just the right price point for that promotion.
Jim Sanderson: Yeah last year, Jim we Didnt, we werent promoting anything with limited time or a price point, we were I believe at the time, we were doing equity advertising potentially sources of sole so we were talking about our sources.
Jim Sanderson: And so there's there was no promotion last year that was kind of get off the couch come into our restaurant promotion.
Jim Sanderson: Alright, Thank you very much.
Jim Sanderson: Yeah.
Speaker Change: Thank you. Your next question is coming from Brian Vaccaro from Raymond James Your line is not that.
Brian Vaccaro: Hi, Thanks, and good morning, I just wanted to piggyback on <unk> question, just about the average versus media and performance and I guess, if we can if we can set aside the impact that the big outlier do you think we're also seeing a broader widening between the winners and losers in the category.
Speaker Change: So I'm curious what can you just give me that.
Speaker Change: About the question of are the benefits of consistently delivering a good experience sort of snowballing with the consumer or is there any evidence that.
Speaker Change: Underperforming players, how do you dig deeper and sort of spot on that kind of negative feedback loop.
Speaker Change: Or maybe there's something to mention on sort of the chains versus independents front.
Speaker Change: And I had a quick follow up.
Speaker Change: Sure Ryan let me just try to get as much as I can from there so starting.
Speaker Change: Starting with the just.
Speaker Change: The change fast.
Speaker Change: We've always said that the change that execute well continue to win and I think no matter what the environment as it comes down to the operational execution more so than anything else.
Speaker Change: You know clearly, sometimes a great marketing and promotion will help drive our near term, but over time. The winners have sought a have to have to be able to execute in the four walls and so there is yeah. There is a bifurcation. Some brands are executing really well are we I would say our brands do a great job with that and so are there.
Speaker Change: Scott that's camp on the ones that are not executing as well are the ones that are probably not winning as much and there is probably more of a divergence.
Speaker Change: Over the last.
Speaker Change: A few quarters as consumers are becoming even more discerning.
Speaker Change: And then from a change versus independence I think the big thing is really when you look at the full service restaurant in CPI and you look at the pricing of change you see that they changed their pricing in general are less than the full service and so I think that is a you know that means that the independents are pricing a lot more and so that it's probably.
Speaker Change: Billy Ah you know that that would have an impact on their performance right. So when you look at the overall data aggregate independents are losing share to change and I would say part of that is probably driven by the pricing differential.
Speaker Change: Yeah.
Speaker Change: Okay.
Just back on the fiscal fourth quarter guidance as well.
Speaker Change: You too prescriptive on the March.
Speaker Change: Trend, but I guess as you think about the next few months is there anything we should be mindful of as it relates to comparisons or calendar shifts or any other context, you wanted to put around kind of how you came up with the above 3% and I understand it the choppy volatile environment, there's a lot of uncertainty.
Speaker Change: Maybe it's just conservatism, but just any incremental color on on that fiscal fourth quarter guys. Thanks again.
Speaker Change: Okay.
Rick: Well keep meeting my microphone, Hey, Brian It's Rick.
Rick: The the fourth quarter, you know when I was answering the question a couple of questions ago, I was actually talking about the third quarter year over year Q4, we were running a create your own pasta $13 49.
Rick: Last year versus buy one take one this year, so I apologize for that it still wasn't necessarily a a get off the couch because it was our normal price and so it wasn't really a play as much of a driving promotion as it was just telling people that we have a great value.
Rick: So the compares this year are a little bit different where we have something that's not necessarily on the menu with a with a a great promotion that we ran years ago.
Rick: You know and and when you think about longhorn, they're running pretty much the same thing they ran last year. So.
Rick: We just think that it's what we're doing with I wouldn't take one and delivery as part of the way. The reason that we're going to see a little bit of an above.
Rick: Above 3% comp.
Rick: For Q4.
Rick: Thanks very much.
Speaker Change: Thank you. Your next question is coming from Christine Cho from Goldman Sachs. Your line is now live.
Speaker Change: Thank you for the opportunity.
Christine Cho: I had a quick follow up on the buy one take one deal could you remind us the impact the deal had on traffic or check size five years ago. When you last ran the promotion.
Christine Cho: If successful would this be something you would consider on a more longer term leases or consider moving out in some of your other brands as well. Thank you.
Christine Cho: Hey, Christine the last time, we ran it was will be you know it was before COVID-19 and it was lapping against itself in of itself. Before so you know this is a promotion that we have a lot of experience with it and I will say, it's just our second best guest driving promotion.
Christine Cho: So without it it's the environment is so different now than it was then to say here's what the guest count impact was then I don't think you can necessarily translate that back to today.
Christine Cho: Another reason was because it was at a much it was at a deep discount when we ran it last time versus now is different.
Christine Cho: And what do we run this another brands you know this olive garden already has this $6 take home. So again it doesn't really change their operations very much.
Christine Cho: And when we think about promotion, we wanted to make sure that it builds brand equity, but I wouldn't take one builds the olive garden equity of abundance.
Christine Cho: It's simple to execute but I wouldn't take one is very simple to execute because it's just the same thing we do today with a take home item.
Christine Cho: And you know, it's not a deep deep discount and this ones not so if we did something like that at other brands it might not fit those filters.
Christine Cho: Okay.
Christine Cho: Mhm.
Speaker Change: Thank you we reached end of our question and answer session I will turn the floor back over for any further or closing comments.
Christine Cho: Yeah.
Christine Cho: That concludes our call I want to remind you that we plan to release fourth quarter results on Friday June 20th before the market opens at the conference call to follow Thank you so much for participating on today's call.
Christine Cho: Thank you that does conclude today's teleconference and webcast you may disconnect. Your line at this time and have a wonderful day, we thank you for your participation today.