Q4 2024 Darden Restaurants Inc Earnings Call
Greetings and welcome to the Darden Restaurants' fiscal year, 'twenty 25, Q4 earnings conference call and webcast at this time, all participants will be listen only mode.
Operator: Greetings, and welcome to the Darden Restaurants Fiscal Year 2025 Q4 Earnings Conference Call Webcast. At this time, all participants are in listen-only mode. If anyone should require operator assistance, please press star zero on your telephone keypad.
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Courtney Aquilla: It's now my pleasure to turn the call over to Courtney Aquilla, Senior Director, Finance & Investment Relations. Courtney, please go ahead. Thank you, Kevin. Good morning, everyone, and thank you for participating on today's call. Joining me are Rick Cardenas, Darden's President and CEO, and Raj Vennam, CFO.
coordinate well: Now my pleasure to turn the call over to coordinate well she's the director of Finance and Investor Relations. Please go ahead.
Speaker Change: Thank you Kevin Good morning, everyone and thank you for participating on today's call. Joining me are Rick Cardenas, Darden's, President and CEO and Raj the Nam CFO.
Speaker Change: 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 the actual results to differ materially from our expectations and projections. Those risks are described in the company.
Courtney Aquilla: 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 the actual results to differ materially from our expected results. Those risks are described in the company's press release. ...distributed this morning and in its filings with the security...
Speaker Change: The press release, which was distributed this morning and in its filings with the Securities and Exchange Commission.
Courtney Aquilla: We are simultaneously broadcasting a presentation during this call, which is posted in the Investor Relations section of our website at Darden. Today's discussion and presentation includes certain non-GAP measurements, and reconciliations of these measurements are included in the presentation.
Speaker Change: We are simultaneously broadcasting a presentation. During this call which is posted in the Investor Relations section of our website at Darden dotcom.
Speaker Change: Today's discussion and presentation include certain non-GAAP measurements and reconciliations of these measurements are included in the presentation.
Courtney Aquilla: Looking ahead, we plan to release fiscal 2026 first quarter earnings on Thursday, September 18, before the market closes. followed by a conference call.
Speaker Change: Looking ahead, we plan to release fiscal 2026 first quarter earnings on Thursday September 18th before the market opens.
Speaker Change: Followed by a conference call.
Speaker Change: During today's call all references to the industry for all its referred to the Black box intelligence casual dining benchmarks, excluding darden during the fiscal fourth quarter average same restaurant sales for the industry grew 3.0% and average same restaurant guest counts grew 0.9%.
Courtney Aquilla: During today's call, all reference to the industry results refer to the Black Box Intelligence Casual Dining Benchmark, excluding Darden. During the fiscal fourth quarter, average same restaurant sales for the industry grew 3.0 percent and average same restaurant guest counts grew 0.9 percent.
Courtney Aquilla: This morning, Rick will share some brief remarks on the quarter. Raj will provide details on our fourth quarter and full year financial results, as well as share our fiscal 2026 financial outlook. Then Rick will close with some final comments. Now I will turn the call over. Thank you, Courtney.
Speaker Change: This morning, Rick will share some brief remarks on the quarter Raj will provide details on our fourth quarter and full year financial results as well as share our fiscal 2026 financial outlook than Rec will close with some final comments now I will turn the call over to Rick.
Rick: Thank you Courtney and good morning, everyone.
Rick Cardenas: Good morning, everyone. We had a strong quarter with same restaurant sales and earnings growth that exceeded our expectations. I'm proud of the great work by our restaurant teams throughout the quarter, particularly on Mother's Day, as several brands achieved sales records for that day. The return of Olive Garden's buy-one-take-one offer for the first time in five years, combined with the continued strength of Off's premise, drove their impressive sales during the quarter. Olive Garden's marketing strategy to meaningfully communicate strong value, create urgency, and introduce food news continue to resonate as guests are motivated by news and compelling price Buy one, take one, with a starting price point of $14.99.
Speaker Change: We had a strong quarter with same restaurant sales and earnings growth that exceeded our expectations I'm proud of the great work by our restaurant teams throughout the quarter, particularly my mother's day several brands achieved sales records for that day.
Speaker Change: The return of Olive Garden's buy one take one offer for the first time in five years combined with the continued strength of off premise drove their impressive sales during the quarter.
Speaker Change: Olive garden's marketing strategy to meaningfully communicate strong value create urgency and introduce food news continue to resonate as guests are motivated by news and compelling price points.
Speaker Change: But I wouldn't take one with a starting price point of 14 99 allowed guests to choose one entree for their dining experience and they can take the second one home.
Rick Cardenas: Allow guests to choose one entree for their dining experience, and then take a second one home. The take-home selections leveraged Olive Garden's existing $6 take-home plan.
Speaker Change: The take home collections leveraged olive garden's existing $6 take home platform minimizing operational complexity.
Rick Cardenas: Minimizing Operational Complexity. During Buy One, Take One, Olive Garden's same restaurant sales gap versus the industry increased to 450 based on... With delivery available nationwide the entire quarter, Olive Garden continued to see order volume grow week-to-week while retaining higher-than-average sales per transaction versus curbside pickup This, combined with continued growth in catering and curbside-to-go, drove overall takeout sales to grow nearly 20% over last year. At the end of the quarter, Olive Garden launched a campaign to promote delivery across multiple channels. Television Advertising, with a compelling and memorable 1 million pre-deliveries, partially funded by Uber. We continue to see strong incrementality, with average weekly deliveries per restaurant nearly doubling during the last two weeks of the quarter.
Speaker Change: During buy one take one olive garden same restaurant sales gap versus the industry increased to 450 basis points.
Speaker Change: With delivery of bell available nationwide the entire quarter Olive garden continued to see order volume grow week to week, while retaining higher than average sales per transaction versus curbside pick up orders.
Speaker Change: This combined with continued growth in catering and curbside to go drove overall take out sales to grow nearly 20% over last year.
Speaker Change: At the end of the quarter Olive Garden launched a campaign to promote delivery across multiple channels, including TV advertising with a compelling and memorable offer 1 million free deliveries partially funded by Uber.
Speaker Change: We continue to see strong Incrementals o'dea with average weekly deliveries per restaurant nearly doubling during the last two weeks of the quarter.
Speaker Change: Yeah.
Rick Cardenas: The Olive Garden team continued to execute at a high level, which led to an all-time high guest satisfaction score for the quarter.
Speaker Change: The olive garden team continued to execute at a high level, which led to an all time high guest satisfaction score for the quarter.
Rick Cardenas: I am extremely proud of how Dan Kiernan and his team manage the business throughout the year and the strong momentum they have generated heading into the new fiscal year. At Longhorn Steakhouse, their ongoing commitment to quality, simplicity, and culture continues to drive their momentum. Their entire team remains obsessed with serving the highest quality steaks in casual dining. This includes having industry-leading specifications and ensuring they perfectly season and grill every steak they serve. To support this, during the quarter, Olive Garden validated each one of their Grillmasters' expertise with the 8th Annual Steakmaster Series, their internal grilling competition and training program.
Speaker Change: I'm extremely proud of how Dan Kiernan and his team managed the business throughout the year and the strong momentum they have generated heading into the new fiscal year.
Speaker Change: But long way steakhouse their ongoing commitment to quality simplicity and culture continues to drive their momentum.
Speaker Change: Their entire team remains obsessed with serving the highest quality steaks in casual dining.
Speaker Change: This includes having industry, leading specifications and ensuring they perfectly season and grill every stake they serve.
Speaker Change: To support this during the quarter Olive garden validated each one of their grill masters expertise with the eighth annual steak Masters series their internal drilling competition and training program.
Speaker Change: Congratulations to Tim Crane from the Longhorn Steakhouse in independence, Missouri, who claimed the championship trophy.
Rick Cardenas: Congratulations to Tim Crane from the Longhorn Steakhouse in Independence, Missouri, who claimed the championship trophy. This focus on ongoing training continues to pay off, as Longhorn ended the year with an all-time high Stakes Will Correctly score, as well as a new all-time high Guest Satisfaction score for the quarter. Laura Williamson and her team have done a great job of building on the business momentum at Longwood. For the fiscal year, their same restaurant sales increased 5.1%, and they reached a major milestone by surpassing $3 billion in total sales. These results reflect the strength of their focus strategy.
Speaker Change: This focus on ongoing training continues to pay off as long run ended the year with an all time high Stakes will correctly score as well as a new all time high guest satisfaction score for the quarter.
Speaker Change: Laura Williamson and her team have done a great job of building on the business momentum at longhorn.
Speaker Change: For the fiscal year their same restaurant sales increased five 1% and they reached a major milestone by surpassing $3 billion in total sales.
Speaker Change: These results reflect the strength of their focus strategy.
Speaker Change: Last quarter, we announced Cheddar scratch kitchen had begun piloting a project.
Rick Cardenas: Last quarter, we announced Shutter Scratch Kitchen had begun piloting Uber Direct. It was a successful pilot and, as of last week, delivery is now available in all but eight Chiders restaurants. Paid media and email support began earlier this week, partially funded by Uber. Cheddar's marketing team also continues to build on its use of connected television, debuting the first 30-second spot in Cheddar's history during the quarter. The spot was developed at no cost to Darden, thanks to the scale of our CTV media spend across our portfolio. In addition to Olive Garden and Longhorn, Cheddar's also received an all-time high guest satisfaction score for the quarter, as did Ruth's Chris Steakhouse and Eddie V's.
Speaker Change: It was a successful pilot and as of last week delivery is now available in all but eight charters restaurants.
Speaker Change: Paid media and email support began earlier this week, partially funded by Uber.
Speaker Change: The Chatters marketing team also continues to build on its use of connected TV did during the first 32nd spot in Cheddars history during the quarter.
Speaker Change: The start was developed at no cost to Darden, thanks to the scale of our C. T V media spend across our portfolio.
Speaker Change: In addition to Olive Garden Longhorn Cheddar has also received an all time high guest satisfaction score for the quarter past at Ruth's, Chris Steak House and Eddie V's.
Rick Cardenas: We know that engaged, well-trained team members help drive operational success, and two of our brands were recognized for their people practices during the quarter. Longhorn and the Capitol Grill received the Employer of Choice Awards from Black Box Intelligence for casual dining and fine dining respectively. The award recognizes exemplary performance in managing turnover rates, fostering an inclusive workplace culture, and implementing best-in-class people practices.
Speaker Change: We know that engaged well trained team members helped drive operational success and two of our brands were recognized for their people practices during the quarter.
Speaker Change: Longhorn in the capital grille received the employer of choice awards from Black box intelligence for casual dining and fine dining respectively.
Speaker Change: The order award recognizes exemplary performance in managing turnover rates fostering an inclusive workplace culture and implementing best in class people practices.
Speaker Change: Overall, I am pleased with our results.
Rick Cardenas: Overall, I am pleased with our results. Our adherence to our winning strategy, anchored in our four competitive advantages, and being brilliant with the basics, led to a successful year. Our strategy remains the right one for the company, and we will continue to execute it to drive growth and long-term shareholder value.
Speaker Change: Our adherence to our winning strategy anchored in our four competitive advantages and being brilliant with the basics led to a successful year.
Speaker Change: Our strategy remains the right one for the company and we will continue to execute it to drive growth and long term shareholder value now I will turn it over to Raj.
Raj Vennam: Now I will turn it over to Raj. Thank you, Rick, and good morning, everyone. As Rick said, fiscal 2025 was another strong year driven by disciplined execution of our strategy. In the fourth quarter, same restaurant sales continued the sequential improvement from prior quarters, with our casual brands gaining significant market share. This resulted in sales and earnings exceeding our expectations for the quarter. Furthermore, we finished the year with same restaurant sales at the top of our initial guidance range and earnings in the upper half of the range, despite the slower than expected start to the year.
Raj: Thank you Rick and good morning, everyone.
Raj: As Rick said fiscal 2025, it was another strong year driven by disciplined execution of our strategy.
Speaker Change: In the fourth quarter same restaurant sales continued the sequential improvement from prior quarters, we saw casual brands gaining significant market share.
Speaker Change: This resulted in sales and earnings exceeding our expectations for the quarter.
Speaker Change: Furthermore, we finished the year with same restaurant sales at the top of our initial guidance range and earnings in the upper half of the range. Despite the slower than expected start to the year.
Speaker Change: Now looking at the fourth quarter.
Raj Vennam: Now looking at the fourth quarter. We generated $3.3 billion of total sales, 10.6% higher than prior years. This was driven by same restaurant sales growth of 4.6% with positive traffic growth, the acquisition of 103 Chuy's restaurants. and the addition of 25 net new restaurants, which includes the permanent closure of 22 underperforming restaurants. Tim Reston Sales exceeded the industry benchmark for the quarter and were in the top decile of the industry. Adjusted diluted net earnings per share from continuing operations increased 12.5% to $2.98 We generated 582 million dollars of adjusted EBITDA. and return $215 million to shareholders through $164 million in dividends and $51 million of share repurchase.
Speaker Change: We generated $3 3 billion of total sales 10, 6% higher than prior year. This was driven by same restaurant sales growth of four 6% with positive traffic growth. The acquisition of 103, Chili's restaurants, and the addition of 25 net new restaurants, which include the permanent closure.
Speaker Change: Of 22 underperforming restaurants.
Speaker Change: Same restaurant sales exceeded the industry benchmark for the quarter and one in the top decile of the industry.
Speaker Change: Adjusted diluted net earnings per share from continuing operations increased to 12, 5% to $2 98.
Speaker Change: We generated $582 million of adjusted EBITDA.
Speaker Change: And returned $215 million to shareholders through $164 million in dividends and $51 million of share repurchases.
Speaker Change: Turning to the fourth quarter P&L compared to last year.
Raj Vennam: Turning to the fourth quarter P&L compared to last year. Food and beverage expenses were 60 basis points lower, as commodities inflation was better than expected at approximately 1.5%. Restaurant labor was 10 basis points lower. As productivity gains more than offset higher performance-based compensation and pricing below total labor inflation of approximately 3.5 percent, Restaurant expenses were 20 basis points higher, driven by brand mix with the addition of chouisse and the impact of first-party delivery at Olive Garden, partially offset by sales leverage. Marketing expenses were flat at 1.3% of sales, consistent with our expectations. This all resulted in restaurant-level EBITDA for the quarter, improving 50 basis points to 21.6%.
Speaker Change: And beverage expenses were 60 basis points lower at <unk>.
Speaker Change: Commodities inflation was better than expected at approximately one 5%.
Speaker Change: Restaurant Labor was 10 basis points lower.
Speaker Change: As productivity gains more than offset high performance higher performance based compensation and pricing below total labor inflation of approximately three 5%.
Speaker Change: Restaurant expenses were 20 basis points higher driven by brand mix with the addition of QE and the impact of first party delivery at Olive garden, partially offset by sales leverage.
Speaker Change: Marketing expenses were flat at one 3% of sales consistent with our expectations.
Speaker Change: This all resulted in restaurant level EBITDA for the quarter, improving 50 basis points to 21, 6%.
Speaker Change: Preopening costs were 10 basis points higher as we accelerated our new restaurant pipeline opening 19 restaurants during the quarter.
Raj Vennam: Pre-opening costs were 10 basis points higher as we accelerated our new restaurant pipeline, opening 19 restaurants during the quarter. Adjusted G&A expenses were 30 basis points higher due to higher incentive compensation accrual compared to the fourth quarter last year and unfavorable mark-to-market expenses on our deferred compensation. Because of the way we hedge mark-to-market expense, this is largely offset in the tax Interest expense increased 20 basis points due to the financing expenses related to the two East acquisitions. And our adjusted effective tax rate for the quarter was 12.2%, with tax expenses down 20 basis points because of the mark-to-market hedge impact I referenced earlier.
Speaker Change: Adjusted G&A expenses were 30 basis points higher due to higher incentive compensation accrual compared to the fourth quarter last year.
Speaker Change: And unfavorable mark to market expenses on our deferred compensation.
Speaker Change: Because of the way, we hedge mark to market expense. This is largely offset in the tax line.
Speaker Change: Interest expense increased 20 basis points due to the financing expenses related to the <unk> acquisition.
Speaker Change: And our adjusted effective tax rate for the quarter was 12, 2% with tax expenses down 20 basis points because of the mark to market hedge impact I referenced earlier.
Speaker Change: In total our adjusted earnings from continuing operations was $352 million, which was 10, 7% of sales.
Raj Vennam: In total, our adjusted earnings from continuing operations were $352 million, which was 10.7% of sales.
Speaker Change: In the fourth quarter all of our segments grew total sales with three of the four segments growing same restaurant sales and segment profit margin.
Raj Vennam: In the fourth quarter, all of our segments grew total sales, with three of the four segments growing same restaurant sales and segment profit margins. Olive Garden increased total sales for the quarter by 8.1 percent. Strong same restaurant sales growth of 6.9% and the addition of 15 net new restaurants. Olive Garden Same Restaurant Sales outperformed the industry benchmark by 390 basis points for the quarter. Uber direct delivery fees positively benefited CheckMix by about 40 basis points in the quarter. These fees were passed on to Uber with the revenue fully offset in restaurant expenses. Olive Garden continues to have industry-leading segment profit margin, delivering 23.8% for the quarter, which is 100 basis points higher than last year.
Speaker Change: Olive garden increased total sales for the quarter by eight 1% with strong same restaurant sales growth of six 9% and the addition of 15 net new restaurants.
Speaker Change: Olive garden same restaurant sales outperformed the industry benchmark by 390 basis points for the quarter.
Speaker Change: What about direct delivery fees positively benefited check mix by about 40 basis points in the quarter.
Speaker Change: These fees were passed on to work with the revenue fully offset in restaurant expenses.
Speaker Change: Olive garden continues to have industry, leading segment profit margin delivering 23, 8% for the quarter, which is 100 basis points higher than last year.
Speaker Change: At Longhorn total sales increased nine 3% driven by same restaurant sales growth of six 7% and the addition of 60 net new restaurants.
Raj Vennam: At Longhorn, total sales increased 9.3%, driven by same restaurant sales growth of 6.7%, and the addition of... 16 Net New Restaurants Longhorn continues to increase market share with strong and sustained sales growth, exceeding the industry's same Russian sales benchmark by 370 basis points this quarter and 850 basis points on a two-year basis. Segment profit margin for the quarter was 20.1%, 80 basis points above last quarter.
Speaker Change: Longhorn continues to increase market share with strong and sustained sales growth exceeding the industry same restaurant sales benchmark by 370 basis points this quarter and 850 basis points on a two year basis.
Speaker Change: Segment profit margin for the quarter was 21% 80 basis points above last year.
Speaker Change: Total sales for fine dining segment increased two 3%.
Raj Vennam: Total sales for fine dining segment increased 2.3%. given by the addition of six net new restaurants, which includes the permanent closure of two underperforming restaurants. restaurant sales were negative for the quarter resulting in segment profit margin lower than last While the fine dining category as a whole continues to be challenged, we are seeing sequential improvement in guest traffic from households earning $150,000 and above. Total sales for the other business segment increased 22.4% with the acquisition of Chewy's and positive CM Restaurant sales at Yardhouse and Chateau. This positive growth was partially offset by the permanent closure of 20 restaurants during the quarter, including 15 Bahama Breeze restaurants.
Speaker Change: And by the addition of six net new restaurants, which includes the farmer and closure of two underperforming restaurants.
Speaker Change: Same restaurant sales were negative for the quarter, resulting in segment profit margin lower than last year.
Speaker Change: While the fine dining category as a whole continues to be challenged we are seeing sequential improvement in guest traffic from households, earning $150000 and above.
Speaker Change: Total sales for the other business segment increased 22, 4% with the acquisition of Chewy and positive same restaurant sales at yard house and Cheddars.
Speaker Change: This positive growth was partially offset by the permanent closure of 20 restaurants during the quarter, including 15 Bahama Breeze restaurants.
Raj Vennam: Positive sales momentum and continued productivity improvements at Your House and Cheddar's contributed to a 17.5% segment profit margin. for the other business segment, 10 basis points higher than last.
Speaker Change: Positive sales momentum and continued productivity improvements at yard house and charters contributed to 17, 5% segment profit margin.
Speaker Change: While the other business segment 10 basis points higher than last year.
Speaker Change: The integration of <unk> is progressing as planned with synergies on track and a neutral impact to EPS for fiscal 2025, which is in line with our expectations.
Raj Vennam: The integration of Chuy is progressing as planned, with synergies on track, and a neutral impact to EPS for fiscal 2025, which is in line with our expectations.
Speaker Change: As we look at our annual results for fiscal 2025, we had same restaurant sales growth of 2% outperforming the industry by 170 basis points.
Raj Vennam: As we look at our annual results for fiscal 2025, we had same restaurant sales growth of 2%, outperforming the industry by 170 basis points. Total sales increased 6%, surpassing $12 billion for the first time in our history. Adjusted diluted net earnings per share from continuing operations increased 7.5% to $9.55. We delivered $2 billion in adjusted EBITDA from continuing operations driven by strong sales growth and we returned $1.1 billion to shareholders with $659 million in dividends and $418 million in share repayments. Looking at our fiscal 2025 full-year P&L, restaurant-level EBITDA grew 40 basis points driven by discipline, cost management, and pricing leverage.
Speaker Change: Total sales increased 6%, surpassing $2 billion for the first time in our history.
Speaker Change: Adjusted diluted net earnings per share from continuing operations increased seven 5% to $9 55.
Speaker Change: We delivered $2 billion in adjusted EBITDA from continuing operations driven by strong sales growth and we returned $1 $1 billion to shareholders with $659 million in dividends and $418 million in share repurchases.
Speaker Change: Looking at our fiscal 2025 full ERP N L I.
Speaker Change: Restaurant level EBITDA grew 40 basis points, driven by disciplined cost management and pricing leverage. This favorability was partially offset by the increased depreciation and amortization expense.
Raj Vennam: Disfavorability was partially offset by the increased depreciation and amortization expense resulting in operating income margin that was 10 basis points higher than last year. Financing expenses related to Chuy's acquisition increased adjusted interest expense 20 basis points from last month. This all resulted in adjusted earnings from continuing operations of 9.4%, which was 10 basis points below last month. As I mentioned earlier, we permanently close 15 underperforming Bahama Bees restaurants, as well as a few restaurants at other brands. These closures will result in a headwind to our fiscal 2026 total sales growth, but are expected to be slightly positive to earnings.
Speaker Change: And operating income margin that was 10 basis points higher than last year.
Speaker Change: Financing expenses related to two lease acquisition increased adjusted interest expense 20 basis points from last year. This all resulted in adjusted earnings from continuing operations of nine 4%, which was 10 basis points below last year.
Speaker Change: Yeah.
Speaker Change: As I mentioned earlier, we permanently closed 15 underperforming, but how long are these restaurants as well as a few restaurants at other brands.
Speaker Change: These closures will result in a headwind to our fiscal 2026 total sales growth, but are expected to be slightly positive to earnings.
Speaker Change: Fiscal 2026 is a 53 week year, and we anticipate a positive impact from the extra week on diluted net earnings per share from continuing operations of approximately 20.
Raj Vennam: The fiscal 2026 is a 53-week year, and we anticipate a positive impact from the extra week on diluted net earnings per share from continuing operations of approximately $26 billion.
Speaker Change: Now turning to our financial outlook for fiscal 2026.
Raj Vennam: Now turning to our financial outlook for fiscal 2020. We expect total sales growth of 7% to 8%, including approximately 2% from the additional. Same restaurant sales growth of 2% to 3.5%. and opening 60 to 65 new restaurants. Capital spending between $700 million and $750 million. Total inflation of 2.5% to 3%, with commodities inflation of approximately 2.5%, and total labor inflation of approximately 3.5%. EBITDA of 2.16 billion dollars to 2.19 billion dollars an annual effective tax rate of approximately 13%. and approximately $117 million diluted average share outstanding for the year. all resulting in diluted net earnings per share between $10.50 and $10.77.
Speaker Change: We expect total sales growth of 7% to 8%, including approximately 2% from the additional week.
Speaker Change: Same restaurant sales growth of 2% to three 5%.
Speaker Change: And opening 60% to 65, new restaurants capital spending between $700 million and $750 million.
Speaker Change: Total inflation of two and half percent to 3% with commodities inflation of approximately two 5% and total labor inflation of approximately three 5%.
Speaker Change: EBITDA of $2.16 billion to 2.19 billion.
Speaker Change: And annual effective tax rate of approximately 13%.
Speaker Change: And approximately higher than $17 million diluted average shares outstanding for the year.
Speaker Change: All resulting in diluted net earnings per share between $10 50, and $10 70.
Speaker Change: This morning, we also announced that our board approved a 7% increase to our regular quarterly dividend to $1 50 per share implying an annual dividend of $6.
Raj Vennam: This morning, we also announced that our board approved a 7% increase to our regular quarterly dividend to $1.50 per share, implying an annual dividend of $6.00.
Speaker Change: Now turning to our long term financial framework, which outlines the strategic priorities and performance expectations that guide our sustained value creation.
Raj Vennam: Now turning to our long-term financial framework, which outlines the strategic priorities and performance expectations that guide our sustained value creation. We remain committed to delivering 10 to 15 percent total shareholder return as defined by EPS growth plus dividend. However, we're updating the framework to reflect a greater emphasis on sales growth with appropriate investments while maintaining or growing margins. As a result, we're increasing new restaurant growth to 3% to 4%, same restaurant sales growth to 1.5% to 3.5%, additionally, we're updating how we define margin expansion.
Speaker Change: We remain committed to delivering 10% to 15% total shareholder return as defined by EPS growth plus dividend yield.
Speaker Change: However, we are updating the framework to reflect a greater emphasis on sales growth with appropriate investments, while maintaining or growing margin.
Speaker Change: As a result, we're increasing new restaurant growth to 3% to 4% same restaurant sales growth to 1.5 to three 5%. Additionally, what our bidding how we define margin expansion shifting from EBIT margin to earnings after tax margin to more accurately reflect how we view.
Raj Vennam: This is a video on shifting from EBIT margin to Earnings After Tax margin to more accurately reflect how we view and manage our business. There are three primary drivers of. First, due to the way we hedge mark-to-market expense on our deferred compensation, the impact in G&A is largely offset in the tax line. Current lease accounting guidelines result in an ongoing negative impact to interest and appreciation with an offsetting benefit in restaurant expenses. And third, to account for any interest expense associated with any future acquisition. Our updated framework targets each margin growth to be flat to 20 basis points.
Speaker Change: You and manage our business.
Speaker Change: There are three primary drivers of this change.
Speaker Change: Due to the way, we hedge mark to market expense on our deferred compensation.
Speaker Change: Impacting G&A is largely offset in the tax line.
Speaker Change: Second.
Speaker Change: Current lease accounting guidelines resolved in an ongoing negative impact to interest and depreciation with an offsetting benefit in restaurant expense.
Speaker Change: Third we are calling for any interest expense associated with any future acquisitions.
Speaker Change: Our updated framework targets each margin growth to be flat to 20 basis points.
Speaker Change: This all results in eat growth contributing 6% to 10% of total shareholder return.
Raj Vennam: This all results in Eat Growth contributing 6-10% of total shareholder returns. Our dividend remains a priority and the target payout ratio range of 50% to 60% remains unchanged. Share repurchase is being updated from a dollar range to a percentage range of contribution to shareholder returns. Return of cash is now targeted to contribute 4% to 5% of total shareholder.
Speaker Change: Our dividend remains a priority and the target payout ratio range of 50% to 60% remains unchanged.
Speaker Change: Share repurchase is being updated from a dollar range to a percentage range of contribution to shareholder return.
Speaker Change: They turned off Kashi is now targeted to contribute 4% to 5% of total shareholder return.
Speaker Change: Looking at our performance since 2019 relative to the updated framework.
Raj Vennam: Looking at our performance since 2019 relative to the updated framework. New restaurant growth, inclusive of acquisitions, was within the updated range having grown 3.1%. same restaurant sales of 2.9% is in the top half of the target. And each margin expansion was above the midpoint of the updated range, increasing 13 basis points on an annualized basis. resulting in an annualized eat growth of 7.6% near the middle of the range. The dividend payout ratio of 58% is near the top end of the range, and share repurchase contribution to shareholder return was 1%. culminating in a total cash return of 4.1% despite the issuance of 9 million shares of common stock in fiscal 2020.
Speaker Change: New restaurant growth inclusive of acquisitions was within the updated range, having grown three 1%.
Speaker Change: Same restaurant sales of two 9% is in the top half of the target range and.
Speaker Change: And <unk> margin expansion was above the midpoint of the updated range, increasing 13 basis points on an annualized basis.
Speaker Change: Resulting in an annualized growth of seven 6% near the middle of the range.
Speaker Change: The dividend payout ratio of 58% is near the top end of the range and share repurchase contribution to shareholder return was 1%, culminating in total cash return of four 1%. Despite the issuance of 9 million shares of common stock in fiscal 2020.
Raj Vennam: Total shareholder return as defined by EPS growth plus dividend yield was 11.6% and within our targeted range.
Speaker Change: Total shareholder return as defined by EPS growth plus dividend yield was 11, 6% and within our targeted range.
Speaker Change: Additionally.
Raj Vennam: Additionally, over our 30 year history as a publicly traded company, Darden has achieved an annualized total shareholder return of 10% or greater for any 10 fiscal year period when taking into account Darden's stock appreciation plus dividend.
Speaker Change: Our 30 year history, and well, what our 30 year history as a publicly traded company Darden has achieved an annualized total shareholder return of 10% or greater for any 10 fiscal year period, when taking into account darden stock appreciation plus dividend yield.
Speaker Change: Yeah.
Speaker Change: Finally, our strong operating model generates a significant generate significant and durable cash flows.
Raj Vennam: Finally, a strong operating model generates significant and durable cash flow. Since Fiscal 2019, we've grown EBITDA by about $800 million and are on track to reach nearly $1 billion in EBITDA growth by the end of Fiscal 2020. Our balance sheet at the end of fiscal 2025 is well positioned with adjusted debt to EBITDA of 2.1 times. This is at the low end of our targeted range of 2 to 2.5 times, despite the additional debt related to the acquisition of Chewy's and Ruth's Crest over the past two years.
Speaker Change: Since fiscal 29, 2019, we've grown EBITDA by about $800 million.
Speaker Change: We're on track to reach nearly $1 billion in EBITDA growth by the end of fiscal 2026.
Speaker Change: Our balance sheet at the end of fiscal 2025 is well positioned with adjusted debt to EBITDAR of two one times.
Speaker Change: This is at the low end of our targeted range of two to 2.5 times. Despite the additional debt related to the acquisition of chewy and Ruth's Chris over the past two years.
Rick Cardenas: Now I'll turn it back to Rick. Thanks, Raj. Strategic planning is one of our competitive advantages, and at the Darden level, it ensures that we have the right portfolio of brands. We align strategies and coordinate operations to maximize our portfolio's value, and we capture the available synergies across all our brands. For our brands, our strategic planning process allows us to determine the strategic role in a portfolio, identify their distinct advantages, and cultivate differentiated positions. develop a deep understanding of their guests and the competitive landscape, and ensure they adhere to their strategy so they can compete effectively and grow share.
Rick: Now I'll turn it back to Rick.
Rick: Thanks Raj.
Raj: Strategic planning is one of our competitive advantages and the garden level. It ensures that we have the right portfolio of brands.
Speaker Change: We align strategies and coordinate operations to maximize our portfolio's value.
Speaker Change: And we capture the available synergies across all our brands.
Speaker Change: For our brands, our strategic planning process allows us to determine the strategic role in our portfolio.
Speaker Change: Identify their distinct advantages and cultivate differentiated positioning.
Speaker Change: Develop a deep understanding of their guests and the competitive landscape.
Speaker Change: And ensure they adhere to their strategy. So they can compete effectively and grow share.
Speaker Change: During the quarter, we completed our five year planning process.
Rick Cardenas: During the quarter, we completed our five-year planning process. Each of our brands has a clear understanding of their role in their portfolio, and they have built a five-year strategic plan based on that role, focusing on what they need to do to win today and into 2030. They have already begun to put their plans in action and will execute them to derive shareholder value.
Speaker Change: Each of our brands has a clear understanding of their role in their portfolio and they have built a five year strategic plan based on that role focusing on what they need to do to win today and into 2030.
Speaker Change: They have already begun to put their plans in action and we will execute them to drive shareholder value.
Rick Cardenas: Additionally, there were some other key outcomes from that process that I would like to share. As Raj mentioned, we made the decision to close 15 Bahama Breeze locations in May, leaving the 28 highest performing Bahama Breeze restaurants in our portfolio. After further review, we have made the difficult decision that these remaining locations and the Bahama Breeze brand are not a strategic priority. We also believe that this brand and these restaurants have the potential to benefit from a new owner. Consequently, we will be considering strategic alternatives for Bahama Breeze. Including a potential sale of the brand or converting restaurants to other Darden brands.
Speaker Change: Additionally, there were some other key outcomes from that process, but I would like to share.
Speaker Change: As Raj mentioned, we made the decision to close 15, Bahama Breeze locations in May and leaving the 28 highest performing bahama breeze restaurants in our portfolio.
Speaker Change: After further review we have made the difficult decision that these remaining locations and the Bahama Breeze brand are not a strategic priority for us.
Speaker Change: We also believe that this brand and these restaurants have the potential to benefit from a new owner.
Speaker Change: Consequently, we will be considering strategic alternatives for Bahama breeze, including a potential sale of the brand or converting restaurants to other darden brands.
Speaker Change: Excluding any one time potential impacts which are unknown as of today, we do not expect these strategic alternatives, including a potential sale to have a material impact on our financial results.
Rick Cardenas: Excluding any one-time potential impacts, which are unknown as of today, we do not expect these strategic alternatives, including a potential sale, to have a material impact on our financial results.
Speaker Change: We also signed a definitive agreement to sell the eight olive garden locations in Canada to recipe unlimited.
Rick Cardenas: We also signed a definitive agreement to sell the eight Olive Garden locations in Canada to Recipe Unlimited. The largest full-service operator in Canada, and we are on track to close that deal soon.
Speaker Change: The largest full service operator in Canada, and we are on track to close that deal soon.
Rick Cardenas: These eight restaurants will become franchised, and upon close, Darden and Recipe Unlimited will enter into an area development agreement to open 30 more olive gardens over the next 10 years. Their expertise in the Canadian market will help the Olive Garden better operate locally and accelerate the brand's ability to grow throughout the country. Our international franchising team, led by Brad Smith, is focused on growing our global presence. Today we have 154 franchise locations, which include 63 in the continental United States and 91 outside the continental United States. One of the benefits of the Ruth Chris acquisition was the scale it added to our franchise.
Speaker Change: These eight restaurants will become franchised and upon close Darden and recipe unlimited will enter into an area development agreement to open 30, more olive garden's over the next 10 years.
Speaker Change: Their expertise in the Canadian market will help the olive garden, better operate locally and accelerate the brand's ability to grow throughout the country.
Speaker Change: Our international Franchising team led by Brad Smith, who is focused on growing our global presence today, we have 154 franchise locations, which includes 63 in the continental United States and 91 outside the Continental United States.
Speaker Change: One of the benefits of the Ruth's Chris acquisition with the scale it added to our franchise business.
Rick Cardenas: The increase in revenue from adding 74 Ruth's Crisp franchise locations has allowed the team to grow faster. We were able to add the resources and systems to help our franchisees better operate our brands that would have taken us longer if we had not added the Ruth's Chris Restaurant. and the team has been busy signing new area development agreements with international partners.
Speaker Change: Increase in revenue from adding 70 for Ruth's Chris franchise locations has allowed the team to grow faster.
Speaker Change: We were able to add the resources and systems to help our franchisees better operate our brands that would have taken us longer if we had not added the ruth's Chris restaurants.
Speaker Change: And the team has been busy signing new area development agreements with international partners.
Speaker Change: In addition to the agreement with recipe unlimited. We also have a new have new agreements with partners in India and Spain.
Rick Cardenas: In addition to the agreement with Recipe Unlimited, we also have new agreements with partners in India and Spain. each of which calls for the development of 40 Olive Garden locations. as well as an agreement with our existing Ruth Chris Franchise partner in Asia for the development of six capital guerrilla camps. Brad and his team are doing a great job, and I'm excited about the growth prospects of our international franchise.
Speaker Change: Each of which calls for the development of 40 Olive garden locations.
Speaker Change: As well as an agreement with our existing Ruth's Chris franchise partner in Asia for the development of six capital grille locations.
Speaker Change: Brad and his team are doing a great job and I'm excited about the growth prospects of our international franchising business.
Speaker Change: Also as you may have seen from our 8-K filing. This morning. After 33 years with Darden, Dan Kiernan will be retiring as president of Olive Garden on August 31.
Rick Cardenas: Also, as you may have seen from our 8K filing this morning, after 33 years with Darden, Dan Kiernan will be retiring as President of Olive Garden on August 31st. Dan has worked in the industry since he was 16 and began his career at Olive Garden as a manager in training. For the last seven years, he has led Olive Garden to new heights and has been a tremendous steward of the brand. As I said earlier, Dan and his team have generated strong business momentum, and following the successful completion of their five-year business plan, Olive Garden is well positioned for this leadership transition.
Speaker Change: Dan It's worked in the industry since he was 16 and began his career at Olive garden as a manager and training.
Speaker Change: For the last seven years. He has led olive garden to New Heights and has had has been a tremendous steward of the brand.
Speaker Change: As I said earlier, Dan and his team have generated strong business momentum and following the successful completion of their five year business plan Olive garden is well positioned for this leadership transition.
Speaker Change: Yeah.
Rick Cardenas: One of the benefits of our scale is having a deep bench of talent to fill leadership roles. I am pleased that we have another proven operator to lead Olive Garden. John Wilkerson, who has led Cheddar's for the past seven years, will be the next president of Olive Garden, and he will work closely with Dan over the next ten weeks to ensure a smooth transition. John is a 30-year Darden veteran who has done an excellent job of rebuilding the fundamentals at Cheddar's and setting the brand up for growth. John will continue reporting to me.
Speaker Change: One of the benefits of our scale is having a deep bench of talent to fill leadership roles.
Speaker Change: I'm pleased that we have another proven operator to lead olive garden.
Speaker Change: John Wilkerson, who has led shadows for the past seven years will be the next president of Olive Garden and he will work closely with Dan over the next 10 weeks to ensure a smooth transition.
Speaker Change: John is a 30 year Darden veteran who has done an excellent job of rebuilding the fundamentals of Cheddars and setting the brand up for growth.
Speaker Change: John will continue reporting to me.
Speaker Change: John's replacement of Cheddars as Mark Cooper.
Rick Cardenas: John's replacement at Cheddar's is Mark Cooper, currently president of Seasons 52 and Bahama Breeze. Laurie Kassler, who has led operations at Seasons for 52 years, I'm sorry, Seasons 52, for 11 years, sorry Laurie, I didn't want to age you, has been named President Season's 52. Mark and Lori will report to John Martin, Group President. In addition to Cheddar's and Season 52, John Martin will retain responsibility for Yardhouse, the Capitol Grill and Eddie V's. He will also lead Bahama Breeze as we consider strategic alternatives for the brand.
Speaker Change: President of seasons, 52, and Bahama Breeze.
Laurie Kasler: Laurie Kasler, who has led operations of seasons for 52 years I'm, sorry, excuse me 52 for 11 years, sorry, Larry Didnt want AG has been named President of.
Speaker Change: Seasons 52.
Speaker Change: Mark and Lorie will report to John Martin Group President.
Speaker Change: In addition to Cheddars and seasons 52, John Martin will retain responsibility for yard house, the capital grille and Eddie V's.
Speaker Change: He will also lead Bahama breeze, as we consider strategic alternatives for the brand.
Speaker Change: Additionally, I am pleased to share their time at all has been named President of choice for.
Rick Cardenas: Additionally, I am pleased to share that Thomas Hall has been named President of CHEWI. For the past 7 years, Thomas served as Executive Vice President of Operations for Longhorn. Timeless will report to Todd Burrows, Group President, who is responsible for Chewy's and Ruth's Crisps, as well as Darden's development and international franchising.
Speaker Change: For the past seven years time has served as executive Vice President of operations for Longhorn.
Speaker Change: Thomas who reports of Todd Burrowes Group, President, who is responsible for chili's and Ruth's, Chris as well as Darden's development and international franchising teams.
Speaker Change: Yeah.
Rick Cardenas: With these changes, I am confident we have the right leaders in place across all our brands to compete effectively and grow share.
Speaker Change: With these changes I am confident we have the right leaders in place across all our brands to compete effectively and grow share.
Speaker Change: Finally last month Darden celebrated its 30 year 30th year as a publicly traded company.
Rick Cardenas: Finally, last month, Darden celebrated its 30th year as a publicly traded company. I was delighted to ring the opening bell at the New York Stock Exchange with several team members with 30 or more years of service, including Liev L. Rutledge, our longest tenured team member at 52 years.
Speaker Change: I was delighted to ring the opening bell at the New York Stock exchange with several team members with 30 or more years of service, including leave El Rutledge, our longest tenured team member at 52 years.
Rick Cardenas: That moment was a great reminder of an enduring quote from Bill Darden. He said, the greatest edge we have on our competition is the quality of our employees reflected each day in the job they do. Our people drive our success, and I want to congratulate our teams on a strong quarter and a successful year. On behalf of our leadership team and the Board of Directors, thank you for your continued dedication and commitment to nourishing and delighting our guests and each other.
Speaker Change: That moment was a great reminder of an enduring quote from build darden.
Speaker Change: You said the greatest edge, we have on our competition is the quality of our employees reflected each day in the job they do.
Speaker Change: Our people drive our success and I want to congratulate our teams on a strong quarter and a successful year.
Speaker Change: Half of our leadership team and the board of directors.
Speaker Change: You for your continued dedication and commitment to nourishing and delighting, our guests and each other.
Operator: Now we'll take your questions. Thank you. We'll now be conducting a question and answer session.
Speaker Change: Now we'll take your questions.
Speaker Change: Thank you, we'll now 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 as a reminder, please ask one question and one follow up then return to the queue.
Operator: If you'd like to be placed in the question queue, please press star one on your telephone keypad. And as a reminder, please ask one question and one follow up, then return to the queue.
Eric Gonzalez: Our first question is coming from Eric Gonzalez from KeyBank Capital Markets. Your line is now live. Hi, thanks for the question and congrats on the really strong Sainsbury's sales results. You know, obviously you're executing at a very high level. It's really hard to deny the fact that the industry seems to be in a strong position, you know, particularly some of the larger chains in full service.
Speaker Change: First question is coming from Eric Gonzalez from Keybanc capital markets. Your line is that lives.
Eric Gonzalez: Hi, Thanks for the question and congrats on a really strong same store sales results.
Speaker Change: Obviously, you're executing at a very high level, it's really hard to deny the fact that the industry seems to be in a strong position.
Speaker Change: Particularly some of the larger change in full service. So perhaps you can give us your perspective on why casual dining is having a bit of a moment right now and Relatedly I'm curious in your thoughts and how some of the smaller chains or independents are you sharing in this environment. Whether you think you know the independents are struggling with the same affordability perception issues that you might have it fast.
Rick Cardenas: So, perhaps you can give us your perspective on why casual dining is having a bit of a moment right now. And relatedly, I'm curious about your thoughts on how some of the smaller chains or independents that you're sharing in this environment, whether you think, you know, the independents are struggling with the same affordability perception issues that you might have in fast food. Yeah, Eric, thanks for the question. Thanks for the comments on our quarter. You know, as we look across what's been going on over the last five or six years, as you recall, we've been very prudent in keeping our pricing below inflation.
Speaker Change: Yeah, Eric Thanks for the question and thanks for the comments on our quarter.
Speaker Change: As we look across what's been going on over the last five or six years as you recall, we've been very prudent and keeping our pricing below inflation.
Rick Cardenas: Because we knew that over time, pricing matters if you take it too much. And what we believe is happening right now in the casual dining space is consumers are figuring out that casual dining is a great value. and so they're coming to Casual Dining more. And we're seeing that across our brands and some of the industry. And so without commenting on what's happened in other places, we think that's a big part of it. Our consumers want to go out and spend their hard-earned money, and we think we're taking some wallet share from fast food and fast cash.
Speaker Change: Because we knew that over time pricing matters, if you take it too much.
Speaker Change: And what we believe is happening right now in the casual dining space.
Speaker Change: As consumers are figuring out the casual dining is a great value.
Speaker Change: And so they're coming to casual that anymore.
Speaker Change: And we're starting to we're seeing that across our brands and some of the industry.
Speaker Change: So without commenting on what's happened in other places.
Speaker Change: We think that's a big part of it.
Speaker Change: <unk> want to go out and spend their hard earned money.
Speaker Change: And we think we're taking some wallet share from from fast food and fast casual.
Eric Gonzalez: Maybe if I can, as a follow-up, ask about the unit growth outlook, the 60 to 65 units this year. You know, your long-term range in your algorithm is 3 to 4 percent. So I think that 60 to 65 implies 2.7 to 3 percent.
Speaker Change: Maybe if I could ask as a follow up that's about the unit growth outlook. The $60 to 65 units. This year. Your long term range that in your algorithm is 3% to 4%. So I think that 60 to 65 implies $2 seven at 3%. So I guess I'm curious you know.
Rick Cardenas: So I guess I'm curious, you know, when we might see a ramp in unit growth and which brands might be the largest contributor. Eric, I'd say from when you look at 60 to 65, you're right, it could imply 273. But as you look at actually, you know, how we're ramping up growth from where we're starting, we're actually building the pipeline, our development team has done a great job, we expect to be in the three plus range over the next five years. And we are actually we have a pretty strong pipeline. You know, as you know, these things take time to build up.
Speaker Change: When we might see a ramp in unit growth and which brands might be the largest contributor.
Speaker Change: Yeah, I'd say from a when you look at 60 to 65, you're right. It could imply two seven to three but as you look at actually how we're ramping up growth from where we're starting we're actually building the pipeline. Our development team has done a great job, we expect to be in the 30 plus range over the next five years.
Speaker Change: And we are actually we have a pretty strong pipeline.
Speaker Change: As you know these things take time to build up but.
Rick Cardenas: But But I think we have new practices and processes in place, and from a brand mix, as we've said, you know, initially, as you look at next year, I'd say between Olive Garden and Longhorn, we're going to probably have 40 to 45 openings, and then Yardhouse might be in the mid-single digits, and then you have all the other brands contributing probably another 15 or so. But as we look into the future, we expect the other brands to become a bigger part of the mix. But we do think there's huge opportunity for still Longhorn to be in the 25 to 30 openings a year, and then Olive Garden to be in that 20-ish range for the foreseeable future.
Speaker Change: But I think that I think we have new new practices and processes in place and from a brand mix. As we've said you know initially as you look at next year I'd say between Olive garden Longhorn, we're going to probably have 40 to 45 openings and then yard house might be in the mid single digits and then you have all the other brands contributing probably another 15 ours.
Speaker Change: So, but as we look into the future. We expect the other brands to become a bigger part of the mix, but we do think there's huge opportunity for us still a longhorn stupid long hard to be in the 25 to 30.
Speaker Change: And the openings a year and then olive garden to be in that 2020 ish range for the foreseeable future.
Rick Cardenas: But then we're also, as I said, the other brands will start to contribute even more as we move into the next few years.
Speaker Change: But then we're also as I said the other brands will start to contribute even more as we move into the next few years.
Speaker Change: Thanks. The next question is coming from Christopher <unk> from Stifel. Your line is now lives.
Eric Gonzalez: Thank you.
Crystal Cole: Next question is coming from Crystal Cole from Steeple. Your line is now live. Yeah, thanks.
Christopher: Yeah. Thanks right. My question was on the updated long term framework, just just the new margin expansion target reflect a different view on the long term restaurant margin opportunity or even the rate of reinvestment do you expect to make in the business.
Raj Vennam: Raj, my question was on the updated long term framework. Does the new margin expansion target reflect a different view on the long term restaurant margin opportunity, or even the rate of reinvestment you expect to make? Yeah, Chris, it does a little bit, right? What we're trying to figure out is, one, let me just start with the, just by changing the definition, we're getting a more holistic view because there's a lot of interaction between the GNA and DNA and then tax and interest. So that's why we wanted to get to a bottom line number. So that's one.
Speaker Change: Yeah, Chris It does get a little bit like what we're trying to figure out is one let me just start with the just by changing the definition, we're getting a more holistic view because theres a lot of interaction between.
Speaker Change: The G&A and and DNA and then tax and interest. So that's why we wanted to get to your bottom line number. So that's one but two does it imply restaurant level EBITDA, maybe not growing at the rate we had targeted in the past, yes, because we're saying that we're going to make investments and with the greater emphasis on sales great.
Crystal Cole: But two, does it imply restaurant-level EBITDA maybe not growing at the rate we've targeted in the past? Yes, because we're saying that we're going to make investments with a greater emphasis on sales. sales growth and if sales growth drives even more margin so you know that that that's good but we are going to try to find ways to reinvest to get for the long term Okay, thank you guys. Thank you.
Speaker Change: Our sales growth and sales growth drives even more margin. So you know that that's that's good but we're going to try to find ways to reinvest to get for the long term.
Speaker Change: Okay. Thank you guys.
Speaker Change: Yeah.
Speaker Change: Thank you next question is coming from David Palmer from Evercore ISI. Your line is now live.
David Palmer: Next question is coming from David Palmer from Evercore ISI. Your line is now live. Thank you.
Speaker Change: Thank you.
David Palmer: Regarding Uber Direct at Olive Garden, curious about what you can share about mix and same store sales contribution in fiscal 4Q and what you're contemplating for mix and same store sales contribution from it in fiscal 26. And also, you know, is there anything different about the incremental margin from that, from the base business? David, so I think we said for Q4, the mixed impact from just the fees was about 40 basis points. Uber Direct was about three-and-a-half percent of total sales at Olive Garden. I think we talked about in the past what the total contribution would be to incremental sales, and we've said it's 40 to 50 percent.
David Palmer: Regarding Uber direct at Olive Garden curious about what you can share about mix and same store sales contribution in the in fiscal <unk> and what you're contemplating for mix in same store sales contribution from it in fiscal 'twenty, six and and and also is there anything different about the incremental margin from that.
Speaker Change: From from the base business.
David Palmer: Yeah, David So I think what we said on Q4 Q4, the mix impact from just the fees was about 40 basis points, a little bit but it was about 3% of total sales at olive garden, So and I think we talked about.
Speaker Change: In the past what the total contribution would be to incremental sales and we've said, it's 40% to 50%. So if you kind of go with that and taken the impact of the fees, it's roughly about 2% incremental sales.
David Palmer: So if you kind of go with that and take in the impact of the fees, it's roughly about 2 percent incremental sales impact to the quarter. We are not ready to talk about the future in terms of what the impact would be for next year, but when we did advertise, the exit rate was about 5 percent of total sales. That included the free delivery offer, and from a margin perspective, we do not expect this to have a meaningful impact on margin, any negative impact or positive impact on margin, because if you look at how we structure the deal, a lot of the fees are just passed on to Uber, but there isn't any margin difference on the base, and the geography impact is pretty minimal.
Speaker Change: Sales impact for the quarter.
Speaker Change: We are not ready to talk about the future.
Speaker Change: In terms of what the impact would be for next year.
Speaker Change: But when we did advertise the exit rate was about 5% of total sales that included the free delivery offer and.
Speaker Change: And from a margin perspective, we do not expect this to have a meaningful impact of a negative on margin any negative impact or positive impact on margin.
Speaker Change: Because if you look at how we structure the deal a lot of the fees are just passed onto luber, but there isn't any margin difference on the base.
Speaker Change: The minimum that the the geography impact is pretty minimal Oh, you're talking about you know maybe 10 basis points at best but then there's also a positive people are buying more through that that helps offset and you saw that in the fourth quarter Olive garden has a pretty strong positive mix and Andy I think as we as we speak.
David Palmer: You're talking about maybe 10 basis points at best, but then there's also positive. People are buying more through that. That helps offset, and you saw that in the fourth quarter.
David Palmer: Olive Garden has a pretty strong positive mix, and I think as we've signaled a few times, if Uber Direct contributes even more than we expect going into this year, we're going to reinvest some of that into the business to drive long-term growth. All right, thank you for that. And with regard to Uber Direct and other brands, I would assume that this is going as you would have expected for Olive Garden.
Speaker Change: A few times if if we were you know food better and contribute even more than we expect going into this year, we're going to reinvest some of that into into into the ER.
Speaker Change: And to the into the business to drive long term growth.
Speaker Change: Thank you for that and with regard to Uber direct and other brands.
Speaker Change: I would just I would assume that this is going as you would've expected for olive garden are there other.
David Palmer: Are there other stalls that you think are particular to, you know, Longhorn and the other brands that you'll want to figure out before you do Uber Direct at those brands that you think might be an additional hurdle? Or are you kind of seeing probably what you need to see from this as a lever that could apply to your other brands? And thank you. Yeah, David, as we launched it in Cheddar's and got pretty similar answers to Olive Garden, we were able to ramp it up faster and get it into most of the restaurants faster. The other brands we'll continue to look at, we have some thoughts on what brand might go next, but we want to make sure that every brand that adds delivery has a great experience for there to go.
Speaker Change: All of that you think are particular to longhorn in the other brands that you don't want to figure out before you do over drag to those brands that you think might be an additional hurdle.
Speaker Change: Or are you kind of seeing probably what you need to see from this as a lever that could apply to your other brands and thank you.
Speaker Change: Yeah, David as we as we launched it in Cheddars.
Speaker Change: And and got pretty similar answers to olive garden, we were able to ramp it up faster and get it into most of the restaurants faster. The other brands will continue to look at them. We have some thoughts on what brand might go next but we wanted to make sure that every brand that adds delivery.
Speaker Change: Has a great experience for their to go and so we mentioned that there were eight cheddars restaurants that didn't that arent lives that's because they didnt earn the right to have delivery.
David Palmer: And so we mentioned that there were eight Cheddar's restaurants that aren't live. That's because they didn't earn the right to have delivery. That doesn't mean that our other brands don't have a great experience, but other brands might have a little less on the curbside space and those kind of things, so they might not even be able to have curbside pickup. And as you recall, we don't want the Uber drivers to come into our restaurant. We want that to be just like another curbside experience. So we're looking through our portfolio to see what we can do on some of the brands that might not have as much curbside to see if we want to add.
Speaker Change: That doesn't mean that our other brands don't have a great experience, but there are a lot of other brands might have a little less on the curbside space and those kinds of things so they might not even be able to have curbside pick up.
Speaker Change: And as you recall, we don't want the Uber drivers to come into a restaurant, we want that to be just like another curbside experience. So we're looking through our portfolio to see.
Speaker Change: What we can do on some of the brands that might not have as much curbside I'm.
Speaker Change: To see if we want to add.
David Palmer: But the last thing I'll say on this is we are not pushing Uber Direct onto any brand. Every brand has their president and their leaders, and they choose if they want to do it. We can veto if they get it, and there's some brands that we would probably veto, but I don't think those brands are thinking about doing it.
Speaker Change: But the last thing I'll say on this is we are not pushing Uber direct onto any brand every brand has their president and their leaders and they choose if they want to do it we can veto if they get it and there are some brands that we would probably veto, but I don't think those brands are thinking about doing it so without getting into which we're in is next.
Andrew Charles: So without getting into which brand is next, we do have another brand that we think we're going to work on, but it'll probably not start until sometime right at the beginning of the next calendar. Thank you.
Speaker Change: We do have another brand that we think we're going to we're going to work on but it'll probably not start until sometime at right at the beginning of the next calendar year.
Speaker Change: Thank you. The next question today is coming from Andrew Charles from TD Cowen. Your line is now live.
Andrew Charles: Next question today is coming from Andrew Charles from TD Calendar Line is now live. Great, thank you.
Andrew Charles: Great. Thank you Rick that's a good segue to my next question I'm curious are you prioritizing spending rolling out Uber direct across the remaining brands that makes sense, recognizing it's not gonna be all of them, whereas there your attitude to see how olive garden would perform on the Uber marketplace.
Andrew Charles: Rick, it's a good segue to my next question. I'm curious, are you prioritizing expanding, you know, rolling out Uber Direct across the remaining brands that make sense, you know, recognizing it's not going to be all of them? Or is there, you know, aptitude to see how Olive Garden would perform on the Uber marketplace? You know, right now, our priority is to continue to see how Olive Garden and Cheddar's perform in Uber Direct. You know, Marketplace is something that has challenges for us, and we've said what those challenges are. And that's why we developed this Uber Direct offer with Uber, which was the perfect thing for us and a really great thing for Uber.
Speaker Change: Yeah.
Speaker Change: You know right now our priority is to continue to see how olive garden and Cheddar has performed in an Uber direct.
Speaker Change: You know marketplace is something that has challenges for us and we've said what those challenges are.
Speaker Change: And that's why we developed this hooper direct.
Speaker Change: Offer with Uber, which was the perfect thing for us and a really great thing for Hoover. So we'll continue to see how this goes before we determine whether we want it even be on the marketplace at all.
Andrew Charles: So, we'll continue to see how this goes before we determine whether we want to even be on the Marketplace. Okay, that's helpful.
Speaker Change: Okay. That's helpful. And then Raj just a follow up question with the outlook for 2026 inflation of 2.5% to 3% Q segue, how that's gonna look between food and labor.
Raj Vennam: And then Raj's follow up question with the outlook for 2026 inflation of two and a half to 3%. Can you segue how that's going to look between food and labor? Yes, Andrew, so the food is, we're expecting food to be about 2.5% and labor to be about 3.5%.
Speaker Change: Ah, yes, Andrew so the food is where we're expecting to be about two and a half per cent and labor to be about 10, 5%.
Speaker Change: Yeah.
Speaker Change: Thank you. The next question is coming from Lauren Silberman from Credit Suisse. Your line is now live.
Lauren Silberman: Your next question is coming from Lauren Silberman from Credit Suisse, your line is now live. Thank you very much and congrats on the quarter. I wanted to follow up on the fiscal 26 guidance for the EPS. If your top line comes in stronger than expected, are you thinking about slowing through to earnings versus reinvesting back in the business? And I guess that kind of applies a bit to the long Yeah, Lauren, I think if you look at our framework, we said, you know, we're going to try to get each margin to be flat to positive.
Lauren Silberman: Thank you very much and congrats on the corner I wanted to follow up on that that's about 26.
Lauren Silberman: The ETS if your top line comes in stronger than expected.
Lauren Silberman: Are you thinking of that flowing through to earnings versus reinvesting back in the business and I guess that kind of implies that take a long time.
Speaker Change: Yeah, Lorne I think if you look at our framework. We said you know we're going to try to get eat margin to be flat to positive. So we're not going to do it at the cost of giving up margin, but we're going to we're okay. If we if the incremental sales just flow through at the current restaurant level margins and then reinvest the rest so there's ways to do that and that's kind of how we're thinking about it.
Rick Cardenas: So we're not going to do it at the cost of giving up margin, but we're going to we're okay if we, if the incremental sales just flow through at the at the at the current restaurant level margins, and then reinvest the rest. So there's ways to do that.
Rick Cardenas: And that's kind of how we're Okay, thanks. And then on the two to three and a half percent comp growth, obviously a very strong momentum in the business. Can you just talk about how you're thinking about the cadence of comp as we move through the year? Well, maybe I'll just start by saying, if you look at, you know, we, fourth quarter was obviously pretty strong for us, and some of the momentum from that has carried on into June, first few weeks of June. But as we look at the 12-month hour, there's obviously, there's a lot of macro uncertainty, and so we thought, you know, looking at 12 months, we just, it's prudent to kind of go with this range where we reflect the uncertainty, because we're going to start wrapping on some of this growth as we get into the back half of the year.
Speaker Change: Okay. Thanks, and then on the two to three and a half to think pop growth.
Speaker Change: He has very strong momentum in the business can you just talk about how you're thinking about the cadence as Tom has witnessed through the year.
Speaker Change: Well, maybe I'll just start by saying if you look at our.
Speaker Change: Fourth quarter was obviously pretty strong for us and some of the momentum that has carried on into June 1st few weeks of June but as we look at the 12 month out. There's obviously, there's a lot of macro uncertainty and and so we talked you know looking out 12 months. We just it's prudent to kind of go in this range, where we reflect.
Speaker Change: The uncertainty because.
Speaker Change: Because we're going to start wrapping on some of this growth as we get into the back half of the year and so that's incorporated into guidance I don't want to get too much into the cadence, but I think it's fair to assume that it will stop stronger from a year over year perspective should be stronger than the first half than the back half.
Rick Cardenas: And so that's incorporated into guidance. I don't want to get too much into the cadence, but I think it's fair to assume that we'll start stronger, and from a year-over-year perspective, should be stronger in the first half than the back half.
Speaker Change: The next question today is coming from Brian Harper from Morgan Stanley. Your line is now live.
Brian Harbour: Your next question today is coming from Brian Harbour from Morgan Stanley, your line is now live. Yeah, thanks. Good morning, guys.
Speaker Change: Yeah. Thanks, Good morning, guys, what Raj what.
Raj Vennam: What Raj what, um, roughly what pricing do you expect to run in the coming year? And I guess just you know, how about like longer term? I mean, is is sort of Continuing to restrain that, you know, sort of key to all the brands as we think about the long-term plan. Yeah, Brian, for fiscal 2026, I would expect us to be in the mid-twos for pricing. I think first quarter is going to be close to two, and then we'll probably get into the mid-to-high twos as we get through the year. Obviously, it depends on how inflation comes in, but it will still likely be below total inflation.
Speaker Change: Roughly what pricing do you expect to run and in the coming year and I guess just.
Speaker Change: How about like longer term I mean is it sort of.
Speaker Change: Continuing to restrain that sort of key to all of the brands as we think about the launch were appointed.
Speaker Change: Yeah, Brian are part of the part fiscal 2026, I would I would expect us to be in that mid mid twos for pricing.
Speaker Change: First quarter is going to be close to two and then we'll probably get into the mid to high teens as we get through the year, obviously it depends on how the inflation comes in.
Speaker Change: But our bias, but it will still likely be below total inflation and you know our bias is as Rick just mentioned earlier, we've been very disciplined with respect to pricing and that is not going to change anytime soon.
Raj Vennam: And our bias is, as Rick just mentioned earlier, we've been very disappointed with respect to pricing, and that is not going to change anytime soon. That's the philosophy. We try to price as little as possible and still get the returns we could get.
Speaker Change: That's just that's a philosophy, we've tried to price as a minimum as as little less possible and still get better times, we thought we could get and we it's it's worked well for us and we always play the long game and we will continue to do that.
Raj Vennam: And it's worked well for us, and we always play the long game, and we'll continue to do that.
Speaker Change: Okay.
Rick Cardenas: Okay, in your comment about, you know, sort of Reserving the right to reinvest. I mean, you're it sounds like you're being more top line focused, right in the in the current algo. So, I mean, to some extent, what form would that take? Would it be more on the food side? Or how would you know, how would that actually show itself? Yeah, Brian. Yeah, you got it right. We are going to focus a little bit more on top line growth and on just grabbing margin. And that'll that can take take place in many ways. Every brand has a different way to do that.
Speaker Change: And your comment about.
Speaker Change: Sort of.
Speaker Change: Reserving the right to reinvest I mean, you're it sounds like you're just being more topline focused REIT in the in the current address so I mean to some extent what form would that take would it be more on the food side or how would you know how would that actually show itself in the brands.
Brian: Yeah, Brian Yeah, you got it right we are going to focus.
Speaker Change: Focus a little bit more on top line growth and I'm just grabbing margin.
Speaker Change: And that will that can take.
Speaker Change: Take place in many ways every brand has a different way to do that olive garden is testing things some things right now, which would bring their mix down a little bit.
Rick Cardenas: Olive Garden is testing things, some things right now, which would bring their mix down a little bit to be more have some more affordability. And because of the strength of Uber Direct, they're able to do that. Other brands might make some investments in labor to speed up the process. But you know, it's only as we continue to grow sales, will we make some of these investments, we think these are the right long term investment. to be able to set the company up for the next five years. And the investments that we're making, especially on the menu, whether it's in mix or in affordability, will benefit both dine-in and off-premise.
Speaker Change: To be more have some more affordability and because of the strength of Uber direct theyre able to do that other brands might make some investments in labor to speed up the process, but you know it's only as we continue to grow sales will we make some of these investments. We think these are the right.
Speaker Change: Long term investments.
Speaker Change: To to be able to.
Speaker Change: Set the company up for the next 30 for the next five years and the investments that we're making especially on the menu, whether it's a mixer and affordability will benefit both dine in and off premise.
Yeah.
Rick Cardenas: Thank you.
Sara Senatore: Thank you. Your next question is coming from Sara Senatore from Bank of America. Your line is now live.
Sara Senatore: Next question is coming from Sara Senatore from Bank of America. Your line is now live. Thank you. I guess I just wanted to ask about fine dining. You know, you mentioned that the category has been pressured, but I think, unlike some of your other larger casual dining, you might be lagging some peers.
Speaker Change: Thank you I guess.
Speaker Change: If it comes to ask about fine dining.
And that the the category has been pressured but I think you know unlike some of your other larger.
Speaker Change: Casual dining you might be lagging some peers.
Sara Senatore: I guess the question is maybe broader about, like, sort of the approach to the portfolio and your decision to, you know, sell some Bahama Breeze, which I know is behind fine dining, but, you know, is there sort of a limit to the span of control that you can have, you know, in terms of the number of brands? You know, is the acquisition of Ruth, would that have played any role in fine dining maybe being a little bit softer just in terms of managerial resources? I'm just trying to understand sort of as you think about the portfolio.
Speaker Change: Question is maybe broader about like sort of the approach their portfolio and your decision to sell some bahama breeze isn't there, but is there sort of a limit to the span of control that you can have you know in terms of the number of brand. It was the acquisition of Bruce.
Speaker Change: Would that have played any role in fine dining maybe being a little bit softer just in terms of managing overseas resources and I'm just trying to understand sort of as you think about the portfolio. It sounds like there's a little bit more movement now than than I've seen in the past and I am trying to sort of think through what might be.
Sara Senatore: It feels like there's a little bit more movement now than I've seen in the past, and I'm trying to sort of think through what might be influencing that.
Speaker Change: Influencing that.
Speaker Change: Yes, Sir Oh I'll start with the end of your question you know the movement in the in the portfolio are being I think you're being you're talking about leadership.
Rick Cardenas: Yes, Sara, I'll start with the end of your question, you know, the movement in the in the portfolio being I think you're being you're talking about leadership. You know, we've we have, if we look, if you look back a couple years ago, we were in a position where we had leaders that, you know, are getting close to retirement age. And so we wanted to set the company up for success over the long term. And we made some changes a year ago. And one of those leaders is retired. So we were ready for it with the changes we're doing this year.
Speaker Change: No. We've we have if we look if you look back a couple of years ago. We were in a position where we had leaders that you are getting closer to retirement age and so we wanted to set the company up for success over the long term and we made some changes a year ago and one of those leaders has retired so we were ready for it with the changes.
Speaker Change: We're doing this year. So we're really playing full of what we do.
Rick Cardenas: So we're really planful of what we do. In regards to the span of control of the scale of the people that we have, you know, now you look at how we've, we've structured the company on people, the two largest brands report to me, Olive Garden Longhorn, and the other brands report to two proven leaders. Todd Burrows and John Martin. And so we think we've got it set up correctly. The number of brands really doesn't, isn't a reason that Fine Dining has gone through the challenges they've gone through. You know, Fine Dining has been hit with a consumer that, during COVID, we had a lot of growth in Fine Dining.
Speaker Change: In regards to the span of control of the scale of the people that we have you know now you look at how we've we've structured the company on people are the two largest brands report to me Olive Garden Longhorn.
Speaker Change: And the other brands reported two proven leaders.
Speaker Change: Todd Burrowes and John Martin.
Speaker Change: And so we think we've got it set up correctly. The number of brands really doesn't isn't a reason that fine dining has gone through the challenges they've gone through you know fine dining has been hit with a consumer that during COVID-19, we had a lot of growth in fine dining.
Rick Cardenas: I don't know what the other brands had, but we had growth in Fine Dining. And those consumers were not necessarily consumers that we had seen before, and they went back to the normal patterns. And so we don't feel at all that our size and scale has hurt Fine Dining. In fact, we have even stronger leaders there when we've got, now we have a president of the two Fine Dining brands, Capagorna and Eddie V's, led by John Martin. And one of our Fine Dining brands that we have is Roots Chris, which we've said many times, whenever you add a brand, we're going to go through some challenges during integration, and that will impact same restaurant sales.
Speaker Change: I don't know what the other brands had but we had growth in fine dining.
Speaker Change: And those consumers.
Speaker Change: We're not necessarily consumers that we had seen before and they went back to the normal patterns. So we don't feel at all that that our size and scale has hurt fine dining in fact, we have even stronger leaders there. When we've got now we have the president of the of the two fine dining brands catheter and Eddie V's.
John Martin: Led by John Martin.
John Martin: And one of our fine dining brands that we have as Ruth's, Chris, which we've said many times whenever you add a brand we're going to go through some challenges during integration and that will impact same restaurant sales and they were one of those so we feel really good about where our fine dining brands are.
Rick Cardenas: And they're one of those. So we feel really good about where our Fine Dining brands are.
John Martin: And and then lastly on the decision on Bahama Breeze.
Rick Cardenas: And then lastly, on the decision on Bahama Breeze. You know, we have When we look at our portfolio and we try to determine what brands we add to our portfolio, we have criteria. And that criteria should be what we look at to keep brands in our portfolio. And, you know, we made the decision that Bahama Breeze doesn't meet the criteria anymore. And we think that they have a lot of growth potential with another owner. We were not going to be putting a lot of investment into Bahama Breeze. And so to give those team members and those managers growth opportunities, it's better for them to be under a different ownership.
John Martin: You know we have.
John Martin: When we look at our portfolio and we try to determine what brands, we add to our portfolio we have criteria.
John Martin: And that criteria should be.
John Martin: What we look at to keep brands in our portfolio and you know we made the decision that Bahama Breeze doesn't meet the criteria anymore, and we think that they have a lot of growth potential with another with another owner.
John Martin: We were not going to be putting a lot of a lot of investment into into Bahama breeze.
John Martin: And so to give those team members and those managers growth opportunities, it's better for them to be under a different ownership.
Speaker Change: Got it Okay and then just a quick follow up you had mentioned 150000 improvement sequentially in fine dining and is there anything else that you can comment on about the demographics I mean, no. One thought is that the other benefit that casual dining might be facing is just having a laugh.
Sara Senatore: Got it. Okay. And then just a quick follow-up. You know, you had mentioned $150,000 improvement sequentially at Fine Dining. Is there anything else that you can comment on about the demographics? I mean, you know, one thought is that the other benefit that casual dining might be facing is just having less exposure to low-income consumers. So anything, you've been very helpful in sort of parsing out kind of under $50,000 and sort of some of the dynamics. Any updates there?
Speaker Change: Allowing for the consumer so anything.
Speaker Change: Been very helpful in sort of parsing out kind of under 50, and instead of some of the dynamics any any updates there.
Speaker Change: Yeah, Sara I think so from a consumer demographic perspective, let me just kind of parse out a little bit Ah I think you know when you look at casual dining in general we're seeing growth across most income cohorts are the only group that is still soft is the below 50, K household and then.
Sara Senatore: Yes, Sarah, I think so from a consumer demographic perspective, let me just kind of parse out a little bit. I think, you know, when you look at casual dining in general, we're seeing growth across most income cohorts, the only group that is still soft is the below 50k house. And in fact, if you actually look at the 150K plus, that's actually where we're seeing a little bit more growth on casual dining. And then when you look at fine dining, you're actually seeing pullback with households below 150K across. And then only place where we're seeing some growth of stabilization is about 150K households.
Speaker Change: If you actually look at the higher end 50 can't plus that's actually where we're seeing a little bit more growth on casual dining.
Speaker Change: And then when you look at fine dining you're actually seeing pull back at.
Speaker Change: Households below 150 K a.
Speaker Change: Across and then all the only place where we're seeing seeing some growth or stabilization is now about 150 K households, the other dynamic with the fine dining specifically is that the the urban what's a suburb of them that we had discussed that.
Sara Senatore: The other dynamic with the fine dining specifically is that the urban versus suburban that we had discussed. That suburban traffic is actually still at, you know, running at 95% of pre-COVID levels. So holding up pretty well, but urban is still in the low 80s. It's like 82 or something in Q4. So it's not, you know, clearly a lot less than where it was before COVID. And now I'll say one other thing on fine dining and then wrap it up is just really, when you look at their retention to pre-COVID, it has stabilized. We're seeing that more stable month to month and quarter to quarter the last few months.
Speaker Change: When traffic is actually still at you know running at 95% of pre COVID-19 levels, So holding up pretty well, but are they still in the low eighties, it's like 82 or something in Q4. So it's not it's not a you know it clearly a lot lot less than where it was before COVID-19.
Speaker Change: No I will say one other thing on fine dining in and then wrap it up it's just really when you look at the retention to pre Covid. It has stabilized we're seeing that more stable a month to month and quarter to quarter in the last few months. So that's a good sign that things are starting to stabilize there.
Sara Senatore: So that's a good sign that things are starting to stabilize. Thank you.
Speaker Change: Okay.
Speaker Change: Thank you. Your next question today is coming from Peter Cella Somebody said Gee why there's not a lot.
Peter Saleh: Next question today is coming from Peter Saleh from BCIG. Your line is now live. Great.
Speaker Change: Oh, great. Thanks for taking the question congrats on a great quarter, Oh I wanted to ask about the Incrementals that you are seeing and Uber direct business, the 40% to 50% at Olive garden.
Peter Saleh: Thanks for taking the question and congrats on a great quarter. I wanted to ask about the incrementality that you're seeing in the Uber Direct business, the 40 to 50 percent at Olive Garden. Can you just comment a little bit about who these customers are? Are they higher income? I mean, I'm assuming, are they new to the brand or is it just increased frequency? Just trying to understand how the customer is using Olive Garden through Uber Direct. Yeah, Peter, you know, right now the delivery customer has very minimal overlap in dining. We're seeing higher guests frequency for delivery versus dining guests.
Speaker Change: Just comment a little bit about who these customers are are they higher income I mean, I'm, assuming there are they new to the brand or is it just increased frequency just trying to understand how the customer is using olive garden to redirect.
Speaker Change: Yeah, Peter I'm you know.
Speaker Change: Now the the delivery customer has very minimal minimal overlap and dining.
Speaker Change:
Speaker Change: We are seeing higher guest frequency for delivery.
Speaker Change: Versus dining guests.
Peter Saleh: and a higher percentage of them are new or last guests versus pickup or dine-in. So we've got a lot of consumers that haven't been to Olive Garden in over a year that are using the delivery service. And nearly 40% of our pickup consumers have tried delivery. And then the last thing on the consumer demographics, they are younger and slightly higher income, which you would expect.
Speaker Change: And a higher percentage of them are new or lapsed guests versus pickup or dine in so we've got a lot of consumers that haven't been to olive garden over a year that are using the delivery service.
Speaker Change: And nearly 40% of our pick up consumers who have tried delivery.
Speaker Change: And then the last thing on the consumer demographics are they are younger and slightly higher income, which you would expect.
Speaker Change: Great. That's very helpful. And then just lastly on on price you know going forward I know, you're taking less price than inflation. When you talk about reinvestment is is it are you considering you know maybe even taking less price going forward or is it just reinvesting.
Peter Saleh: Right, that's very helpful. And then just lastly, on on price, you know, going forward, I know you're taking less price than inflation. When you talk about reinvestment, is it are you considering, you know, maybe even taking less price going forward? Or is it just reinvesting back in quality? Just trying to understand kind of the reinvestment comments. Again, just if you guys can elaborate a little Yeah, Peter, I think those reinvestments can take many forms. And one of them could be pricing even lower than inflation. But I think we've got some other places that we can invest.
Speaker Change: Back in quality and just trying to understand kind of reinvestment comments again, just if you guys can elaborate a little bit.
Speaker Change: Yeah, Peter I think those reinvestments can take many forms and one of them could be pricing, even lower than inflation, but I think we've got some other places that we can invest in and that as I said is somewhere in affordability do we have enough items under a certain price point.
Peter Saleh: And that, as I said, is somewhere in affordability, do we have enough items under a certain price point? And in labor, are we providing the service experience that our guests expect for the prices they're paying? Now, we're not talking about, you know, huge, huge, huge dollars, but it, you know, it could be 10s of basis points. In investment, or maybe even 20s, depending on how how much we exceed our sales targets. But, you know, one of them could be pricing, but I would say that we've been making that investment for a long time. We'll keep doing that, and we're going to continue to do that, but add some other things.
Speaker Change: And then in labor are we providing the service experience that our guests expect for the prices they're paying.
Speaker Change: Now, we're not talking about huge huge huge dollars, but you know it could be tens of basis points and investment or maybe even twenties, depending on how how much we exceed ourselves.
Speaker Change: Targets.
Speaker Change: But you know one of them could be pricing, but I would say that that we've been making that investment for a long time, we'll keep doing that and we're going to continue to do that but add some other things.
Jake Bartlett: Thank you next question is coming from Jake Bartlett from true Securities. Your line is that life.
Jake Bartlett: The next question is coming from Jake Bartlett from Truist Securities, your line is now live. Great. Thanks for taking the question. Mine was about the SINs for Sales guidance in 26 and how it relates to the long-term framework. Roughly the same, very similar, but you are seeing this big contributor from delivery now. You have easy compares. It looks like you talked about good momentum into the first quarter here. What are some of the offsets? It sounds like you are baking in some conservatism due to the macro environment. What are you seeing from macro that is making you maybe a little more cautious there?
Jake Bartlett: Great. Thanks for taking the question mine was about the same store sales guidance in 'twenty six.
Jake Bartlett: Relates to the long term framework on roughly the same you know very similar but you are seeing this big contributor from some delivery now you have easy compares it looks like you you talked about good momentum into the quarter or into the first quarter here. So what are some of the offsets.
Jake Bartlett: It sounds like you're baking in some conservatism due to the macro environment.
Jake Bartlett: Or what are you seeing from back with it that's making you maybe a little more cautious there any more color on the moving pieces, we can see the what what's driving some of the strength, but what are what are you worried about in terms of the headwinds.
Jake Bartlett: Any more color on the moving pieces? We can see what is driving some of the strength, but what are you worried about in terms of the headwind?
Speaker Change: Hey, Jake so theres a lot in there so let me try to unpack the big Big headline would be where we're going to continue to make the investments and you know like look if you go back to during Covid, we were pushed very hard to take a lot more pricing when everybody else was and we did.
Jake Bartlett: Hey, Jake. So there's a lot in there. So let me try to unpack the big, big headline would be we're going to continue to make the investments. And you know, like, look, if you go back to during COVID, we were pushed very hard to take a lot more pricing than everybody else was. And we didn't. And that is paying dividends. And so we've invested in price. Now we're going to invest in other places. Rick talked about different areas where we're going to continue to invest. And we like again, we are not trying to achieve a near term or over earnings to hurt us for the long term.
That is paying dividends and so we've invested in price now we're going to invest in other places as Rick talked about different areas, where we're going to continue to invest and that we like again, we are not trying to achieve a near term or all earnings to hurt us for the long term. We're just playing the long game and we you know I think we've earned the credibility over time to show that.
Raj Vennam: We're just playing the long game. And we you know, I think we've we've earned the credibility over time to show that our strategy works. If you look at over time, the fact that we've been able to deliver a double digit TSR consistently is a testament to these, the way we operate this business, and we'll not deviate from that. And that's really what's reflected in this guy.
Speaker Change: Our strategy works if you look at all the time, the fact that we've been able to Delaware.
Speaker Change: Did you T. S are consistently is a testament to these the way we operate this business and we will not deviate from that and that's really what's reflected in this guidance.
Speaker Change: Yeah.
Speaker Change: Great and.
Raj Vennam: Great.
Raj Vennam: My follow-up is on GNA. You were a little higher than guided in FYSBO 25. Could you give us a hand on what we should expect for FYSBO 26 for GNA? Yeah, Jake, I think, just let me start with the first part of why it was a little bit higher in the first, in this year than what we thought. It was really mark-to-market. So because there was such a big run-up in the market, it was an incremental impact of about $15 to $20 million, and it was offset in taxes. And that's just, you know, that's why we're kind of talking about there is some interaction between G&A and tax, and you've got to look at them together.
Speaker Change: My follow up is on G&A, you were little higher than guided.
25 25.
Speaker Change: Give us a handle on what we should expect for 'twenty six for G&A.
Speaker Change: Yeah, Jake I think just let me start with the first part of why it was a little bit higher in the first in this year than what we thought it was really mark to market. So because there was such a big run up in the market.
Speaker Change: It was an incremental impact of about $15 million to $20 million and it was offset in taxes and that's just you know that's why we're kind of talking about there isn't there is some interaction between G&A and tax and you Gotta look them look at them together.
Raj Vennam: Now, as we look at next year, we expect G&A going in to be around $500 million for the year. That includes the 53rd week. So if you take out roughly $10 million for the 53rd week, you're looking at a $490 million G&A on a 52-week basis. And like I just said, there are several factors that can influence what will end up being, because especially mark-to-market and then the incentive cost.
Speaker Change: As we look at next year, we expect G&A going into be it on $500 million part of the year.
Speaker Change: That includes the 53rd week. So if you take out roughly $10 million for the 53rd week Youre looking at a $490 million of G&A on a 52 week basis and like I. Just said there are several factors that can influence what will end up being because especially mark to market and then the incentive comp.
Speaker Change: Okay.
Jim Suva: Thank you next question is coming from Jim Suva from Stephens. Your line is our lives.
Raj Vennam: Thank you.
Jim Salera: Next question is coming from Jim Salera from Stephen's. Your line is now live. You guys, good morning. Thanks for taking our question.
Jim Suva: Hey, guys. Good morning, Thanks for taking the question.
Jim Salera: Um, can you give the the breakout of traffic and ticket of Olive Garden for the quarter? You're trying to size up how much of an impact the buy one, take one contributed on transactions. And do you have a sense for if that deal was more of a frequency driver among loyal Olive Garden guests or if it kind of enticed new households to come Let me start with the first part, and then we'll get to the second part in a second. So from a same restaurant sales breakdown for Olive Garden, their pricing was 2.7 percent, and catering grew by about 70 basis points.
Jim Suva: The breakout of traffic and ticket at Olive garden for the quarter did you just trying to size up how much of an impact the buy one take one contributed on transactions.
Jim Suva: Do you have a sense for if that deal was more of a frequency driver among loyal olive garden's guests or at worst I need to kind of entice new households to come to the brand.
Jim Suva: Let me start with the first part and then we'll get to the second part of the second so from a same restaurant sales breakdown five olive garden are there.
Jim Suva: Their pricing was two 7% and catering grew by about 70 basis point and then there. They had you know I mentioned already I already Uber delivery mix was about 40 basis points and then there was a positive mix of about a one.
Raj Vennam: And then they had, you know, I mentioned already, Uber delivery mix was about 40 basis points, and then there was a positive mix of about 1 percent. And so their underlying traffic was about 2 percent, a little over 2. But truly, the traffic would be more close to 3 if you take into consideration the catering. From a buy-one-take-one, it's just, you know, any time we do something like that, we do bring in a few new guests, but that also drives frequency. And I think Rick mentioned in the script, we leverage an existing offer. It actually did not hurt our check at all, I mean, our margin.
Jim Suva: One.
Jim Suva: 1% and so their underlying traffic was about 2% a little over two but truly the traffic would be more close to three if you take into consideration the catering mix from.
Jim Suva: From a buy one take one are it's just you know anytime we do something like that we do bring in a few new gas, but that's also drives frequency and I think Rick mentioned in the script, but we leveraged an existing offer you'd actually it did not hurt our checks at all if you and then our margin. So you saw that I mean, olive garden printed euro or euro.
Raj Vennam: So you saw that. I mean, Olive Garden printed year-over-year segment profit growth of 100 basis points. And that's where we talk about how we're not deep discounting to just get traffic. We're doing it in ways that's prudent.
Jim Suva: Profit growth of 100 basis points, and that's where we talk about how we're not deep discounting to just get topic, we're doing it in ways that's prudent.
Jim Suva: Yeah.
Jim Suva: Okay, Great and then thinking about.
Raj Vennam: Okay, great. And then thinking about 26. Do you have any comments you can offer on promotional cadence? You know, you mentioned, I believe industry discount was was up just under 100 basis points in the quarter. And so it seems like the consumer may be gradually improving just thoughts on, you know, how much we pull on the promotional lever in 26, to kind of support that that gradual Yeah, Jake, for competitive reasons, I'm not getting into too much detail on the promotional activity. But I can tell you that if you look at a brand like Olive Garden, what this year demonstrated is that Olive Garden can react to whatever environment they compete in.
Jim Suva: 26.
Jim Suva: Just any comments you can offer on promotional cadence you mentioned.
Jim Suva: We believe industry guest count was up just under 100 basis points in the quarter and so it seems like you have consumer maybe gradually improving just thoughts on how much equal on the promotional lever in 'twenty six.
Jim Suva: To support that that gradual recovery.
Jake Bartlett: Yeah Jake.
Speaker Change: For competitive reasons, I'm not getting into too much detail on the promotional activity.
Speaker Change: But I can tell you that if you look at a brand like Olive garden with this year demonstrated at olive garden can react to whatever environment. They compete in and so if the environment gets a little bit more a little less challenging maybe we come off of a little bit promotion activity and make investments in other places if it gets more challenged.
Raj Vennam: And so if the environment gets a little bit less challenging, maybe we come off of a little bit of promotion activity and make investments in other places. If it gets more challenging, we keep the promotional activity we have. But, you know, we like the cadence that we have now. Recall that we have Never Any Possible during a time that's a normal lull in casual dining. And we have Buy One, Take One at the other time that's a normal lull in casual dining. But they're not deep discounted. And they do drive some traffic. And then you take all of our other mix, you think about some of the marketing testing we're doing at Cheddar's.
Speaker Change: We keep the promotional activity, we have but you know we like the cadence that we have now recall that we have never ending pasta bowl during the time that the normal lull in casual dining and we have I wouldn't take one at the other time, it's there's normal lull in casual dining.
Speaker Change: But they're not deep deep discounted.
Speaker Change: And they do drive some traffic.
Speaker Change: And then if you take it all or going out of the mix do you think about some of the marketing testing we're doing a cheddars you know John Wilkerson and his team have done a lot of great things to improve and make the brand much more foundational is ready to go and so we're we're testing right now connected TV and that's having a good impact and so it will get people to.
Raj Vennam: You know, John Wilkerson and his team have done a lot of great things to improve and make that brand much more foundationally ready to go. And so we're testing right now connected television, and that's having a good impact. And so it'll get people to see what Cheddar's has done over those years. So if you call that promotional activity, that's just marketing their brand. It's not necessarily promotional, but we're gonna continue to invest in marketing, whether it's promotional or not. Thank you.
Speaker Change: See what Cheddar has done over this year. So if you call that promotional activity. That's just a marketing they're there they're brand it's not necessarily promotional but you know we're going to continue to invest in marketing, whether it's promotional or not.
Speaker Change: Thank you next question today is coming from Dennis Geiger from UBS. Your line is now live.
Dennis Geiger: Next question today is coming from Dennis Geiger from UBS. Your line is now live. Great. Thanks, guys. I wanted to ask... and how you're thinking about the strength of the moment, you know. Unknown Speaker ...kind of gave some color there, Rick, especially on Uber as well. Just anything at a high level, thinking about the combination of Uber, new manual, it seems like you've had good success, promos, you know, anything else. So just the confidence in that momentum running through Twitter. Hey, Jake, you broke up a little bit in the beginning. Sorry to say it.
Dennis Geiger: Great. Thanks, guys I wanted to ask.
Speaker Change: And how are you thinking about the strength of the mall.
Speaker Change: Yeah.
Speaker Change: Give some color there Ricky.
Speaker Change: As well just anything at a high level thinking about the combination of Uber new menu.
Speaker Change: Emmanuel where it seems like you've had good success promos you know anything else. So just the confidence in that momentum running through 'twenty six.
Speaker Change: Hey, Jake you you broke up a little bit in the beginning.
Speaker Change: Sorry to say it can you just give us that question again.
Dennis Geiger: Can you just give us that question again? These work phones are great. Sorry, Rick. Just on Olive Garden.
Speaker Change: He's worked for ones or Gregg sorry.
Speaker Change: Just on Olive garden.
Jim Suva: Jim you touched on the Newark.
Rick Cardenas: You touched on Uber, but in thinking about that momentum in 2026, thinking about Uber, but also the new menu items, the promos, just how you're thinking about the Olive Garden momentum continuing through. Yeah, Dennis, and I would say Olive Garden has had some strong momentum in the fourth quarter. And that momentum that we have in this quarter is contemplated in our guide. And recall what Raj said earlier, you know, our, our first half of the year is probably got a little bit more, a little easier compares. And so our first half of the year should be a little bit better than our second half.
Jim Suva: In thinking about that that momentum into 'twenty six thinking about newer but also the new menu items. The promos just how youre thinking about the olive garden momentum continuing through thank you.
Jim Suva: Yeah, Dennis and I would say olive garden has had some strong momentum in the fourth quarter and that momentum that we have in this quarter as contemplated in our guide.
Raj: And recall, what Raj said earlier.
Raj: You know our our first half of the year, it's probably got a little bit more a little easier compares and so our first half of the year should be a little bit better than our second half.
Rick Cardenas: That said, we're going to continue to find ways to, you know, keep that momentum going. But a brand as big as Olive Garden is going to be pretty similar to Darden, so I wear Darden Resorts. What we're going to do with Uber and if Uber Direct continues to build as it is, we've got some things that are in test right now in a couple of divisions at Olive Garden. Perhaps we add it to more divisions and those are investments. And so that would impact our same restaurant sales. So if we get more same restaurant sales from Uber, we may reduce our same restaurant sales a little bit based on those tests that we have.
Jim Suva: That said, we're going to continue to find ways to keep that momentum going.
Jim Suva: But a brand is big as olive garden, a is going to be pretty similar to darden. So.
Jim Suva: Our garden results are.
Jim Suva: What we're gonna do with Uber and Uber direct continues to build.
Jim Suva: As it is we've got some things that are in test right now in a couple of divisions at Olive garden, perhaps we added two more divisions and those are investments and so that would impact our same restaurant sales. So if we get more same restaurant sales from mover. We may reduce our same restaurant sales a little bit based on those tests that we have it wouldn't necessarily mean that we have.
Rick Cardenas: It wouldn't necessarily mean that we would go negative, but it would reduce the impact of Uber. But for the right reasons for the long term, as Raj said, we've got a five-year plan and we're focusing on being great today and in 2030.
Speaker Change: Go negative, but it would reduce the impact of Uber, but for the right reasons for the long term as Raj said, we've got a five year plan and we're focusing on being great today and in 2030.
Speaker Change: Thanks, and just a quick follow up as it relates to that that acceleration or that increase in the long term comp guide for the business. Overall is that largely delivery driven is there anything with any other initiatives I know you've got a focus on ops and you can see that the long term focused and anything else.
Rick Cardenas: Thanks, and just a quick follow up as it relates to that, that acceleration or that increase in the long term comp guy for the business overall, is that largely delivery driven? Is there anything with any other initiatives? I know you've got to focus on ops and speed. That's a long term focus. Anything else? Now, I would say that if you look at the long-term comp guidance, we're assuming a little bit more inflation over the next five years than we saw in the first five years, and so we'll price a little bit below inflation, and that's a big component of that.
Speaker Change: No I would say that if you look at the long term comp guidance.
Speaker Change: We're assuming a little bit more inflation over the next five years and we saw it in the first five years and so we'll price a little bit below inflation and that's a big that's a big component of that.
Speaker Change: You know we have our long term framework prior to this assumed in the midpoint that was no traffic growth that we would have traffic growth.
Rick Cardenas: Our long-term framework prior to this assumed in the midpoint that with no traffic growth that we would have traffic growth, our comps would come from check growth, and our new long-term framework has the same general assumption. So we think we have a little bit more on price because of inflation, but we'll also have some growth because of Uber that will help offset some other things that we're implementing to continue to improve our business for the long term. Thank you.
Speaker Change: Our comps would come from from check growth.
Speaker Change: And our new long term framework has the same general assumption.
Speaker Change: So we think we have a little bit more on price because of inflation, but we'll also have some some growth because of buber that will help offset.
Speaker Change: Some other things that where we're implementing to improve continue to improve our business for the long term.
Speaker Change: Thank you next question today is coming from Christine Cho from Goldman Sachs. Your line is not wise.
Christine Cho: Next question today is coming from Christine Cho from Goldman Sachs. Your line is now live. Thank you so much and congrats on a strong quarter. You've reiterated the ongoing resilience in consumers above $50K the last few quarters, but I was wondering if there was any notable observation on consumers in various age groups. So for example, have you seen better sales trends or higher net purchase intent from younger guests that is driving acceleration across casual dining as well as your major brands? Thank you.
Speaker Change: Thank you so much and congrats on a strong quarter.
Speaker Change: You've reiterated the ongoing resilience in consumers about 50 call. It the last few quarters.
Speaker Change: But I was wondering if there was any notable observations.
Speaker Change: There's various each script. So for example have you seen better sales trends or higher net purchase intent from younger guests.
Speaker Change: That is driving acceleration across casual dining I smell that your major brands. Thank you.
Speaker Change: Christine I really it all comes down to the household income I mean, what we're seeing is that the higher income is actually doing it a little bit more than the lower income in general. So if you look at across all the segments as you move up to incomes in the 100 150, K households, that's where we're seeing more growth than other play.
Christine Cho: And Christine, really it all comes down to the household income. I mean, what we're seeing is that the higher income is actually doing a little bit more than the lower income in general. So if you look at across our segments, as you move up to incomes in the 100, 150K households, that's where we're seeing more growth than other places. And now it varies from brand to brand, but when you look at an aggregate, pretty much household income is growing in casual dining, except for the ones below 50K where it's kind of flattish. And that's really, you know, the age is really, it's more about the correlation to income than age.
Speaker Change: Yes.
Speaker Change: And now it varies from brand to brand, but when you look at in aggregate are every pretty much every household income is growing and casual dining except for the once below 50, K, where it's it's kind of flattish and that's really on the edge is really it's more about the correlation to income than age.
Speaker Change: Yeah.
Gregory Frankfurt: Thank you next question is coming from Gregory Frankfurt from Guggenheim Securities. Your line is now live.
Christine Cho: Thank you.
Gregory Francfort: Next question is coming from Gregory Francfort from Guggenheim Securities.
Gregory Francfort: Your line is not live. Hey, thanks for the question.
Speaker Change: Hey, Thanks for the question, Mike Rick I guess my question is for you.
Gregory Francfort: Rick, I guess my question is for you. I guess in the state category, if I go back five, 10 years ago, you might have been competing with a number one player who was more focused on maybe margins, and now you're focused, you're competing with a number one player that might be a little more focused on top line. How have you positioned Longhorn to compete? I mean, I'm just trying to figure out how you're doing comps at this level, you know, six and change. And going forward, do you think you need to reinvest in price? Do you think you need to reinvest in portion sizing?
Speaker Change: I guess in the steak category. If I go back 510 years ago, you might have been competing with the number one player who was more focused on maybe margins in and now you're focused you are competing with a.
Speaker Change: The number one player that might be a little more focused on top line.
Speaker Change: How have you positioned longhorn to compete I mean, I'm just trying to figure out how youre doing comps at this level, you know six and change and going forward do you think you need to reinvest in price do you think you need to reinvest a portion sizing.
Gregory Francfort: I'm trying to figure out how you're going to continue to compete there. Thanks.
Speaker Change: How you're going to continue to compete there. Thanks.
Speaker Change: Hey, Greg you know longhorn the reason, they're performing the way they have been is because it is a very adherent to their strategy quality simplicity and culture, you know they've been.
Rick Cardenas: Hey, Greg. You know, Longhorn, the reason they're performing the way they have been, is because of their adherence to their strategy, quality, simplicity and culture. You know, they've made a lot of investments, especially during COVID, significant investments in all of their items. So they increased the size of all their stakes, they took a lot less pricing and inflation. And, you know, they're going to continue to focus on that and improve the service at Longhorn. You know, so quality isn't just about food, it's about the overall experience. And so, yeah, they'll keep making those investments, but not at the detriment of margin.
Speaker Change: A lot of investments, especially during COVID-19 significant investments in all of their items. So we they increase the size of other stakes they took a lot less pricing and inflation.
Speaker Change: And you know theyre going to continue to focus on that and improve the service at longhorn.
Speaker Change: So quality isn't just about food, it's about the overall experience and so yeah, they'll keep making those investments.
Speaker Change: But not at the detriment of margin. So you know, we think that long run is well positioned to compete with our with the with their category.
Rick Cardenas: So, you know, we think that Longhorn is well positioned to compete with their category There's not as much overlap between the biggest player and Longhorn as you would think on consumer. They go there for different reasons. And so we still feel like we've got a great Thank you. Thank you.
Speaker Change: Ah theres not as much overlap between the biggest player in longhorn as you would think I'm consumer they go there for different reasons.
Speaker Change: And so we still feel like we've got a great.
Speaker Change: A consumer proposition at longhorn.
Speaker Change: And we would anticipate that continuing and that's contemplated in our guide and our five year long term or long term framework, not our favorite or framework long term.
Speaker Change: Thank you.
Speaker Change: Thank you. Our next question today is coming from interest from BMO capital markets. Your line is that life.
Andrew Strelzik: Our next question today is coming from Andrew Strelzik from BMO Capital Markets. Your line is now live. Thanks for taking the questions. Two quick ones for me. Excuse me. The first one's on marketing within that long-term framework and a stronger top-line focus. How are you thinking about marketing over the next several years and in 26 as well? And then the other question was on speed of service, which has been a focus for you. What drivers do you see there for 26? And can you give us an update on the progress there? Yeah, Andrew, on the marketing front, you know, over the next five years, we anticipate marketing growing faster than our sales, without getting into the total impact of marketing.
Speaker Change: Hey, thanks for taking the questions.
Speaker Change: Two quick ones for me.
Speaker Change: He has me the first one is on marketing within that long term framework, and and and and a stronger topline focus how are you thinking about marketing over the next several years and in 26 as well and then the other question was on.
Speaker Change: Speed of service, which has been a focus for you what drivers do you see there for for 'twenty six and can you give us an update on the progress there. Thanks.
Speaker Change: Yeah, Andrew I'm on the marketing front, you know over the next five years, we anticipate marketing growing faster than ourselves.
Speaker Change: Without getting into the the total impact of marketing, but you know as Rajeev said in the past you know somewhere 10 20 basis points I'm Raj can get more detail on next fiscal year.
Rick Cardenas: But, you know, as Raj has said in the past, you know, somewhere 10s of 20s of basis points, Raj can get more detail on next fiscal year.
Rick Cardenas: And I'll get turn it over to him in a second. But again, we're going to continue to invest in marketing. And you'll see more of that in cheddars, you'll see more of that across some of our brands, but it's not and it'll grow faster than sales. When you think about speed, we're in the early innings, I know there's a lot of times we got a baseball analogy. We're in the real early innings here. And as I said, when I when I mentioned speed before this, you know, our speed challenges have been a longtime trend in the entire industry.
Speaker Change: Ill turn it over him in a second but again, we're going to continue to invest in marketing and you'll see more of that in cheddars, you'll see more of that across some of our brands.
Speaker Change: But it's not and it will grow faster than sales.
Speaker Change: When you think about speed we're in the early innings I know Theres a lot of times, you've got a baseball analogy. We're in the real early innings here and as I said when I when I mentioned speed before this.
Speaker Change: Our our speed challenges have been a long time trend in the entire industry and we will take a good time to reverse that we've made some progress.
Rick Cardenas: And we will take a good time to reverse that. We've made some progress. It's, you know, it's not as fast as I'd like it to be. But we've made progress, all of our brands are faster. And what we're really trying to do is ensure that the consumer we're meeting the pace that the consumer wants, and not holding them hostage in our restaurant. So that'll take, as I said, take some time. We've got about 100,000 servers or more in our in our system. And we got to convince all of them that they've got to change a little bit of what they do.
Speaker Change: It's you know, it's not as fast as I'd like it to be but we've made progress all of our brands are faster.
Speaker Change: And what we're really trying to do is ensure that the consumer where were meeting this the pace that the consumer wants.
Speaker Change: That holding them hostage in our restaurants, so that'll.
Speaker Change: That'll take as I said it takes some time, we've got about 100000 servers are more in our in our system and we got to convince all of them that they've got to change a little bit of what they did and we're working on that.
Raj Vennam: And we're working on that. I think, Rick, you talked about it just so for fiscal 2026, specifically, we're still talking maybe in the 1020 basis points. I think if you look over the five years, same thing, Rick, already. And one thing I'll just point out is we don't assume that it's actually a margin drag. The way we look at it is that the investments we're making, we're going to get a return on it, and that keeps the margins flat. So I wouldn't view this as a margin erosion.
Speaker Change: Yeah, I think Rick you talked about it for fiscal 'twenty 'twenty six specifically, we're still talking maybe in the 10 20 basis points I think if you look at what are the five years same thing Rick already mentioned that.
Speaker Change: And one thing I'll just point out that we don't assume that it's actually a margin track the way we look at it is that the investments, we're making we're going to get out of turn on it and that keeps the margins flat. So I wouldn't view this as a margin erosion.
Speaker Change: Yeah.
Speaker Change: Great. Thank you very much.
Raj Vennam: Great, thank you very much.
Speaker Change: Thank you. Your next question is coming from Brian Vaccaro from Raymond James Your line is that life.
Brian Vaccaro: Thank you.
Raj Vennam: Next question is coming from Brian Vaccaro from Raymond James. Your line is now live. Hi, thanks. Most of them I've been asked, but just one quick one. Raj, can you walk through the traffic and check dynamics at Longhorn as well? Thank you. Sure Brian, Longhorn was basically, their pricing was 3-3, their traffic was 3-4, their check was pretty flat to pricing, so I think their total was 6-7. Thank you.
Speaker Change: I think most of mine have been asked but just one quick one Roger can you walk through the traffic and check dynamics at longhorn as well. Thank you.
Speaker Change: Oh sure.
Speaker Change: Sure Brian Longhorn was basically the pricing was three three their traffic was three four that checklist pretty flat to pricing. So I think a total of 67.
Speaker Change: Thank you next question is coming from John Ivankov from JP Morgan. Your line is now alive hi. Thank you. According to the government overall industry growth and using it sounds this has a broad industry seems to have slowed from around 2.5% to around 1.5%.
John Ivankoe: Next question is coming from John Ivankoe from J.P. Morgan. Your line is now live. Hi. Thank you. According to the government, overall industry growth in units, now this is a broad industry, seems to have slowed from around 2.5% to around 1.5%. So my question is, where do you think that that growth rate is changing across the industry, and how might that be influencing your ability to access the type of real estate that Darden typically does? In other words, you make a comment about the tightening or loosening of the specific sites that you're looking for over the next couple of years.
Speaker Change: And my question is where do you think that that growth rate is changing across the industry and how might that be influencing your ability to access you know that the type of real estate that Darden typically does best with in other words, you can make a comment about you know the tightening or loosening of the specific sites that you're looking for over the next.
Speaker Change: A couple of years.
John Martin: Yeah, John you know we have a.
Rick Cardenas: Yeah, John, you know, we have built a strong pipeline of sites for the next few years. We are in a better position to start this fiscal year than we were to start last fiscal year. We feel really good about the work that the team has done, including new prototypes for Cheddar's and Yardhouse and increasing the number of potential sites for Cheddar's, Yardhouse, Olive Garden, and Longhorn. I think your comment on the number of units is restaurant growth. And so where the slowdown is coming from, I think, is smaller independents and smaller chains. The big chains, like us, continue to grow.
Speaker Change: Built a strong pipeline of sites for the next few years, we're in a better position to start this fiscal year than we were to start last fiscal year, we feel really good about the work that the team has done including new prototypes for Cheddars and yard house.
John Martin: And finding you know.
John Martin: Increasing the number of potential sites for four Cheddars yard house, Olive garden and longhorn.
John Martin: I think your comment on the number of units is restaurant growth.
John Martin: And so where that's coming from or where the slowdown is coming from I think is smaller independents and smaller chains. The big chains like US continue to grow we've got great access to capital we've got great cost of capital and we've shown that we deserve to be able to grow.
Rick Cardenas: We've got great access to capital. We've got great cost of capital, and we've shown that we deserve to be able to grow. Thank you.
John Martin: Thank you.
Speaker Change: Thank you next question today is coming from Jeffrey Bernstein from Barclays. Your line is now lives.
Jeffrey Bernstein: Next question today is coming from Jeffrey Bernstein from Barclays. Your line is now live. Great, thank you. Rick, it sounds like you're more comfortable with the uptick in promotions in recent quarters. I know you guys were previously more hesitant to do any more promotional activity. And I think you mentioned focus more on affordability at Olive Garden going forward to perhaps drive more traffic.
Great. Thank you.
Speaker Change: Rick It sounds like you're more comfortable with the uptick in promotions in recent quarters. I know you guys were previously are more hesitant to do any more promotional activity so and.
Speaker Change: And I think he mentioned focus more on affordability at Olive garden going forward to perhaps drive more traffic I'm. Just wondering if you could talk a little bit more about that increased confidence and waiting into the more value or more affordability side of things and your ability at the same time to still protect margin and then I had one follow up.
Rick Cardenas: I'm just wondering if you could talk a little bit more about that increased confidence in wading into the more value or more affordability side of things and your ability at the same time to still protect margin. I'm going to have one follow-up. Yeah, Jeff, you know, if you think about the promotions, you know, it's not like we're promotion crazy here, we added buy one, take one, which, as Raj mentioned, wasn't a margin drag. And it was five weeks at a lull time. So it's not like we're going to go into heavy promotional activity.
Speaker Change: Yeah, Jeff are you know what you're thinking about the promotions that you know it's not like we're promotion Crazy here, we added buy one take one which as Raj mentioned wasn't a margin drag and it was five weeks at a long time. So it's not like we're gonna go into heavy promotional activity.
Rick Cardenas: As you as we talk about the investments that we're looking at, you know, we're looking at a couple of things. One is You know as we let's let's double down on affordability at Olive Garden and at other brands You know as you think about what we think has been helping somewhat casual dining and definitely us is the price gap between us and Other segments and so let's keep that moving. Let's get let's get that a little bit stronger and that would mean adding some items on the menu that may not be the same price points as The ones that are on the menu today, and so that would be a mix mix impact whether we promote that or not I don't know we may talk about it, but it's not like we're going to We think that we're going to have to have a promotion to do that We'll talk about it.
Speaker Change: As you as we talk about the investments that we're looking at you.
Speaker Change: You know we're looking at a couple of things one is.
Speaker Change: You know as we let's let's double down on affordability at Olive garden and at other brands.
Speaker Change: As you think about what we think has been helping somewhat casual dining and definitely us is the price gap between us and other segments and so let's keep that moving let's get let's get that a little bit stronger.
Speaker Change: And that would mean, adding some items on the menu that may not be the same price point as the ones that are on the menu today, and so that would be a mix mix impact, whether we promote that or not.
Speaker Change: I don't know we may talk about it but it's not like we're going to we think that we're gonna have to have a promotion to do that.
Speaker Change: We will talk about it we'll let our consumers know and as I said, we've got we've got some of this in test in <unk>.
Rick Cardenas: We'll let our consumers know and as I said we've got we've got some of this in test in Couple of divisions at Olive Garden.
Speaker Change: Couple of divisions at Olive Garden, it's doing pretty well for us and so we feel really good about it what it's done to our affordability ratings, which we're already strong and what it's done for those guests intent to return. So we feel good we feel good about the investments, we're making we wouldn't be making the investments if we didn't think they'd pay off in the long run.
Rick Cardenas: It's doing pretty well for us And so we feel really good about it what it's done to our affordability ratings Which were already strong and what it's done for those guests intent to return So we feel we're going to we feel good about the investments We're making we wouldn't be making the investments if we didn't think they'd pay off in the long run Understood.
Speaker Change: Understood and then just as it relates to your competition on the same front. How do you think the industry is thinking about discounting versus prior whether or not they're comfortable with the elevated levels or whether you might see some change there.
Rick Cardenas: And then just as it relates to your competition on the same front, how do you think the industry is thinking about discounting versus prior, whether or not they're comfortable with the elevated levels or whether you might see some change there? Yeah, Jeff, all I can, I mean, I don't know what the industry is thinking about other than what I see. And we've got, you know, a player that's been doing some good communication on a good value item and looking at the rest of their menu. They're driving some folks in. I can't say what anybody else is going to do.
Speaker Change: Yeah, Jeff I'll I can I mean, I I don't know what the industry is thinking about it other than what I see and we've got a you know a player that's been doing some some good communication on a on a good value item.
Speaker Change: And looking at the rest of your menu, they're they're driving some folks in I can't say, what what anybody else Who's Gonna do I can just say that we're ready to react or way to whatever happens and we showed that at olive garden. This year and what we did to continue to improve the prop.
Jeffrey Bernstein: I can just say that we're ready to react our way to whatever happens. And we showed that at Olive Garden this year and what we did to continue to improve the profitability at Olive Garden and drive traffic and drive same restaurant sales. Thank you.
Speaker Change: The ability to olive garden and drive traffic and drive drive same restaurant sales.
Speaker Change: Thank you.
Speaker Change: The next question today is coming from.
Danilo Gargiulo: Next question today is coming from Danilo Gargiulo from Bernstein. Your line is now live. Great, thank you.
Speaker Change: From Bernstein Your line is not a lot.
Speaker Change: Great. Thank you.
Rick Cardenas: Rick, I was wondering if you can comment on the labor environment in the United States and particularly whether you've seen any increase in turnover in the areas that you're operating, maybe not necessarily in your case, but in general, in the in the trade areas that you're most active on, specifically in light of these immigration policies that seem to be tight. Yeah, what I would say is I don't, we don't get turnover data by market for others. We know what ours are, and we're not really seeing material impact on turnover or people showing up to work.
Speaker Change: I was wondering if you can comment on the labor environment in the United States, and particularly whether you've seen any increasing turnover or indeed, if the euro operating maybe not necessarily in your case, but in general India.
Speaker Change: E trade areas that you are most active on it, especially if you can light up.
Speaker Change: Based on policies that seem to be tightening.
Speaker Change: Yeah, what I would say is I don't we don't get turnover data by by market for others. We know what ours are and we're not really seeing a material impact on turnover.
Speaker Change: Turnover or or people showing up to work you know from day to day things fluctuate in the restaurants, but as of now nothing material on the top line or on labor.
Rick Cardenas: You know, from day to day, things fluctuate in our restaurants, but as of now, nothing material on the top line or on the... I think it's because we've got such a great employment proposition, and people want to come to work for us. So if anyone leaves, we're able to refill that job pretty quickly. But we haven't really seen an uptick in turnover.
Speaker Change: I think oh.
Speaker Change: I think it's because we've got such a great employment proposition.
Speaker Change: And people want to come to work for us.
Speaker Change: So if anyone leaves were able to fill that job pretty quickly, but we haven't really seen an uptick in turnover in fact, our brands have been at record turnover levels record retention levels.
Rick Cardenas: In fact, our brands have been at record turnover levels, record retention levels.
Speaker Change: Okay, great to hear and then regarding your international aspirations.
Rick Cardenas: And then regarding your international aspirations, specifically on the franchising side, what do you think your long-term objective might be from, in terms of like total number of units that you think over the next five to even ten years, you could be aspiring to get to, and which areas do you think are going to be getting most attention? You mentioned like India, Spain, any other areas that you think could be of particular interest to you? Thank you. Well, Danilo, you know, we've really started this international push not too long ago, and we're already seeing really great results in signing franchise partners.
Speaker Change: Specifically on the franchising side, what do you think your long term objective might be from in terms of like the total number of units that you think over the next five Sweden any or it will be aspiring for bacterin and which areas. Do you think are going to be getting most attention you mentioned like even yesterday in any other areas that you think.
Speaker Change: Would be particularly interesting thank you.
Speaker Change: Well the new low you know, we've really started this international push not too long ago.
Speaker Change: And we're already seeing really great results and signing franchise partners, we want to see them build those restaurants with India. For example are the 40 restaurants or just in one small part of India. We've got a lot of other areas. We can go but we felt it was prudent to have that partner prove that they can meet those development commitments.
Rick Cardenas: We want to see them build those restaurants. With India, for example, the 40 restaurants are just in one small part of India. We've got a lot of other areas we can go, but we felt it was prudent to have that partner prove that they can meet those development commitments in that part of India before we give them another part of India. In regards to Spain, you know, they were really high on Olive Garden, and, you know, when signing a 40-restaurant deal, we'll want to see how they go. There's no guarantee that all 40 of those restaurants are going to open, just like there's no guarantee that the 40 India restaurants are going to open, but we feel really good about our progress.
Speaker Change: In the in that part of India before we give them another part of India.
Speaker Change: In regards to Spain, you know they were really they were really high on Olive garden and you know when the signing of 40 restaurant deal we want to see how they go where there's no guarantee that all 40 of those restaurants are going to open just like Theres no guarantee that the 40, India restaurants are gonna open.
Speaker Change: But we feel really good about our progress and once we get a a restaurant in Spain, what generally happens let me take that back what generally happens once we get olive garden in a in a country those franchise partners realize how good we support them and they want another brand and.
Rick Cardenas: And once we get a restaurant in Spain, what generally happens, let me take that back, what generally happens, once we get Olive Garden in a country, those franchise partners realize how good we support them, and they want another brand. And so we'll probably get another brand in those countries if we support them and they see the performance.
Speaker Change: So, we'll probably get another brand in those countries, if if we support them and they see the performance but.
Rick Cardenas: But I'm not going to give you a number of where we're going to be in five years. What I will say is I believe it will be bigger than it is today, and it's already a meaningful business for us on the profit side with really no capital. Thank you.
Speaker Change: But I'm not going to give you a number of where we're gonna be in five years what.
Speaker Change: What I will say is I believe it'll be bigger than it is today and it's already a meaningful business for us on the profit side with with really no capital.
Speaker Change: Thank you. Our next question is coming from Jim Sanderson from Northcoast Research. Your line is in our lives.
Jim Sanderson: Our next question is coming from Jim Sanderson from North Coast Research.
Jim Sanderson: Your line is now live. Hey, thanks for the question. I wanted to go back to your fiscal 26 guidance. So what closure rate is implied for 2026? And just wondering if you're looking more closely at some of some of the smaller brands like season 52, or any of these that haven't really grown that much if there's an opportunity to streamline your portfolio going forward? Hey, Jim, I think we basically, as part of the five-year plan, we went through the portfolio and we closed more than normal this fiscal year.
Jim Sanderson: Hey, Thanks for the question I wanted to go back to your fiscal 'twenty six guidance. So what closure rate is implied for 2026, and just wondering if youre looking more closely at some of some of the smaller brands like seasons 52, Eddie V's that havent really grown that much if theres an opportunity to streamline your portfolio going forward.
Jim Suva: Hey, Jim I think we basically.
Speaker Change: As part of the five year plan, we went through that portfolio.
Speaker Change: We closed more than normal this fiscal year, we're not assuming any significant number of closings next year.
Jim Sanderson: We're not assuming any significant number of closures.
Speaker Change: Alright, and then a quick follow up question on the Uber direct you mentioned the promotion in the last part of May that generated significant pickup and delivery. Just wondering did the incremental 40 to 50 per cent was that consistent we did you see more new clients coming to the brand helps by the board.
Raj Vennam: All right, and a quick follow up question on the Uber Direct. You mentioned the promotion in the last part of May that generated significant pickup and delivery. Just wondering, did the incrementality, the 40 to 50%, was that consistent? Or did you see more new clients coming to the brand helped by the marketing and promotions for TV, on TV? Yeah, Jim, it's fairly, the incrementality is fairly consistent. Recall, when we offer free delivery, we may have some people that are doing current pickup, getting delivery. So I wouldn't say that the incrementality is going to spike because we may have some trade over from our current, current pickup.
Speaker Change: Getting in promotions for TV on television.
Speaker Change: Yeah, Jim it's it's fairly the instrumentality is fairly consistent.
Speaker Change: Recall, when we offer free delivery, we may have some people that are doing current pick up getting delivery. So I wouldn't say that the incrementals, you're just going to spike because we may have some trade over from our current current pickup guests.
But it did increase our sales for delivery when we added the commercial.
Speaker Change: But it did incur.
Speaker Change: To increase our sales for delivery when we added the commercial.
Speaker Change: Thank you we've reached the end of our question and answer session I'll, just turn the floor back over for any further or closing comments.
Thank you.
We've reached the end of our question and answer session. I'd like to turn the floor back over for any further closing comments.
Speaker Change: This concludes our call I want to remind you that we plan to release first quarter results on Thursday September 18th before the market open the conference call to follow Thank you for participating have a great day.
This concludes our call. I want to remind you that we plan to release first quarter results on Thursday, September 18th before the market opens with a conference call to follow. Thank you for participating. Thank you.
Speaker Change: Yeah.
Speaker Change: Thank you that does conclude today's teleconference webcast me just centralized at this time and have a wonderful day. We thank you for your participation today.
That does conclude today's teleconference webcast and we disconnect your lines at this time and have a wonderful day. We thank you for your participation.