Q1 2027 Darden Restaurants Inc Earnings Call

September 24, 2026

Speaker #1: Welcome to the Darden Fiscal Year 2027 First Quarter Earnings Call. Your lines have been placed on listen-only until the question and answer session.

Operator: Welcome to the Darden Fiscal Year 2027 first quarter earnings call. Your lines have been placed on listen-only until the question and answer session. To ask a question, you may press star one on your telephone keypad. The conference is being recorded. If you have any objections, please disconnect at this time. I will now turn the call over to Ms. Courtney Aquila. Thank you. You may begin.

Operator: Welcome to the Darden Fiscal Year 2027 Q1 earnings call. Your lines have been placed on listen-only until the question and answer session. To ask a question, you may press star one on your telephone keypad. The conference is being recorded. If you have any objections, please disconnect at this time. I will now turn the call over to Ms. Courtney Aquila. Thank you. You may begin.

Speaker #1: To ask a question, you may press star 1 on your telephone keypad. The conference is being recorded. If you have any objections, please disconnect at this time.

Speaker #1: I will now turn the call over to Ms. Courtney Aquila. Thank you. You may begin.

Speaker #2: Thank you, Donna. Good morning, and thank you for participating on today's call. Joining me are Rick Cardenas, Darden's President and CEO, and Raj Ranam, CFO.

Courtney Aquilla: Thank you, Donna. Good morning, and thank you for participating on today's call. Joining me are Rick Cardenas, Darden's President and CEO, and Raj Vennam, CFO. As a reminder, comments made during this call will include forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. These statements are subject to risks and uncertainties that could cause actual results to differ materially from our expectations and projections. Those risks are described in the company's press release, which was distributed this morning, and in its filings with the Securities and Exchange Commission. A supplemental materials presentation containing information shared on today's call is available on the Financials tab in the Investors section of our website at darden.com. Today's discussion includes certain non-GAAP measurements, and reconciliations of these measurements are included in the presentation.

Speaker #2: As a reminder, comments made during this call will include forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. These statements are subject to risks and uncertainties that could cause actual results to differ materially from our expectations and projections.

Speaker #2: Those risks are described in the company's press release, which was distributed this morning, and in its filings with the Securities and Exchange Commission. A supplemental materials presentation containing information shared on today's call is available on the Financials tab in the Investor section of our website at Darden.com.

Courtney Aquilla: Those risks are described in the company's press release, which was distributed this morning, and in its filings with the Securities and Exchange Commission. A supplemental materials presentation containing information shared on today's call is available on the Financials tab in the Investors section of our website at darden.com. Today's discussion includes certain non-GAAP measurements, and reconciliations of these measurements are included in the presentation.

Speaker #2: Today's discussion includes certain non-GAAP measurements, and reconciliations of these measurements are included in the presentation. Looking ahead, we plan to release fiscal 2027 second quarter earnings on Friday, December 18, before the market opens, followed by a conference call.

Courtney Aquilla: Looking ahead, we plan to release fiscal 2027 second quarter earnings on Friday, 18 December before the market opens, followed by a conference call. During today's call, all references to industry results refer to the Black Box Intelligence Casual Dining Benchmark, excluding Darden on a calendar-aligned basis. Darden's transition from a 53-week fiscal year last year to a 52-week fiscal year this year has created an offset of one week between our reported fiscal periods and the comparable calendar periods used in the industry benchmark. As a result, industry trends should be compared to Darden's comparable calendar results, which helps account for the one-week shift and is intended to provide a clearer year-over-year comparison. On a comparable calendar basis, average same restaurant sales for the industry increased 2.4%, and average same restaurant guest counts decreased 0.2% during our first quarter.

Courtney Aquilla: Looking ahead, we plan to release fiscal 2027 Q2 earnings on Friday, 18 December before the market opens, followed by a conference call. During today's call, all references to industry results refer to the Black Box Intelligence Casual Dining Benchmark, excluding Darden on a calendar-aligned basis. Darden's transition from a 53-week fiscal year last year to a 52-week fiscal year this year has created an offset of one week between our reported fiscal periods and the comparable calendar periods used in the industry benchmark.

Speaker #2: During today's call, all references to industry results refer to the Black Box Intelligence casual dining benchmark, excluding Darden, on a calendar-aligned basis. Darden's transition from a 53-week fiscal year last year to a 52-week fiscal year this year has created an offset of one week between our reported fiscal periods and the comparable calendar periods used in the industry benchmark.

Speaker #2: As a result, industry trends should be compared to Darden's comparable calendar results, which helps account for the one-week shift and is intended to provide a clearer year-over-year comparison.

Courtney Aquilla: As a result, industry trends should be compared to Darden's comparable calendar results, which helps account for the one-week shift and is intended to provide a clearer year-over-year comparison. On a comparable calendar basis, average same restaurant sales for the industry increased 2.4%, and average same restaurant guest counts decreased 0.2% during our Q1. During today's call, we will be referring to comparable calendar periods when discussing our same restaurant sales results. This morning, we will share some brief remarks on the quarter and provide details on our financial results. Now I will turn the call over to Rick.

Speaker #2: On a comparable calendar basis, average same-restaurant sales for the industry increased 2.4%, and average same-restaurant guest counts decreased 0.2% during our first quarter.

Speaker #2: During today's call, we will be referring to comparable calendar periods when discussing our same-restaurant sales results. This morning, we will share some brief remarks on the quarter and provide details on our financial results.

Courtney Aquilla: During today's call, we will be referring to comparable calendar periods when discussing our same restaurant sales results. This morning, we will share some brief remarks on the quarter and provide details on our financial results. Now I will turn the call over to Rick.

Speaker #2: Now, I will turn the call over to Rick.

Speaker #3: Thank you, Courtney, and good morning, everyone. The first quarter was a solid start to fiscal '27. Results were in line with our expectations, and each of our segments delivered positive same-restaurant sales.

Rick Cardenas: Thank you, Courtney, and good morning, everyone. Q1 was a solid start to fiscal 2027. Results were in line with our expectations, and each of our segments delivered positive same restaurant sales. Throughout the quarter, our restaurant teams did a great job of controlling what they can control. They remain focused on strong operating fundamentals, and guest satisfaction scores across our brands remain at or near record highs for the quarter. Equally important, they continue to advance their strategic priorities to support long-term growth. Olive Garden grew same-restaurant sales by 1% for the quarter. The brand continued to pair menu innovation with compelling value. Their Calabrian Summer promotion introduced differentiated flavors at an accessible starting price, while their Season of Garlic promotion provided guests with additional choice and multiple protein-forward offerings.

Speaker #3: Throughout the quarter, our restaurant teams did a great job controlling what they can control. They remained focused on strong operating fundamentals, and guest satisfaction scores across our brands remained at or near record highs for the quarter.

Speaker #3: Equally important, they continued to advance their strategic priorities to support long-term growth. Olive Garden grew same-restaurant sales by 1% for the quarter. The brand continued to pair menu innovation with compelling value.

Speaker #3: Their Calabrian Summer promotion introduced differentiated flavors at an accessible starting price, while their Season of Garlic promotion provided guests with additional choices and multiple protein-forward offerings.

Speaker #3: During the quarter, Olive Garden was prepared to communicate about one of its core brand equities—unlimited soup, salad, and breadsticks—but quickly pivoted away from their planned marketing support in response to external events that led to broader consumer concern about lettuce.

Rick Cardenas: During the quarter, Olive Garden was prepared to communicate about one of its core brand equities, unlimited soup, salad, and breadsticks, but quickly pivoted away from their planned marketing support in response to external events that led to broader consumer concern about lettuce. Olive Garden is a brand that is well-positioned to leverage news to drive traffic, and there is no better example than their signature promotion, Never Ending Pasta Bowl. This year's offer launched at the beginning of Q2, and we are very pleased with the early results. Adding to the excitement this year are two new bold menu additions, Spicy Alfredo sauce and Crispy Shrimp Fritta as a protein topping. Guest preference for the protein-forward options remains strong, and Olive Garden has seen increased buyups for unlimited protein toppings with Never Ending Pasta Bowl.

Speaker #3: Olive Garden is a brand that is well-positioned to leverage news to drive traffic, and there is no better example than their signature promotion: Never-Ending Pasta Bowl.

Speaker #3: This year's offer launched at the beginning of Q2, and we are very pleased with the early results. Adding to the excitement this year are our two new bold menu additions.

Speaker #3: Spicy Alfredo sauce and crispy Shrimp Frita as a protein topping. Guest preference for the protein-forward options remains strong, and Olive Garden has seen increased buy-ups for unlimited protein toppings with the Never-Ending Pasta Bowl.

Speaker #3: In support of the launch of NEPB, Olive Garden brought back their Never-Ending Pasta Pass after a six-year hiatus. The Olive Garden team drove significant social media buzz as 3 million devices logged in for the Pasta Pass sale, and all 10,000 passes sold out immediately.

Rick Cardenas: In support of the launch of NEPB, Olive Garden brought back their Never Ending Pasta Pass after a six-year hiatus. The Olive Garden team drove significant social media buzz as 3 million devices logged in for the pasta pass sale. All 10,000 passes sold out immediately. More broadly, the response demonstrated the deep connection guests have with the brand and the value and abundance found at Olive Garden. This demonstrates the popularity of Olive Garden, which was further reaffirmed in YouGov's Best bites 2026 report ranking US restaurant brands. The report ranked them the number one casual dining brand for consideration when dining out by multiple generational cohorts, including millennials. Olive Garden also ranked number one among casual dining brands for service, dining experience, and value. While Olive Garden has delivered strong sales growth over the past several years, the weekday lunch daypart remains a meaningful opportunity.

Speaker #3: More broadly, the response demonstrated the deep connection guests have with the brand and the abundance of value found at Olive Garden. This demonstrates the popularity of Olive Garden.

Speaker #3: Which was further reaffirmed in YouTube's YouGov's Best Sites 2026 report ranking U.S. restaurant brands. The report ranked them the number one casual dining brand for consideration when dining out by multiple generational cohorts, including millennials.

Rick Cardenas: The report ranked them the number one casual dining brand for consideration when dining out by multiple generational cohorts, including millennials. Olive Garden also ranked number one among casual dining brands for service, dining experience, and value. While Olive Garden has delivered strong sales growth over the past several years, the weekday lunch daypart remains a meaningful opportunity.

Speaker #3: Olive Garden also ranked number one among casual dining brands for service, dining experience, and value. While Olive Garden has delivered strong sales growth over the past several years, the weekday lunch daypart remains a meaningful opportunity.

Speaker #3: I'm excited about several initiatives the team is working on that are designed to reinforce their value proposition and drive additional traffic. Later in our current quarter, Olive Garden will activate the previously planned marketing support behind its iconic unlimited soup, salad, and breadsticks lunch offering at a compelling price point.

Rick Cardenas: I'm excited about several initiatives the team is working on that are designed to reinforce their value proposition and drive additional traffic. Later in our current quarter, Olive Garden will activate the previously planned marketing support behind its iconic unlimited soup, salad, and breadsticks lunch offering at a compelling price point. The team also plans to test a new lunch platform that delivers a highly competitive value proposition and includes the abundance that differentiates the Olive Garden. At dinner, the team continues to test additional protein-forward dishes to build on the success of new core menu items like Calabrian Steak & Shrimp Bucatini that has quickly become a guest favorite. LongHorn Steakhouse delivered same-restaurant sales growth of 6.8% for the quarter. Their momentum has been powered by disciplined adherence to a clear strategy focused on quality, simplicity, and culture over many years.

Speaker #3: The team also plans to test a new lunch platform that delivers a highly competitive value proposition and includes the abundance that differentiates the Olive Garden.

Speaker #3: At dinner, the team continues to test additional protein-forward dishes to build on the success of new core menu items, like Calabrian steak and shrimp bucatini, which has quickly become a guest favorite.

Rick Cardenas: At dinner, the team continues to test additional protein-forward dishes to build on the success of new core menu items like Calabrian Steak & Shrimp Bucatini that has quickly become a guest favorite. LongHorn Steakhouse delivered same-restaurant sales growth of 6.8% for the quarter. Their momentum has been powered by disciplined adherence to a clear strategy focused on quality, simplicity, and culture over many years.

Speaker #3: Longhorn Steakhouse delivered same-restaurant sales growth of 6.8% for the quarter. Their momentum has been powered by disciplined adherence to a clear strategy, with a focus on quality, simplicity, and culture over many years.

Speaker #3: Sustaining that momentum is not easy, and the team continues to have a relentless focus on consistently executing 14 great shifts every week. LongHorn also continues to invest in food quality and will be introducing new menu items and menu enhancements during the second quarter, designed to strengthen value and variety at both lunch and dinner.

Rick Cardenas: Sustaining that momentum is not easy, and the team continues to have a relentless focus on consistently executing 14 great shifts every week. LongHorn also continues to invest in food quality and will be introducing new menu items and menu enhancements during the Q2 designed to strengthen value and variety at both lunch and dinner. Our other business segment delivered same-restaurant sales growth of 4.5%. This was driven by very impressive same-restaurant sales growth of 10% at Yard House. A broad menu and socially energized bar makes Yard House a natural gathering place for group occasions like sporting events. This was true for the World Cup, which presented a great opportunity for Yard House to deepen connections with their loyal guests.

Speaker #3: Our other business segment delivered same-restaurant sales growth of 4.5%. This was driven by very impressive same-restaurant sales growth of 10% at Yard House.

Speaker #3: A broad menu and socially energized bar make Yard House a natural gathering place for group occasions like sporting events. This was true for the World Cup, which presented a great opportunity for Yard House to deepen connections with their loyal guests.

Speaker #3: It also grew brand awareness by bringing in many new guests who got to experience all the new menu enhancements the team has introduced over the past few years, including the new burger, pizza, taco, and pasta platforms.

Rick Cardenas: It also grew brand awareness by bringing in many new guests who got to experience all the new menu enhancements the team has introduced over the past few years, including the new burger, pizza, taco, and pasta platforms. Yard House is a high-potential growth brand with plans to open 13 new restaurants this fiscal year, giving even more guests an opportunity to experience the brand. Five of the openings will be conversions of Bahama Breeze restaurants, and half of the other locations will utilize the new, smaller Yard House prototype. This will be the primary prototype going forward, helping lower construction costs, enabling the brand to consider even more sites while still delivering their impressive AUV of $10.5 million. I am proud of what Bryan Clements and the team at Yard House have accomplished.

Speaker #3: Yard House is a high-potential growth brand, with plans to open 13 new restaurants this fiscal year, giving even more guests an opportunity to experience the brand.

Speaker #3: Five of the openings will be conversions of Bahama Breeze restaurants, and half of the other locations will utilize the new, smaller Yard House prototype. This will be the primary prototype going forward, helping lower construction costs and enabling the brand to consider even more sites while still delivering their impressive AUV of $10.5 million.

Speaker #3: I'm proud of what Brian Clements and the team at Yardhouse have accomplished. Just last week, they reached $1 billion in sales for the trailing 52 weeks.

Rick Cardenas: Just last week, they reached $1 billion in sales for the trailing 52 weeks, becoming Darden's third billion-dollar brand. Stepping back, I am pleased with the progress our team has made during the quarter. The performance across our portfolio reinforces the importance of having distinctive brands, each with a clear strategy supported by Darden's scale and other competitive advantages. Our focus remains the same: operate our restaurants at a high level, strengthen guest loyalty, invest in our people and brands, and deploy capital in ways that support long-term shareholder value. During the Q1, we also held our annual leadership conferences with the general managers and managing partners from across our more than 2,200 restaurants. These leaders hold the most influential position in our company, and the opportunity to interact with them and hear what is on their mind is invaluable.

Speaker #3: Becoming DARDEN's third billion-dollar brand. Stepping back, I'm pleased with the progress our team's made during the quarter. The performance across our portfolio reinforces the importance of having distinctive brands each with a clear strategy supported by DARDEN's scale and other competitive advantages.

Speaker #3: Our focus remains the same: operate our restaurants at a high level, strengthen guest loyalty, invest in our people and brands, and deploy capital in ways that support long-term shareholder value.

Speaker #3: During the first quarter, we also held our annual leadership conferences with the general managers and managing partners from across our more than 2,200 restaurants.

Speaker #3: These leaders hold the most influential positions in our company, and the opportunities to interact with them and hear what's on their minds are invaluable.

Speaker #3: Across the conferences, I saw strong engagement and alignment around what success looks like in fiscal '27. The message was clear: our brands are aligned and remain disciplined.

Rick Cardenas: Across the conferences, I saw strong engagement and alignment around what success looks like in fiscal 2027. The message was clear: Our brands are aligned and on remaining disciplined. Our success goes beyond the four walls of our restaurants. There is a larger purpose to what we do, and that is to nourish and delight everyone we serve, which includes the communities our guests and team members call home. One way we serve our communities is working to help end hunger. This year, the Darden Foundation and Penske are helping seven more Feeding America food banks add refrigerated trucks to support food distribution in communities with significant need. With these additions, more than 60 Feeding America food banks will have received a truck through the program during the last six years.

Speaker #3: Our success goes beyond the four walls of our restaurants. There's a larger purpose to what we do, and that is to nourish and delight everyone we serve.

Speaker #3: This includes the communities our guests and team members call home. One way we serve our communities is by working to help end hunger. This year, the Darden Foundation and Penske are helping seven more Feeding America food banks add refrigerated trucks to support food distribution in communities with significant need.

Speaker #3: With these additions, more than 60 Feeding America food banks will have received a truck through the program during the last six years. Of course, our philanthropic giving would not be possible without the passion of our restaurant teams for nourishing and delighting our guests.

Rick Cardenas: Of course, our philanthropic giving would not be possible without the passion of our restaurant teams for nourishing and delighting our guests. On behalf of our leadership team and board of directors, I want to thank our more than 200,000 team members for the care and commitment they bring to serving our guests and communities every day. Now I will turn it over to Raj.

Speaker #3: On behalf of our leadership team and Board of Directors, I want to thank our more than 200,000 team members for the care and commitment they bring to serving our guests and communities every day.

Speaker #3: Now, I'll turn it over to Raj.

Speaker #4: Thank you, Rick, and good morning, everyone. The first quarter was another strong quarter for Darden, with sales and earnings growth meeting our expectations. The World Cup positively impacted Yard House same-restaurant sales by approximately 180 basis points.

Raj Vennam: Thank you, Rick, and good morning, everyone. The Q1 was another strong quarter for Darden, with sales and earnings growth meeting our expectations. The World Cup positively impacted Yard House same-restaurant sales by approximately 180 basis points. However, the tournament negatively impacted the rest of our brands, resulting in a net negative impact to Darden same-restaurant sales of approximately 80 basis points. This impact was concentrated earlier in the quarter, which is evident in the sequential improvement of traffic throughout the quarter. We have seen this trend further accelerate into September. In the Q1, we generated $3.2 billion of total sales. This was 5.1% higher than last year, driven by positive same-restaurant sales growth and the addition of 53 net new restaurants. On a comparable calendar basis, same-restaurant sales grew 3.2%.

Speaker #4: However, the tournament negatively impacted the rest of our brands, resulting in a net negative impact to Darden same restaurant sales of approximately 80 basis points.

Speaker #4: This impact was concentrated earlier in the quarter, which is evident in the sequential improvement of traffic throughout the quarter. We've seen this trend further accelerate into September.

Speaker #4: In the first quarter, we generated $3.2 billion of total sales. This was 5.1% higher than last year, driven by positive same-restaurant sales growth and the addition of 53 net new restaurants.

Speaker #4: On a comparable calendar basis, same-restaurant sales grew 3.2%. Diluted net earnings per share from continuing operations were $2.05, an increase of 4.1% over last year's adjusted net earnings per share.

Raj Vennam: Diluted net earnings per share from continuing operations were $2.05, an increase of 4.1% over last year's adjusted net earnings per share. We generated $464 million in EBITDA and returned $406 million to shareholders through $184 million in dividends and $222 million of share repurchases. Looking at our margin analysis compared to adjusted performance for last year, food and beverage expenses were 30 basis points higher. Our pricing was in line with commodities inflation of 3.5%. The cost of sales increase was driven by the mix of sales growth across brands, with a greater contribution from brands that operate with higher food and beverage costs than the company average. Restaurant labor was 30 basis points lower, driven by productivity improvements and the mix of sales growth across brands. Restaurant expenses were flat as inflation was offset by pricing. Marketing expenses were also flat.

Speaker #4: We generated $464 million in EBITDA and returned $406 million to shareholders through $184 million in dividends and $222 million of share repurchases.

Speaker #4: Looking at our margin analysis compared to adjusted performance for last year, food and beverage expenses were 30 basis points higher. Our pricing was in line with commodities inflation of 3.5%.

Speaker #4: The cost of sales increase was driven by the mix of sales growth across brands, with a greater contribution from brands that operate with higher food and beverage costs than the company average.

Speaker #4: Restaurant labor was 30 basis points lower, driven by productivity improvements and the mix of sales growth across brands. Restaurant expenses were flat, as inflation was offset by pricing.

Speaker #4: Marketing expenses were also flat. We had incremental marketing activity in the quarter that was funded by cost savings from prior year initiatives that began in the second quarter last year.

Raj Vennam: We had incremental marketing activity in the quarter that was funded by cost savings from the prior year initiatives that began in the Q2 last year. All this resulted in restaurant-level EBITDA of 18.8% for the quarter, flat to last year and consistent with our expectations. Reopening costs were 10 basis points higher as we continue to ramp up new restaurant growth. D&A expense as a percent of sales were flat to last year, and our effective tax rate for the quarter was 12.9%. In total, our earnings from continuing operations were $234 million, which was 7.3% of sales. In the Q1, all of our segments grew total sales and generated positive same-restaurant sales growth. LongHorn continued its strong momentum, Fine Dining delivered another quarter of positive same-restaurant sales growth, and Yard House led the growth within the other business segment.

Speaker #4: All this resulted in restaurant-level EBITDA of 18.8% for the quarter, flat to last year and consistent with our expectations. Pre-opening costs were 10 basis points higher as we continued to ramp up new restaurant growth.

Speaker #4: DNA expense as a percent of sales was flat compared to last year, and our effective tax rate for the quarter was 12.9%. In total, our earnings from continuing operations were $234 million, which was 7.3% of sales.

Speaker #4: In the first quarter, all of our segments grew total sales and generated positive same-restaurant sales growth. LongHorn continued its strong momentum, Fine Dining delivered another quarter of positive same-restaurant sales growth, and Yard House led the growth within the Other Business segment.

Speaker #4: While segment profit margin performance varied across the portfolio, strong margin expansion at some of our brands helped offset the margin investment at Olive Garden and the impact of winding down Bahama Breeze, resulting in consistent year-over-year restaurant-level margins at the consolidated level.

Raj Vennam: While segment profit margin performance varied across the portfolio, strong margin expansion at some of our brands helped offset the margin investment at Olive Garden and the impact of winding down Bahama Breeze, resulting in consistent year-over-year restaurant level margins at the consolidated level. This is a testament to the power of our portfolio. Olive Garden increased total sales for the quarter by 2.2% with the addition of 20 net new restaurants and comparable calendar same-restaurant sales growth of 1%, despite several unique headwinds during the quarter. Same-restaurant guest counts were negatively impacted by 150 to 200 basis points from the World Cup and heightened consumer concerns regarding lettuce. In addition, the lighter portion section of the menu created a 50 basis point mix headwind to the check.

Speaker #4: This is a testament to the power of our portfolio. Olive Garden increased total sales for the quarter by 2.2% with the addition of 20 net new restaurants and comparable calendar same-restaurant sales growth of 1%.

Speaker #4: Despite several unique headwinds during the quarter, same restaurant guest counts were negatively impacted by 150 to 200 basis points from the World Cup and heightened consumer concerns regarding lettuce.

Speaker #4: In addition, the lighter portion section of the menu created a 50-basis-point mixed headwind to the check. They also lapped a high-growth quarter last year that included the Uber Direct 1 million free deliveries promotion and one week of Never-Ending Pasta in the comparable calendar period.

Raj Vennam: They also lapped a high growth quarter last year that included the Uber Direct 1 million free deliveries promotion and one week of Never-Ending Pasta Bowl in the comparable calendar period. On a two-year basis, Olive Garden same-restaurant sales increased 7%, reinforcing the brand's continued strength. Olive Garden continues to have industry-leading segment profit margin, delivering 20.4% for the quarter. Segment profit margin declined 20 basis points from last year, which included the margin investment of approximately 30 basis points related to the addition of lighter portion section to the menu. At LongHorn, total sales increased 10.9%, driven by comparable calendar same-restaurant sales growth of 6.8% and the addition of 29 net new restaurants. LongHorn continues to increase market share and deliver its 22nd consecutive quarter of positive same-restaurant sales growth.

Speaker #4: On a two-year basis, Olive Garden same restaurant sales increased 7%, reinforcing the brand's continued strength. Olive Garden continues to have industry-leading segment profit margin, delivering 20.4% for the quarter.

Speaker #4: Segment profit margin declined 20 basis points from last year, which included a margin investment of approximately 30 basis points related to the addition of the lighter portion section to the menu.

Speaker #4: At LongHorn, total sales increased 10.9%, driven by comparable calendar same-restaurant sales growth of 6.8% and the addition of 29 net new restaurants.

Speaker #4: LongHaul continues to increase market share and delivered its 22nd consecutive quarter of positive same-restaurant sales growth. Over the past three years, same-restaurant sales have increased 17%, with minimal marketing spend, highlighting the strength of the brand strategy.

Raj Vennam: Over the past three years, same-restaurant sales have increased 17%, with minimal marketing spend highlighting the strength of the brand strategy. Segment profit margin was 18%, 60 basis points above last year. Total sales for the Fine Dining segment increased 6.2% driven by positive comparable calendar same-restaurant sales of 1% and the addition of six net new restaurants. Segment profit margin was 50 basis points lower than last year. Total sales for the other business segment increased 3.6%, driven mainly by positive comparable calendar same-restaurant sales of 4.5%, as the permanent closure of Bahama Breeze restaurant more than offset the addition of 16 net new restaurants at the other brands. Segment profit margin was 15.8%, 30 basis points lower than last year, driven by the costs associated with winding down Bahama Breeze.

Speaker #4: Segment profit margin was 18%, 60 basis points above last year. Total sales for the fine dining segment increased 6.2%, driven by positive comparable calendar same-restaurant sales of 1% and the addition of six net new restaurants.

Speaker #4: Segment profit margin was 50 basis points lower than last year. Total sales for the other business segment increased 3.6% driven mainly by positive comparable calendar same restaurant sales of 4.5% as the permanent closure of Bahama Breeze restaurants more than offset the addition of 16 net new restaurants at the other brands.

Speaker #4: Segment profit margin was 15.8%, 30 basis points lower than last year, driven by the costs associated with winding down Bahama Breeze. Finally, as shared in our press release this morning, we are reaffirming all aspects of our financial outlook for fiscal 2027, culminating in diluted net earnings per share between $11.10 and $11.35 for the year.

Raj Vennam: Finally, as shared in our press release this morning, we are reaffirming all aspects of our financial outlook for the fiscal 2027, culminating in diluted net earnings per share between $11.10 and $11.35 for the year. As a reminder, Thanksgiving shifts from our fiscal Q3 last year into our Q2 this year. We expect this calendar shift to create an approximately 1% headwind to Q2 sales with an offsetting benefit in the Q3. The impact will vary across brands based on holiday operating schedules, benefiting our fine dining brands, Seasons 52 and Yard House, in the Q2 while creating a headwind in the Q2 for the remainder of our brands in our portfolio. This calendar shift is reflected in our full-year guidance and is simply a matter of quarterly timing.

Speaker #4: As a reminder, Thanksgiving shifts from our fiscal third quarter last year into our second quarter this year. We expect this calendar shift to create an approximately 1% headwind to second quarter sales, with an offsetting benefit in the third quarter.

Speaker #4: The impact will vary across brands based on holiday operating schedules, benefiting our fine dining brands Seasons 52 and Yard House in the second quarter while creating a headwind in the second quarter for the remainder of our brands in our portfolio.

Speaker #4: This calendar shift is reflected in our full-year guidance and is simply a matter of quarterly timing. In closing, this quarter is further proof that adherence to our strategy and consistent execution enabled our teams to navigate unexpected headwinds and deliver results in line with our expectations.

Raj Vennam: In closing, this quarter is further proof that adherence to our strategy and consistent execution enabled our teams to navigate unexpected headwinds and deliver results in line with our expectations. The strength and durability of our portfolio continues to position us well to create long-term value for our shareholders. With that, we will take your questions.

Speaker #4: The strength and durability of our portfolio continue to position us well to create long-term value for our shareholders. With that, we'll take your questions.

Speaker #1: Thank you. The floor is now open for questions. If you would like to ask a question, please press star one on your telephone keypad at this time.

Operator: Thank you. The floor is now open for questions. If you would like to ask a question, please press star one on your telephone keypad at this time. A confirmation tone will indicate that your line is in the question queue. You may press star two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up the handset before pressing the star keys. We do ask that you please limit yourself to one question and one follow-up. Again, that is star one to register a question at this time. Our first question is coming from Chris O'Cull of Baird. Please go ahead.

Speaker #1: A confirmation tone will indicate that your line is in the question queue. You may press star two if you would like to remove your question from the queue.

Speaker #1: For participants using speaker equipment, it may be necessary to pick up the handset before pressing the star keys. We do ask that you please limit yourself to one question and one follow-up.

Speaker #1: Again, that's star one to register a question at this time. Our first question is coming from Crystal Cull of Baird. Please go ahead.

Speaker #2: Thanks. Good morning, guys. Well, I know that Olive Garden raised the price on the never-ending possible promotion this year. Just wondering if this was the company feeling more constructive about the consumer environment or maybe other reasons for the higher price?

Chris O'Cull: Thanks. Good morning, guys. Raj, I know that Olive Garden raised the price on the Never-Ending Pasta Bowl promotion this year. Just wondering if this was the company feeling more constructive about the consumer environment or maybe other reasons for the higher price? Then I had a follow-up.

Speaker #2: And then I had a follow-up.

Speaker #3: Yeah, Chris. Good morning. So, if you think about it, the last time we increased the price at Olive Garden on an EPB was when we brought it back after COVID.

Raj Vennam: Yeah, Chris, good morning. If you think about the last time we increased the price at Olive Garden on an NEPB was when we brought it back after COVID, and it was $13.99 for almost five years, basically. When you look at what we have done with pricing over time, we have been very disciplined in thinking about how to make sure the consumer is still feeling good about the value and abundance they receive. Part of what we have done here is actually added more to the offer. If you think about some of the additions we made to the Never-Ending Pasta Bowl, including the Spicy Alfredo, the addition of shrimp, Cheddar's, protein add-ons, those are also helping. By the way, we did not actually raise the price on a protein buy-up, which is unlimited proteins for $4.99.

Speaker #3: And it was $30.99 for almost five years, basically. And so, when you look at what we've done with pricing over time, we've been very disciplined.

Speaker #3: And thinking about how to make sure the consumer is still feeling good about the value and abundance they receive. So, part of what we've done here is actually added more to the offer. If you think about some of the additions we made to the Never-Ending Possible, including the Spicy Alfredo, the addition of shrimp fritter, protein add-ons—those are also helping.

Raj Vennam: If you think about some of the additions we made to the Never-Ending Pasta Bowl, including the Spicy Alfredo, the addition of shrimp, Cheddar's, protein add-ons, those are also helping. By the way, we did not actually raise the price on a protein buy-up, which is unlimited proteins for $4.99. It is a compelling, great value, and I think our performance quarter to date at Olive Garden indicates that that was a great decision.

Speaker #3: And by the way, we didn't actually raise the price on a protein buyup, which is unlimited proteins for $4.99. So it's a compelling, great value.

Raj Vennam: It is a compelling, great value, and I think our performance quarter to date at Olive Garden indicates that that was a great decision.

Speaker #3: And I think our performance quarter to date on Olive Garden indicates that that was a great decision.

Speaker #2: Okay. And then you mentioned lunches and opportunity at Olive Garden. Can you maybe describe the recent traffic trends at that daypart, and maybe expand on your comments about improving value there?

Chris O'Cull: Okay. You mentioned lunch as an opportunity at Olive Garden. Can you describe the recent traffic trends at that day part and expand on your comments about improving value there? Thanks.

Speaker #2: Thanks.

Speaker #3: Hey Chris, this is Rick. Without getting into recent traffic trends, it's been a longer-term traffic trend at Olive Garden, even ever since COVID ended. So, if you think about what we had done before COVID, we had marketed our lunch platform quite a bit, whether it was soup, salad, and breadsticks or our sandwich platform.

Raj Vennam: Hey, Chris. This is Rick. Without getting into recent traffic trends, it has been a longer-term traffic trend at Olive Garden, ever since COVID ended. If you think about what we had done before COVID, we had marketed our lunch platform quite a bit, whether it was soup, salad, and breadsticks or sandwich platform. Then we stopped our marketing, and after COVID, we had not put it back in. We have seen a little bit more deterioration at lunch than we have in any other place. We thought it was time, and it was already in our five-year plan to work on lunch. We thought it was the right time to talk about it and do more things with it.

Rick Cardenas: Hey, Chris. This is Rick. Without getting into recent traffic trends, it has been a longer-term traffic trend at Olive Garden, ever since COVID ended. If you think about what we had done before COVID, we had marketed our lunch platform quite a bit, whether it was soup, salad, and breadsticks or sandwich platform. Then we stopped our marketing, and after COVID, we had not put it back in. We have seen a little bit more deterioration at lunch than we have in any other place. We thought it was time, and it was already in our five-year plan to work on lunch. We thought it was the right time to talk about it and do more things with it.

Speaker #3: And then we stopped our marketing, and after COVID, we just hadn't put it back in. So we've seen a little bit more deterioration at lunch than we have in any other place.

Speaker #3: And so we thought it was time and it was already in my our five-year plan to work on lunch. We thought it was the right time to talk about it and do more things with it.

Speaker #3: Unfortunately, in the quarter, we had a challenge that we couldn't promote the lunch offer that we were hoping to promote. And so we're doing it this quarter.

Raj Vennam: Unfortunately, in the quarter, we had a challenge that we could not promote the lunch offer that we were hoping to promote, and we are doing it this quarter. On variety, we also had reduced some variety at lunch when we simplified our menu. We are going to be testing some offers that add variety to the lunch menu with still a compelling value. We feel really good about it. Raj and I had the food yesterday. It is amazing. We feel really good about what that offer will be as we start testing sometime in this quarter. We hope that after a successful test, that we would be talking more about it in the back half of this fiscal year.

Rick Cardenas: Unfortunately, in the quarter, we had a challenge that we could not promote the lunch offer that we were hoping to promote, and we are doing it this quarter. On variety, we also had reduced some variety at lunch when we simplified our menu. We are going to be testing some offers that add variety to the lunch menu with still a compelling value. We feel really good about it. Raj and I had the food yesterday. It is amazing. We feel really good about what that offer will be as we start testing sometime in this quarter. We hope that after a successful test, that we would be talking more about it in the back half of this fiscal year.

Speaker #3: On variety, we also had reduced some variety at lunch when we simplified our menu. And so we're going to—we're testing some—we're going to be testing some offers that add variety to the lunch menu, with still a compelling value.

Speaker #3: So, we feel really good about it. Raj and I had the food yesterday. It's amazing. We feel really good about what that offer will be.

Speaker #3: And as we start testing, sometime in this quarter, and we hope that after a successful test that we'd be talking more about it in the back half of this fiscal year.

Speaker #2: Thank you.

Chris O'Cull: Thank you.

Speaker #1: Thank you. The next question is coming from Chris Carroll of KeyBank Capital Markets. Please go ahead.

Operator: Thank you. The next question is coming from Chris Carroll of KeyBank Capital Markets. Please go ahead.

Speaker #2: Thanks. Good morning. Could you provide any additional detail on the cadence of Olive Garden sales through the first quarter, and maybe how you're thinking about the brand here for the balance of the year?

Chris Carroll: Thanks. Good morning. Could you provide any additional detail on the cadence of Olive Garden sales through Q1 and maybe how you are thinking about the brand here for the balance of the year, and perhaps compared to the consolidated guide? Rick, I know you spoke to the positive response to Never Ending Pasta Bowl, so to the extent you can provide any color of the current quarter, that would be helpful. Thank you.

Chris Carril: Thanks. Good morning. Could you provide any additional detail on the cadence of Olive Garden sales through Q1 and maybe how you are thinking about the brand here for the balance of the year, and perhaps compared to the consolidated guide? Rick, I know you spoke to the positive response to Never Ending Pasta Bowl, so to the extent you can provide any color of the current quarter, that would be helpful. Thank you.

Speaker #2: And perhaps compare it to the consolidated guide. And then, Rick, I know you spoke to the positive response to Never-Ending Pasta Bowl. So, to the extent you can provide any color for the current quarter, that would be helpful.

Speaker #2: Thank you.

Speaker #3: Let me start with the question around the guide cadence of that, and then, if Rick wants to jump in about the performance on any PB, we'll get there.

Raj Vennam: Let me start with the question around the cadence of that, then if Rick wants to jump in about the performance on NEPB, we will get there. From a quarter perspective, as I mentioned in my prepared remarks, we actually saw trends improve throughout the quarter. I think on a calendar basis, when we look at August was our strongest, and September is actually even stronger than that. I do not want to get exactly into the numbers, but I can tell you that the positive traffic has actually further accelerated into September. So we feel good about just the underlying business trends we are seeing.

Speaker #3: So from a quarter perspective as I mentioned in my prepared remarks, we actually saw trends improve throughout the quarter. I think on a calendar basis when we look at August was our strongest.

Speaker #3: And September is actually even stronger than that. I don't want to get exactly into the numbers, but I can tell you that the positive traffic has actually further accelerated into September.

Speaker #3: So we feel good about just the underlying business trends we're seeing.

Speaker #2: And I'll add to that—with Never-Ending Pasta Bowl, as we said in the prepared remarks, we sold 10,000 Pasta Passes in the second quarter. And we've seen a lot of guest reaction to that and seen a lot of redemption at Pasta Pass.

Rick Cardenas: And I will add to that with Never Ending Pasta Bowl. As we said in the prepared remarks, we sold 10,000 pasta passes, and we have seen a lot of guest reaction to that and seen a lot of redemption of that pasta pass. That said, we have also seen a little bit better results than we expected in the beginning of Never Ending Pasta Bowl this quarter. So all of that is contemplated in our guide for the year, but we feel really good about where NEPB has started. Our buyups are a little bit higher than they were before, and as Raj mentioned in an answer a second ago, we did not raise the price on the protein buyups, and that protein is unlimited, too. The Spicy Alfredo sauce is doing really well.

Speaker #2: That said, we've also seen a little bit better results than we expected in the beginning of never-ending possible this quarter. So all of that's contemplated in our guide for the year, but we feel really good about where NEPB has started.

Rick Cardenas: So all of that is contemplated in our guide for the year, but we feel really good about where NEPB has started. Our buyups are a little bit higher than they were before, and as Raj mentioned in an answer a second ago, we did not raise the price on the protein buyups, and that protein is unlimited, too. The Spicy Alfredo sauce is doing really well. So guests have really jumped onto the new things we have added, and NEPB is doing well for us.

Speaker #2: Our buy-ups are a little bit higher than they were before. And as Raj mentioned in an answer a second ago, we didn't raise the price on the protein buy-ups.

Speaker #2: And that protein is unlimited too. So the spicy Alfredo sauce is doing really well. So guests have really, really jumped on to the new things we've added.

Rick Cardenas: So guests have really jumped onto the new things we have added, and NEPB is doing well for us.

Speaker #2: And NEPB is doing well for us. Got it. Thank you. And then, maybe just to relate it to the protein comments there—Rick, I think you mentioned in your prepared remarks the opportunity at Olive Garden with more protein-forward options.

Chris Carroll: Got it. Thank you. And then, and maybe just related to just the protein comments there. Rick, I think you mentioned in your prepared remarks, the opportunity at Olive Garden with more protein-forward options. So how are you thinking about that longer term? And then any comments on just kind of implications there for check or margins at the brand would be helpful. Thank you.

Chris Carril: Got it. Thank you. And then, and maybe just related to just the protein comments there. Rick, I think you mentioned in your prepared remarks, the opportunity at Olive Garden with more protein-forward options. So how are you thinking about that longer term? And then any comments on just kind of implications there for check or margins at the brand would be helpful. Thank you.

Speaker #2: So, how are you thinking about that longer term? And then, any comments on just kind of implications there for check or margins at the brand would be helpful.

Speaker #2: Thank you.

Speaker #3: Yeah. Long-term, we're going to continue to look for more items that have some protein in them at Olive Garden. The second promotion we did this year, the garlic promotion, had many protein options on it.

Rick Cardenas: Yeah. Long term, we are going to continue to look for some more items that have some protein in it at Olive Garden. The second promotion we did this year, with the garlic promotion, had many protein options on it. And some of them, our highest priced item on that promotion did the best. So I think guests are looking for great value at an appropriate price for what they are being offered. I will not comment on what the margin implications will be down the road on what we do or the check implications, because we still have other things that we are looking at. But, as we get closer to those things, we will let you know. But the promotion was strong for us, and the protein was a well-received hit, including an appetizer that has some protein on it, too.

Speaker #3: And some of them our highest priced item on that promotion did the best. So I think people, guests are looking for great value at an appropriate price for what they're being offered.

Speaker #3: I won't comment on what the margin implications will be down the road on what we do, or the check implications, because we still have other things that we're looking at.

Speaker #3: But as we get closer to those things, we'll let you know. The promotion was strong for us, and the protein was a well-received hit, including an appetizer that has some protein on it, too.

Speaker #2: Great. Thank you.

Chris Carroll: Great. Thank you.

Chris Carril: Great. Thank you.

Speaker #1: Thank you. The next question is coming from Brian Bittner of Oppenheimer & Company. Please go ahead.

Operator: Thank you. The next question is coming from Brian Bittner of Oppenheimer & Co. Please go ahead.

Speaker #2: Thank you. As it relates to the improving trends through the quarter and into September, can you maybe talk about the drivers of this a little bit more? Maybe help us understand how much of this is driven by the easing of the lettuce concerns versus what you're doing?

Brian Bittner: Thank you. As it relates to the improving trends through the quarter and into September, can you maybe talk about the drivers of this a little bit more, maybe help us understand how much of this is driven by maybe the ease of the lettuce concerns versus maybe what you are doing.

Speaker #3: Hey, Brian. I would say it's a little bit of both. There are some external factors, and I mentioned tougher wrap as we started the quarter, but also the World Cup, and then some concerns around lettuce.

Raj Vennam: Hey, Brian. I would say it is a little bit of both. There are some external factors, and I mentioned a tougher wrap as we started the quarter, but also the World Cup and then some concerns around lettuce. These are all things that were hurting a little bit earlier in the quarter, but as they eased, we saw our underlying trends improve. There are actions we have taken. I think we just talked a lot about what we did with Never-Ending Pasta Bowl. I think a lot of activity around how we launched, the investments we are making in ensuring that the offer is still compelling, and justifies the price. Rick just talked about the proteins. That is still a huge value for a guest when you can get unlimited proteins for $4.99, and we added Crispy Shrimp Fritta as another protein option, and that is doing really well too.

Speaker #3: These are all things that were hurting a little bit earlier in the quarter, but as they eased, we saw our underlying trends continue improve.

Speaker #3: And then there are actions we've taken. I think we just talked a lot about what we did with Never-Ending Possible. I think there's a lot of activity around how we launched, the investments we're making in ensuring that the offer is still compelling and justifies the price.

Raj Vennam: I think a lot of activity around how we launched, the investments we are making in ensuring that the offer is still compelling, and justifies the price. Rick just talked about the proteins. That is still a huge value for a guest when you can get unlimited proteins for $4.99, and we added Crispy Shrimp Fritta as another protein option, and that is doing really well too. So there are actions our teams are taking that are helping.

Speaker #3: And so, Rick just talked about the proteins. I mean, that is still a huge value for a guest when you can get unlimited proteins for $4.99.

Speaker #3: And we added shrimp fritter as another protein option, and that's doing really well, too. So there are actions our teams are taking that are helping.

Raj Vennam: So there are actions our teams are taking that are helping.

Speaker #2: Thanks for that. And just as it relates to pricing, can you update us on where pricing is now for the second quarter, and maybe expectations for the model for the year? I know you showcased it in your slide deck, but it looks like commodities are really under control.

Brian Bittner: Thanks for that. Just as it relates to pricing, can you update us on where pricing is now for Q2 and maybe expectations for the model for the year? I know you showcased it in your slide deck, but it looks like commodities are really under control. Can you remind us where you're expecting overall commodity basket to be for Q2?

Speaker #2: Can you remind us where you're expecting the overall commodity basket to be for Q2?

Speaker #3: Sure, Brian. So let me start with the pricing. I think the first quarter pricing was basically, first quarter was 3.7%. I expect that to moderate as we go through the year.

Raj Vennam: Sure, Brian. Let me start with the pricing. I think for the quarter, pricing was basically Q1 was 3.7%. I expect that to moderate as we go through the year, coming down to basically low to mid 2s by Q4. So expect slightly moderating as we go through the year. So Q2 will probably be in that, kind of call it mid 3 range, and then it will go down as we go through the year. From a commodities inflation perspective, for the year, we're still expecting 3%. I would expect Q2 to be in the 2.5% to 3% range, and then H2 to be closer to 3%. So right now, the commodities are fairly in line with what we expected going into the fiscal year.

Speaker #3: Coming down to basically low to mid-2s by the end of Q4. So expect it to slightly moderate as we go through the year. Second quarter will probably be in that kind of, call it, mid-3 range, and then it will go down as we go through the year.

Speaker #3: From a commodities inflation perspective, for the year we're still expecting 3%. I would expect second quarter to be in that 2.5% to 3% range.

Raj Vennam: I would expect Q2 to be in the 2.5% to 3% range, and then H2 to be closer to 3%. So right now, the commodities are fairly in line with what we expected going into the fiscal year. While there is some movement between the categories, in aggregate, we're trending pretty close to where we thought we would be at the beginning of the fiscal year.

Speaker #3: And then the back half to be closer to 3. So right now, commodities are fairly in line with what we expected going into the fiscal year, while there is some movement between the categories.

Raj Vennam: While there is some movement between the categories, in aggregate, we're trending pretty close to where we thought we would be at the beginning of the fiscal year.

Speaker #3: In aggregate, we're trending pretty close to where we thought we would be at the beginning of the fiscal year.

Speaker #2: Great. Thank you.

Brian Bittner: Great. Thank you.

Speaker #1: Thank you. Our next question is coming from Andrew Charles of TD Cowen. Please go ahead.

Operator: Thank you. Our next question is coming from Andrew Charles of TD Cowen. Please go ahead.

Speaker #2: Great, thank you. Rick, I recognize that over the long term, the correlation is low, but can you just remind us how the Olive Garden business fares when there are these acute spikes in gas prices? And I guess, as a side question for Raj: with the reiterated 2027 EPS guidance, how should we think about the impact of fuel surcharges charged by your distributors?

Andrew Charles: Great. Thank you. Rick, I recognize over the long term, the correlation is low, but can you remind us in the past how the Olive Garden business fares when there is these acute spikes in gas prices. I guess a side question for Raj, with the reiterated 2027 EPS guidance, how should we think about the impact of fuel surcharges charged by your distributors?

Rick Cardenas: Hey, Andrew. I do not know if you are wearing a headset or something, but your line is kicking back and forth, so it is hard to understand your question. Can you try that one again?

Speaker #3: Hey, Andrew. I don't know if you're wearing a headset or something, but your line is kicking back and forth, so it's hard to understand your question.

Speaker #3: Can you try that one again?

Speaker #2: Sure. Can you hear me better now?

Andrew Charles: Sure. Can you hear me better now?

Speaker #3: No, if you go slow—go slow—then maybe we can get it.

Rick Cardenas: No. If you go slow, then maybe we can get it.

Speaker #2: Sure. So thanks, Rick. I recognize over the long term the correlation is low, but can you remind us, in the past, how the Olive Garden business fares when there's acute spikes in gas prices? And then, as a follow-up for Raj, within the reiterated 2027 EPS guidance, how should we think about the impact of fuel surcharges charged by your distributors?

Andrew Charles: Sure. Thanks, Rick. I recognize over the long term, the correlation is low, but can you remind us in the past how the Olive Garden business fares when there is acute spikes in gas prices? As a follow-up for Raj, within reiterated 2027 EPS guidance, how should we think about the impact of fuel surcharges charged by your distributors?

Speaker #3: Okay, I think we got it. So correlation is pretty low, and I would say that the impact on gas prices isn't necessarily any different for Olive Garden and other brands, except for maybe that consumer that has to drive farther.

Rick Cardenas: Okay. I think we got it. Correlation is pretty low, and I would say that the impact on gas prices is not necessarily any different for Olive Garden and other brands, except for maybe that consumer that has to drive farther to go to an Olive Garden than some others. As you can see, as gas prices continue to grow throughout the quarter, Raj had mentioned that our performance got better throughout the quarter. We are seeing some pretty good performance in the first part of the Q2 at Olive Garden. Gas prices do not seem to be a challenge for a few reasons. One, gas prices at $4 a gallon or more are not a shock to people as they were the last time gas prices spiked years ago. The percent of people's wallet in gas is lower today than it was 10, 15 years ago.

Speaker #3: To go to an Olive Garden and some others. But as you can see, as gas prices continued to grow throughout the quarter, Raj had mentioned that our performance got better throughout the quarter.

Speaker #3: And we're seeing some pretty good performance in the first part of the second quarter at Olive Garden, so gas prices don't seem to be a challenge.

Speaker #3: And for a few reasons. One, gas prices at $4 a gallon or more aren't as much of a shock to people as they were the last time gas prices spiked years ago.

Speaker #3: And the percentage of people's wallets spent on gas is lower today than it was 10 or 15 years ago. So it doesn't seem to be as big of an impact, but if gas prices stay high for a long time, then there could be a chance that it starts to weigh in that category.

Rick Cardenas: It doesn't seem to be as big of an impact, but if gas prices stay high for a long time, then there could be a chance that it starts to weigh in the category. Last, I think it does impact that consumer at the bottom quintile consumer, that really we don't have as many of those coming to us in our mix as other categories in dining.

Speaker #3: Last, I think it does impact that consumer at the bottom quintile consumer, but really, we don't have as many of those coming to us in our mix as other categories in dining.

Speaker #2: Yep. And Andrew, on the fuel stuff,

Raj Vennam: Andrew, on the fuel stuff, yes, we do have some variable fuel charge that is depending on where the diesel prices are. We have contemplated some of that into our guidance. But if the prices stay elevated throughout the year, if I have to just quantify at a high level the risk, we're talking about tens of basis points incremental inflation on commodities. But when you think about as a percent of sales for Darden, you're probably talking somewhere around 10 to 15 basis points at a very high level, elevated level, $6 plus diesel prices for the whole fiscal year type of thing.

Speaker #4: Yes, we do have some variable fuel charge that depends on where the diesel prices are. We have contemplated some of that into our guidance.

Speaker #4: But if prices stay elevated throughout the year, if I have to quantify it at a high level, the risk we're talking about is tenths of basis points of incremental inflation on commodities.

Speaker #4: But when you think about it as a percent of sales for Darden, you're probably talking somewhere around 10 to 15 basis points at a very high level—elevated $6-plus diesel prices for the whole fiscal year type of thing.

Speaker #2: Thank you.

Andrew Charles: Thank you.

Speaker #1: Thank you. The next question is coming from John Tower of City. Please go ahead.

Operator: Thank you. The next question is coming from Jon Tower of Citi. Please go ahead.

Speaker #2: Great. Thanks for taking the questions. Maybe starting off, curious, if you could dig into a little bit how your social media strategy might be changing at all this year.

Jon Tower: Great. Thanks for taking the questions. Maybe starting off, curious if you could dig into a little bit how your social media strategy might be changing at all this year. I know we have seen some relative success in campaigns that have been multi-year from other competitors, some within the past year or so, in terms of how they are communicating, particularly with younger consumers. I am curious how you are doing that not only across broadly, but within the individual brands at Darden.

Speaker #2: I know we've seen some relative success in campaigns that have been multi-year from other competitors, some within the past year or so, in terms of how they're communicating, particularly with younger consumers. I'm curious how you're doing that, not only broadly, but within the individual brands at Darden.

Speaker #3: Yeah, John. I won't get into individual brands, but I will say that all of our brands have a strong social media presence, and that's reflected in how big their audiences are.

Rick Cardenas: Yeah, Jon, I will not get into individual brands, but I will say that all of our brands have a strong social media presence. It is reflected in how big their audiences are and how much engagement and passion they have for our brands. Our social media strategy is anchored in bringing our brands to life in authentic ways. Without trying to be too shoppy about it is authentically how do those folks in social media or those people think about our brands, and in channels that are most relevant to our guests. We do have influencer partnerships. We do partner with influencers who already have a love and affinity for our brands. You can see that in some messages that go out on Instagram and TikTok and other things.

Speaker #3: And how much engagement and passion they have for our brands. Our social media strategy is anchored in bringing our brands to life in authentic ways.

Speaker #3: So without trying to be too shoppy about it, it's authentically how do those brands how do those folks in social media or those brands think about our think about or those people think about our brands.

Speaker #3: And in channels that are most relevant to our guests. So we do have influencer partnerships. We do partner with influencers influencers who already have a love and affinity for our brands.

Speaker #3: And you can see that in some messages that we that go out on Instagram and TikTok and other things. But there are other people that aren't influencers that have a lot of views just because they love our brand.

Rick Cardenas: But there are other people that are not influencers that have a lot of views just because they love our brand. So we are working with social media in ways. Also lastly, we are not focused necessarily on a certain age cohort, but we are on TikTok. All of our casual brands are on TikTok, and we are rolling it out to the rest of them. You will see more of us with social media over the next year or so as we continue to move some more marketing into the digital space. But we are really pleased with what we are doing and being authentic in how we use that.

Speaker #3: So, we're working with social media in various ways. Also, lastly, we're not necessarily focused on a certain age cohort, but we are on TikTok.

Speaker #3: All of our casual brands are on TikTok, and we're rolling it out to the rest of them. You'll see more of us with social media over the next year or so, as we continue to move some more marketing into the digital space.

Speaker #3: But we're really pleased with what we're doing, and being authentic in how we use that.

Speaker #2: Okay. I appreciate that. And then maybe since you provided a little bit of color on Olive Garden trends during the quarter and quarter to date, can you provide similar color on Longhorn and how that's been doing?

Jon Tower: Okay. I appreciate that. Then, maybe since you provided a little bit of color on Olive Garden trends during the quarter and quarter to date, can you provide similar color on LongHorn and how that has been doing?

Speaker #4: John, I would say Longhorn is still holding up. Longhorn has been a strong has had strong momentum with traffic and sales. And I mentioned in my prepared remarks, they have grown their sales from on the same restaurant basis from three years ago by 17%.

Raj Vennam: John, I would say LongHorn is still holding up. LongHorn has had strong momentum with traffic and sales, and I mentioned in my prepared remarks, they have grown their sales on a same restaurant basis from three years ago by 17%. If you look at how much they have grown since COVID, you are talking 40-plus percent. I do not want to get too specific into the exactly, and they have done all of that without any marketing. They are basically spending less than basically 0.4% of sales in marketing. A lot of that is just the basic stuff that has to be, whether it is menus and things like, yeah.

Speaker #4: And if you look at how much they've grown since COVID, you're talking 40-plus percent. So, yeah. I don't want to get too specific into the exact numbers.

Speaker #4: And they've done all of that without any marketing. I mean, they're basically spending less than 0.4% of sales on marketing. And a lot of that is just the basic stuff that has to be—whether it's menus and things like that.

Speaker #2: Got it. Thank you.

Jon Tower: Got it. Thank you.

Speaker #1: Thank you. The next question is coming from David Palmer of Evercore ISI. Please go ahead.

Operator: Thank you. The next question is coming from David Palmer of Evercore ISI. Please go ahead.

Speaker #5: Thanks. Maybe a little bit of a follow-up, but just on that, just from oftentimes you guys will talk about the consumer in general. There've been some there's been some nooks and crannies of the restaurant world out there where we're seeing a little bit of easing.

David Palmer: Thanks. Maybe a little bit of a follow-up, but just on that, oftentimes you guys will talk about the consumer in general. There has been some nooks and crannies of the restaurant world out there where we are seeing a little bit of easing. This is really up through now, what are you seeing in the consumer environment out there? Sometimes when energy and interest rates and the stock market are not behaving, things can wobble at least a little bit in the near term.

Speaker #5: Are you seeing—and this is really up through now—what are you seeing in the consumer environment out there? Sometimes when energy, interest rates, and the stock market aren't behaving, things can wobble at least a little bit in the near term.

Speaker #3: Hey, David. I would say that we haven't really seen much change in the consumer throughout the quarter. We didn't see a whole lot of change.

Rick Cardenas: Hey, David. I would say that we haven't really seen much change in consumer. Throughout the quarter, we didn't see a whole lot of change, and even as we talked about our trends in this quarter, we feel pretty good about them. It doesn't seem like a consumer has changed very much for us. I'll say, externally, you can see consumer sentiment being down, but consumers are still spending. They're still resilient. They're spending in casual dining. We're not seeing changes in demographic composition of our casual dining brands. There's slight movements here or there, but overall, age and income haven't changed. We always come back to, we know that casual dining or dining out, whether it's casual or full service, remains the number one category where customers want to treat themselves and actually splurge.

Speaker #3: And even as we talked about our trends in this quarter, we feel pretty good about them. So it doesn't seem like a consumer has changed very much for us.

Speaker #3: I'll say, externally, you can see consumer sentiment is down, but consumers are still spending. They're still resilient. They're spending in casual dining, and we're not seeing changes in the demographic composition of our casual dining brands.

Speaker #3: There's a whole—there's not—there's slight movements here or there, but overall, Asian income hasn't changed. And so—and we always come back to we know that casual dining or dining out, whether it's casual or full service, remains the number one category where customers want to treat themselves.

Rick Cardenas: There's slight movements here or there, but overall, age and income haven't changed. We always come back to, we know that casual dining or dining out, whether it's casual or full service, remains the number one category where customers want to treat themselves and actually splurge. We're going to continue to focus on what we can control, delivering an excellent experience, and providing value to every guest. If the consumer is wavering, we're not seeing it.

Speaker #3: And actually splurge. So we're going to continue to focus on what we can control, delivering an excellent experience and providing value to every guest.

Rick Cardenas: We're going to continue to focus on what we can control, delivering an excellent experience, and providing value to every guest. If the consumer is wavering, we're not seeing it.

Speaker #3: So, if the consumer is wavering, we're not seeing it.

Speaker #5: That's awesome. Thank you. I just wanted to circle back to Cheddar's and Yard House—obviously, great work with those brands. For those of us that don't have those nearby, could you just tell us what's going right there?

David Palmer: That's awesome. Thank you. I just wanted to circle back to Cheddar's and Yard House. Obviously, great work with those brands. For those of us that don't have those nearby, could you just tell us what's going right there? You said you were working, at least, on the box a little bit, I think it was on Yard House. Where are the ROIs going to on these brands? Do you think this is like, were we talking high single digit unit growth long term in both of these, or could that even edge up a bit? Then I'll pass it on.

Speaker #5: And you said you were working at least on the box a little bit. I think it was on yardhouse. Where are the ROIs going to on these brands?

Speaker #5: And do you think this is like when we're talking high single-digit unit growth long-term in both of these, or could that even edge up a bit?

Speaker #5: And I'll pass it on.

Speaker #3: Yeah, David, thanks for the questions on some of the brands. So Yardhouse, we're really pleased—and both brands: Yardhouse and Cheddar's, you asked specifically. I'll start with Yardhouse.

Rick Cardenas: Yeah, David. Thanks for questions on some of the brands. So Yard House, we're really pleased. Both brands, Yard House and Cheddar's, you asked specifically. I'll start with Yard House. Yard House, we're really pleased with performance. You saw the 10% comp that we just had. We are ramping up unit growth. I mean, we've been working on that over the last few years with a new prototype. We're actually going to open more than single digits this year just because of the conversions of Bahama Breeze restaurants. Our goal would be in the higher single digits for Yard House, not double digits in the long term. We do believe that the best way to grow for any of our brands is to stay somewhere below 10%, just because of the people that we need to run these restaurants, and we need them to understand the brands.

Speaker #3: At Yard House, we're really pleased with performance. You saw the 10% comp that we just had. We growth—I mean, we've been working on that over the last few years.

Speaker #3: With a new prototype, we're actually going to open more than single digits this year, just because of the conversions of Bahama Breeze restaurants. But it would be in the higher single digits for Yard House, not double digits in the long term.

Speaker #3: We do believe that the best way to grow for any of our brands is to stay somewhere below 10%, just because of the people that we need to run these restaurants, and we need them to understand the brands.

Speaker #3: And then for cheddar and I'll come back to why we think it's working for both. On cheddars, it's the same thing. Cheddars is a little bit less growth still.

Rick Cardenas: And then for Cheddar's, and I will come back to why we think it is working for both. On Cheddar's, it is the same thing. Cheddar's is a little bit less growth still. They will be ramping up growth as they continue to get improved operations, and we should see them in the mid-single digits over time. We are focusing on the new prototype that we had already introduced. For both brands, what has done that? That is an intense focus on food. Yard House has made a huge focus on their food, thinking about the platforms that we talked about before, providing a great guest value and improving service. The same thing happened to Cheddar's. We have been focusing on food. We just introduced a new burger, which is amazing, and we just introduced other new items.

Speaker #3: They will be ramping up growth as they continue to achieve improved operations, and we should see them in the mid-single digits over time.

Speaker #3: We're focusing on the new prototype that we had already introduced. Now, for both brands, what has done what has done that? And that is an intense focus on food.

Speaker #3: Yard House has made a huge focus on their food, thinking about the platforms that we talked about before, providing a great gross value, and improving service.

Speaker #3: The same thing happened to cheddars. We've been focusing on food. We just introduced new burger, which is amazing. And we just introduced other new items.

Speaker #3: And with Cheddar's, it's a little bit more about getting into the markets that we do really well in, because people know who they are, versus growing all over the place.

Rick Cardenas: With Cheddar's, it is a little bit more about getting into markets that we do really well in because people know who they are versus growing all over the place. So we are focusing our growth at Cheddar's in markets where we have Cheddar's, and we are seeing pretty good results there. I will let Raj talk about the ROI.

Speaker #3: So we're focusing our growth at Cheddar's in markets where we have Cheddar's, and we're seeing pretty good results there. So, and I'll let Raj talk about the ROI.

Speaker #4: Thanks, Rick. Just to add to that, part of the reason we're able to do that is, again, because of the benefit of the portfolio, we are able to take a long-term view and make the right investments in these brands.

Raj Vennam: Thanks, Rick. Just to add to that, part of the reason we are able to do that is, again, because of the benefit of the portfolio, that we are able to take a long-term view and make the right investments at these brands, and not have to react to do something short term. Some of the investments we made over time are helping us get this ROI, pretty strong ROI. Yard House, as we mentioned, at their AUVs, with the investments we have and the restaurant segment profit margins that are high teens, that is actually a pretty compelling return on investment. On Cheddar's, in select markets, they are very successful. So we are focused on making sure that we are going to the right markets and making the right investment. They have done some work on the prototype, too.

Speaker #4: And not have to react to do something short-term. Some of the investments we made over time are helping us get this ROI, a pretty strong ROI.

Speaker #4: Yard House, as we mentioned, at their AUEs with the investments we have and the restaurant segment profit margins that are high teens, that's actually a pretty compelling return on investment.

Speaker #4: On Cheddar's, intellect markets, they're very successful. So we're focused on making sure that we're going to the right markets and making the right investment.

Raj Vennam: On Cheddar's, in select markets, they are very successful. So we are focused on making sure that we are going to the right markets and making the right investment. They have done some work on the prototype, too. We see opportunity to further improve the economics at Cheddar's, but we feel good about where we are.

Speaker #4: They've done some work on the prototype too. And so there's still opportunity we see opportunity to further improve economics at cheddars, but we feel good about where we are.

Raj Vennam: We see opportunity to further improve the economics at Cheddar's, but we feel good about where we are.

Speaker #5: Thank you.

David Palmer: Thank you.

Speaker #1: Thank you. The next question is coming from Jim Solera of Stevens. Please go ahead.

Operator: Thank you. The next question is coming from Jim Salera of Stephens. Please go ahead.

Speaker #6: Hey, guys. Good morning. Thanks for taking our question. I just wanted to ask a little bit on the beef side of things. The low single-digit guidance for commodity inflation for beef seems pretty favorable.

Jim Salera: Hi, guys. Good morning. Thanks for taking our question. Raj, I wanted to ask a little bit on the beef side of things. The low single-digit guidance for commodity inflation for beef seems pretty favorable, yet it feels like we see a lot of negative headlines just around supply and obviously the expansion of the screw worm outbreak. Can you just walk us through what you are seeing there as we move through the rest of the year, and just any updates on the contract program and how you feel about pricing as we move through the back half of the year?

Speaker #6: And yet, it feels like we see a lot of negative headlines just around kind of supply, and obviously the expansion of the screwworm outbreak.

Speaker #6: Can you just kind of walk us through what you're seeing there as we move through the rest of the year, and just provide any updates on the contract program, as well as how you feel about pricing as we head into the back half of the year?

Speaker #3: Yeah, Jim. I think there are two dynamics here to think about, right? One, I want to separate what's happening externally versus what's happening with our own inflation.

Raj Vennam: Yeah, Jim. I think there are two dynamics here to think about. One, I want to separate what is happening externally versus what is happening with our own inflation. Part of it is, we give a lot of kudos to our great supply chain team that has done an excellent job over the last few years. If you look at our performance last year, we outperformed the market, or they did, helped us outperform the market on beef prices meaningfully. This year, they continue to do that. Some months we may not be as great, as much better versus market as we were last year, but still better than market. I want to start with that. From an external perspective, there have been a few factors. Obviously, recently you are starting to see some prices come down, especially on sirloin and to some extent tenders.

Speaker #3: Part of it is, we give a lot of kudos to our great supply chain team that has done an excellent job over the last few years.

Speaker #3: And if you look at our performance last year, we outperformed the market, or they did, which helped us outperform the market on beef prices meaningfully.

Speaker #3: And this year, they continue to do that. Some months we may not be as great as much better versus market as we were last year, but still better than market.

Speaker #3: So I want to start with that. From an external perspective, there have been a few factors, right? Obviously, recently, you're starting to see some prices come down, especially on sirloin and, to some extent, tenders.

Speaker #3: And that was also because last year, they were really high during that time frame—August, September. But as we look at where we thought we would be for beef at the beginning of the year, and three months later, we're basically trending pretty much in line with our initial estimate of low single-digit inflation for our fiscal 2027.

Raj Vennam: That was also because last year they were really high during that timeframe, August, September. As we look at where we thought we would be for beef at the beginning of the year and 3 months later, we are basically trending pretty much in line with our initial estimate of low single-digit inflation for our fiscal 2027. Things that are helping this are increased cattle weights, and imports are helping offset some of the lower slaughter levels. That is part of it. The other, what we are seeing is from a long term, there are some reasons to believe the beef market will improve. One, packers are now in the black. Production may start to increase, which would provide some pricing relief. Also beef industry seems to be slowly transitioning towards expansion, with heifer retention up for the first time since 2016.

Speaker #3: Things that are helping this are increased cattle weights, and imports are helping offset some of the lower slaughter levels. And so that's part of it.

Speaker #3: The other thing we're seeing is, from a long-term perspective, there's some reasons to believe the beef market will slightly improve. One, packers are now in the black. Production may start to increase, which would provide some pricing relief.

Raj Vennam: One, packers are now in the black. Production may start to increase, which would provide some pricing relief. Also beef industry seems to be slowly transitioning towards expansion, with heifer retention up for the first time since 2016. Mexican cattle slowly reentering the US, right now about 20% of historic volumes, but could reach 70% by the end of fiscal 2027. So there are some reasons to believe that this market could improve. By the way, there are no active screw worm cases in the US.

Speaker #3: And also, beef industry seems to be slowly transitioning towards expansion with heifer retention up for the first time since 2016. And then Mexican cattle slowly re-entering the US right now, about 20% of historic volumes, but could reach 70% by the end of fiscal 2027.

Raj Vennam: Mexican cattle slowly reentering the US, right now about 20% of historic volumes, but could reach 70% by the end of fiscal 2027. So there are some reasons to believe that this market could improve. By the way, there are no active screw worm cases in the US.

Speaker #3: So, there are some reasons to believe that this market could improve. And, by the way, there are no active screwworm cases in the U.S.

Speaker #6: Okay, that's helpful. And then maybe shifting gears on fine dining, that's been kind of chugging along, modestly positive. As we think about the macro backdrop, and if we're worried about kind of deteriorating conditions between interest rates, gas prices—all the headlines we all see—can you just walk us through the guest engagement across your fine dining portfolio, and maybe the split there between price and traffic, and expectations for that as we progress through the year?

Jim Salera: Okay. That is helpful. Then maybe shifting gears on fine dining, that has been kind of chugging along modestly positive. As we think about the macro backdrop and if we are worried about kind of deteriorating between interest rates, gas prices, all the things, headlines we all see. Can you just walk us through the guest engagement across your fine dining portfolio and maybe the split there between price and traffic and expectations for that as we progress through the year?

Speaker #4: So, from a fine dining perspective, look, traffic is still below where we were pre-COVID. We are starting to see gradual improvement and less decline.

Raj Vennam: From a fine dining perspective, look, traffic is still below where we were pre-COVID. We are starting to see gradual improvement, less decline, and pricing is actually, we have actually been very thoughtful about how much we price. So, our pricing year to year might have been a little different, but cumulatively, when you look at versus pre-COVID, we are still well below even full service CPI, which fine dining, I think outside of our brands, most of them have taken a lot more pricing. We are seeing the business spending is still low. That is still declining a little bit year over year. We are starting to see some growth in private dining. Then there are some things our teams are doing that are helping us. For example, Generous Pour was in the quarter, helped quite a bit. The Capital Grille had a pretty strong quarter.

Speaker #4: And pricing is—actually, we've been very thoughtful about how much we price. So our pricing year to year might have been a little different, but cumulatively, when you look at versus pre-COVID, we're still well below even full-service CPI.

Speaker #4: Which fine dining—I think outside of our brand, most of them have taken a lot more pricing. We are seeing that business spending is still low.

Speaker #4: We're not— that is still declining a little bit year over year. We're starting to see some growth in private dining, and then there are some things our teams are doing that are helping us.

Speaker #4: Like, for example, generous for was in the quarter, helped quite a bit. Capor Grill had a pretty strong quarter. And there were some things that are on price certainty that we said were important even for those customers.

Raj Vennam: And there were some things around price certainty that we said were important even for those customers, and some of the things we did were helping it. For example, Ruth's last year had the 3 Course for $60, so that kind of stuff. I do not know if you want to add anything. That is really all we have. Clearly, there is the urban versus suburban that continues to be a little bit of a theme, but nothing more to add beyond that.

Speaker #4: And some of the things we did were helping it. For example, Ruth's last year had the 3460. So that kind of stuff. So I don't know if you want to add anything.

Speaker #4: So that's really all we have. Clearly, there's the urban versus suburban dynamic that continues to be a bit of a theme, but nothing more to add beyond that.

Speaker #6: Great. Thank you. Thank you.

Jim Salera: Great. Thank you.

Jim Salera: Great. Thank you. Okay. Thank you.

Raj Vennam: Okay. Thank you.

Speaker #1: Thank you. The next question is coming from Brian Harbor of Morgan Stanley. Please go ahead.

Operator: Thank you. The next question is coming from Brian Harbour of Morgan Stanley. Please go ahead.

Speaker #7: Yeah, thanks. Good morning, guys. The smaller portions that I've garned, I mean, was the have they kind of performed as you expected? Has the you talked about kind of the mixed drag, but has the traffic benefit been there?

Brian Harbour: Yeah, thanks. Good morning, guys. The smaller portions at Olive Garden, have they kind of performed as you expected? You talked about kind of the mix drag, but has the traffic benefit been there, and could you just talk more generally about customer behavior with those dishes?

Speaker #7: And could you just talk more generally about customer behavior with those dishes?

Speaker #3: Yeah, Brian. The smaller portions with great, affordable prices have performed as we expected. As you recall, when we launched this, we said this was going to be a long-term investment.

Rick Cardenas: Well, Brian, the smaller portions with great affordable prices have performed as we expected. As you recall, when we launched this, we said this was going to be a long-term investment, and we were using some of the windfall, I wouldn't say, but some of the increased profitability from first party delivery to help fund it. We had said we were going to use some of that to fund the dining room, and that's what this was for. So the lighter portion entrees are. The preference is higher weekday lunch. I mean weekend lunch, I'm sorry. Weekend lunch, where we don't have the lunch menu. That really was part of the beauty of it, is to put something out there that people can get that are a little bit more lunch appropriate sized. We are getting preference at dinner as well.

Speaker #3: And we're using some of the windfall—I wouldn't say, but some of the increased profitability—from first-party delivery to help fund it. We had said we were going to use some of that to fund the dining room.

Speaker #3: And that's what this was for. So the lighter portion entrees—the preference is higher for weekday lunch. I mean, weekend lunch. I'm sorry, weekend lunch, where we don't have a lunch menu.

Speaker #3: And that really was part of the beauty of it, to put something out there that people can get that are a little bit more lunch-appropriate sized.

Speaker #3: And we are getting preference at dinner as well. We're still receiving great feedback from our guests, saying that it's the right portion for what they're looking for.

Rick Cardenas: We're still getting great feedback from our guests saying that it's the right portion for what they're looking for. We are seeing increased frequency for the people that order that versus the people that don't. That frequency is continuing to build. We've always said this is a very long-term play, and we may communicate it one day, but right now we're still letting it build the way it is. We should be wrapping on the full rollout sometime this year. So the margin implication of that will deteriorate over time because it's already been wrapping on itself.

Speaker #3: And we are seeing increased frequency from the people who order that versus the people who don’t. And that frequency is continuing to build. So, we've always said this is a very long-term play.

Speaker #3: And we may communicate it one day, but right now we're still letting it build the way it is. We should be wrapping up on the full rollout.

Speaker #3: Sometime this year. So it's not the margin implication of that will deteriorate over time. Because it's already been wrapping on itself.

Speaker #7: Okay. Got it. Was delivery a year-over-year contributor or not because of the lapping dynamic that you mentioned? And I guess, have you still been messaging that, or what are you seeing in that channel?

Brian Harbour: Okay, got it. Was delivery a year-over-year contributor or not because of sort of the lapping dynamic that you mentioned? I guess, have you still been messaging that or what are you seeing in that channel?

Speaker #4: Yeah, I would say for first-party delivery, because of the wrap on 1 million free deliveries from a year-over-year, it was lower. So just to give you an idea, I think last year, first quarter, first-party—basically our delivery was Uber Direct—was 5.6% of sales.

Raj Vennam: Yeah, I would say for first-party delivery, because of the wrap on 1 million free deliveries from a year-over-year, it was lower. Just to give you an idea, I think last year, Q1, first-party delivery, Uber Direct, was 5.6% of sales. This year, Q1, they were basically in line with Q3, Q4, around 4.7%, 4.8%. I think we ended up at 4.8%. So think of it as 80 basis points lower as a percent of total sales year-over-year. But to your point about when we do promote some free delivery, we do see a lift. It's actually been slowly growing quarter to quarter. I just mentioned Q3, Q4, we were in the 4.7% of sales, and now we're 4.8%.

Speaker #4: And this year, Q1, they were basically in line with Q3 and Q4, around 4.7, 4.8. I think we ended up at 4.8.

Speaker #4: So think of it as 80 basis points lower as a percent of total sales. Year over year. But to your point about when we do promote some free delivery, we do see some yeah, we see a lift and but it's actually been slowly growing.

Speaker #4: Quarter to quarter. So I just mentioned Q3 and Q4—we were in the 4.7% of sales, and now we're at 4.8%. Q1 tends to be a lower off-prem quarter compared to Q3 and Q4.

Raj Vennam: Q1 tends to be a lower off-prem quarter compared to Q3, Q4, and to be able to maintain that level shows that we're still growing organically a little bit.

Speaker #4: And to be able to maintain that level shows that we're still growing organically a little bit.

Speaker #1: Thank you. The next question is coming from Jacob Aken Phillips of Melius Research. Please go ahead.

Operator: Thank you. The next question is coming from Jacob Aiken-Phillips of Melius Research. Please go ahead.

Jacob Aiken-Phillips: Hi, good morning. The first one on the LongHorn, segment margin expanded 60 basis points despite the beef backdrop and continued investment in food quality. Is that beginning to reflect the structural conversion from much higher volume base that you've built over the last few years? I guess as beef becomes less of a headwind, how should we think about the balance of weighting that flow through versus reinvesting behind brand?

Speaker #7: Hi, good morning. So, the first one on LongHorn: segment margin expanded 60 basis points, despite the beef backdrop and continued investment in food quality.

Speaker #7: Is that the beginning to reflect the structural conversion from the much higher volume base that you've built over the last few years? And then, I guess as beef becomes less of a headwind, how should we think about the balance of letting that flow through versus reinvesting behind the brand?

Speaker #4: Well, Jacob, let me start with the last part first because that's always easy. We always think about the investments we got to make. We don't versus kind of taking all to the bottom line.

Raj Vennam: Well, Jacob, let me start with the last part first because that's always easy. We always think about the investments we got to make versus taking all to the bottom line, but always any investment we make has to have a return. We have to believe that that's actually going to help us long term. I would argue that's what's helped us over time grow margins and take market share. So that is a philosophy that we believe in, and we'll continue to do that. From a structural perspective, margin perspective, part of it is just, yeah, as inflation stabilizes a little bit and we're not getting into that mid-single-digit inflation plus for them, for LongHorn, that would help stabilizing of those segment profit margins and growth year-over-year. The traffic growth is always helpful to margins.

Speaker #4: But always, any investment we make has to have a return. We have to believe that that's actually going to help us long-term. I would argue that's what helped us over time grow margins and take market share.

Speaker #4: So that is a philosophy that we believe in and will continue to do that. So from a structural perspective, margin perspective, part of it is just, yeah, as inflation stabilizes a little bit and we’re not getting into that mid single-digit inflation plus for them, for Longhorn, that would help some stabilizing of those segment profit margins and growth year over year.

Raj Vennam: From a structural perspective, margin perspective, part of it is just, yeah, as inflation stabilizes a little bit and we're not getting into that mid-single-digit inflation plus for them, for LongHorn, that would help stabilizing of those segment profit margins and growth year-over-year. The traffic growth is always helpful to margins. Anybody in the restaurant business, if it's full service, will tell you that's a good leverage to have. So that's part of it, but part of it is the inflation on the commodities coming down for them.

Speaker #4: Now, traffic growth is always helpful to margins. Anybody in the restaurant business, full service, will tell you that it helps quite a bit. That's a good leverage to have.

Raj Vennam: Anybody in the restaurant business, if it's full service, will tell you that's a good leverage to have. So that's part of it, but part of it is the inflation on the commodities coming down for them.

Speaker #4: And so that's part of it, but part of it is the inflation on the commodities coming down for them.

Speaker #7: Got it. And then, you mentioned that the brand mix hurt the food cost line this quarter, but helped labor. As LongHorn, Yard House, and some of the other higher-growth brands become a larger percentage of Darden, should we expect the portfolio mix to change the consolidated restaurant margin structure over time, even if EBITDA dollars are still growing?

Jacob Aiken-Phillips: Got it. You mentioned that the brand mix hurt the food cost line this quarter, but helped labor. As LongHorn, Yard House, and some of the other higher growth brands become a larger percentage of Darden, should we expect the portfolio mix to change the consolidated restaurant margin structure over time, even if EBITDA dollars are still growing?

Speaker #4: Well, I would actually say the percentage on EBITDA will probably not change either. There's always some mix shift between COGS and labor. And earlier, there was a question about proteins too.

Raj Vennam: Well, I would actually say the percentage on EBITDA will not probably change either. There's probably always some mix shift between COGS and labor. Earlier there was a question around proteins, too. As you think about high COGS, high price items, you leverage labor, and that's part of how that works. When you look at our long-term framework, our focus is not on any individual line item. It's on growing earnings after tax margin, flat to positive, and at 20 basis points. That's what we do. That's what we'll look at. Yeah.

Speaker #4: As you think about high COGS, high-price items, you leverage labor. And that's kind of part of how that works. And when you look at our long-term framework, our focus is not on any individual line item.

Speaker #4: It's on growing earnings after-tax margin, flat to positive. And at 20 basis points, that's what we do. That's what we look at. Yeah.

Speaker #7: Thank you.

Jacob Aiken-Phillips: Thank you.

Speaker #1: Thank you. The next question is coming from Peter Sillay of U.S. Bancorp BTIG. Please go ahead.

Operator: Thank you. The next question is coming from Peter Saleh of BTIG. Please go ahead.

Peter Saleh: Great. Thanks for taking the question. I did want to ask, I do not know if I heard this, but Raj, are you guys still seeing demand destruction at retail for beef? Is that still one of the dynamics going on that is helping to reduce some of the pressure on beef? Then two, I guess my second question would be, on the delivery side, are these elevated gas prices for a sustained period of time, does that have any impact on the delivery fee that you guys are charging? Thanks.

Speaker #6: Great, thanks for taking the question. I did want to ask—I don't know if I heard this—but Raj, are you guys still seeing demand destruction at retail for beef?

Speaker #6: Is that still one of the dynamics going on that's helping to reduce some of the pressure on beef? And then, two, I guess my second question would be: On the delivery side, are these elevated gas prices for the sustained period of time—does that have any impact on the delivery fee that you guys are charging?

Speaker #6: Thanks.

Speaker #4: Yeah, Peter. Let me start with the last question first. No. We're not increasing we don't change the delivery fees or commitment. We have a contract for a certain price and that's what we're charging.

Raj Vennam: Yeah, Peter, let me start with the last question first. No. We are not increasing the. We do not change the delivery fees or commitment. We have a contract for a certain price, and that is what we are charging. So that is easy one. From a retail demand perspective, yes, there is still some demand destruction. I think last I checked for the month of August, we got data that is about down 4% on the steaks we look at. But it has come down. It is not as low as it. It was running 10% decline, I think, a quarter ago when we talked about it for several quarters, for three quarters or so up to that. Now we are starting to see that, I guess, plateau a little bit, but still down 4%.

Speaker #4: And that's—so that's an easy one. From a retail demand perspective, yes, there's still some demand destruction. I think last I checked, for the month of August, we've got data that's about down 4% on the steaks we look at.

Speaker #4: But it is not; it has come down. It's not as low as it was—running a 10% decline, I think, a quarter ago when we talked about it for several quarters, for three quarters or so up to that. And now we're starting to see that, I guess, plateau a little bit, but it's still down 4%.

Speaker #6: Thank you very much.

Peter Saleh: Thank you very much.

Speaker #1: Thank you. The next question is coming from Sarah Senator of Bank of America. Please go ahead.

Operator: Thank you. The next question is coming from Sara Senatore of Bank of America. Please go ahead.

Speaker #5: Thank you very much. I guess I wanted to go back to the smaller portions in the lunch business. I think in the past, you've kind of framed it.

Sara Senatore: Thank you so much. I guess I wanted to go back to the smaller portions in the lunch business. I think in the past, you've kind of framed it, I know you said right portion, right price, but I think you've framed it as maybe appealing to people who are eating less, perhaps GLP-1. I guess my sense would be it sounds maybe it's a little bit more about the price point, and right now, especially given what you're seeing in terms of the uptake. One is, are you still thinking about this as something that's more driven by GLP-1 versus an affordable price, just an absolute entry-level price point? Then second, is there any risk if you build the lunch business that it cannibalizes dinner?

Speaker #5: I know you said "right portion, right price," but I think you've framed it as maybe appealing to people who are eating less, perhaps GLP-1.

Speaker #5: I guess my sense is that it sounds like this is maybe a little bit more about the price point, especially given what you're seeing right now in terms of uptake. So, one question is: Are you still thinking about this as something that's more driven by GLP-1 versus just an affordable, entry-level price point?

Speaker #5: And then second, is there any risk if you build the lunch business that it cannibalizes dinner? I guess I'm thinking some of your kind of peers talk about if people don't come for if people are coming for lunch, they're not coming for dinner, which tends to be a higher check.

Sara Senatore: Then second, is there any risk if you build the lunch business that it cannibalizes dinner? I guess I'm thinking some of your peers talk about if people are coming for lunch, they're not coming for dinner, which tends to be a higher check and maybe more profitable. Just trying to understand if there's any kind of trade between those two day parts.

Sara Senatore: I guess I'm thinking some of your peers talk about if people are coming for lunch, they're not coming for dinner, which tends to be a higher check and maybe more profitable. Just trying to understand if there's any kind of trade between those two day parts.

Speaker #5: Maybe more profitable. So just try and understand if there's any kind of trade between those two day parts.

Speaker #4: Yeah, Sarah. Let's start with the question on the lighter portions. It isn't about price; it's about the right portion size for the right price.

Rick Cardenas: Yes, Sara. Let's start with the question on the lighter portions. It is not about price. It is about the right portion size for the right price. As I said, we are getting a lot more preference at lunch on the weekends than we are at dinner on the weekdays. We are getting dinner on the weekdays, but it is a little bit more about having the right size portion across our menu all the way through the week. We are seeing people that, as we talked about, I think when we initially launched it, we have got people that are not sharing items like they used to. That might be the folks that are more price sensitive. Now they are getting their own choice for the right portion size for them.

Speaker #4: And as I said, we're getting a lot more preference at lunch on the weekends than we are at dinner on the weekdays. We are getting dinner on the weekdays, but it is a little bit more about having the right size portion across our menu all the way through the week.

Speaker #4: We are seeing people that, as we talked about, and I think when you're initially launched it, we've got people that aren't sharing items like they used to.

Speaker #4: So that might be the folks that are more price sensitive. Now they're getting their own choice. For the right portion size for them. But we are also seeing people that when they come out to eat want some things that are either a little bit smaller on the portion size or a little more protein-forward.

Rick Cardenas: We are also seeing people that, when they come out to eat, want some things that are either a little bit smaller on the portion size or a little more protein forward, and we have both of those options. When it comes to lunch cannibalizing dinner, it is not dramatically a cannibalization that we see. Think about LongHorn. LongHorn has, that is the best example we have. LongHorn added new menu items even before COVID at lunch, and it was a slow build for them because they did not market it. Lunch is still growing and so is dinner. When you think about some of those brands that talk about lunch cannibalizing dinner, it might be because the price points and the margins are very different. We do not have as big a disparity generally when you think about what we offer.

Speaker #4: And we have both of those options. When it comes to lunch, cannibalizing dinner, it's not dramatically a cannibalization that we see. And think about long horn.

Speaker #4: So, LongHorn has, and that's the best example we have. LongHorn added new menu items even before COVID at lunch, and it was a slow build for them because they didn't market it.

Speaker #4: And lunch is still growing, and so is dinner. And when you think about some of those brands that talk about lunch cannibalizing dinner, it might be because the price points and the margins are very different.

Speaker #4: We don't have as big a disparity generally. When you think about what we offer, it would drive traffic, and that should help our overall margin—maybe not at the segment, or actually, it would at the segment level because it'll leverage some of the fixed costs at the restaurant.

Rick Cardenas: It would drive traffic, and that should help our overall margin. Maybe not at the segment, it would actually at the segment level because it will leverage some of the fixed costs at the restaurant. Last, I will go back to when we used to have a bigger lunch program at Olive Garden. We were very profitable, and we feel really good about it. So we are not too worried about cannibalization. If some of it comes, some of it comes, but we would expect to be more traffic in total than not.

Speaker #4: So and last, I'll go back to when we used to have a bigger lunch program at Olive Garden. We were very profitable and we feel really good about it.

Speaker #4: So we're not too worried about cannibalization. If some of it comes, some of it comes, but we would expect it to be more traffic in total, then not.

Speaker #5: Okay. Thank you. That's very helpful. And then just a quick follow-up. I guess on the maybe more pointedly on the sort of GLP-1 question, I think you've always been very good at measuring and sharing what you see in your data.

Sara Senatore: Okay, thank you. That is very helpful. Just a quick follow-up, I guess on the, maybe more pointedly on the GLP-1 question. I think you have always been very good at measuring and sharing what you see in your data, but as a result, maybe one of the few restaurants that have actually talked about potentially seeing an impact. As usage gets more widespread, has anything changed? To the extent that I think you have talked about that in the past, more frequency, but maybe perhaps lower spend per visit or these lighter portions, that kind of thing. Have you seen any sort of ongoing shifts as usage gets broader? Thank you.

Speaker #5: But as a result, maybe one of the few restaurants that have actually talked about potentially seeing an impact as usage gets more widespread. Have you—has anything changed?

Speaker #5: So, to the extent that I think you have talked about that in the past—more frequency, but maybe lower spend per visit, or these lighter portions, that kind of thing.

Speaker #5: Have you seen any sort of ongoing shifts as usage gets broader? Thank you.

Speaker #4: Yeah, Sarah, I can tell you the research that we see. We don't necessarily ask our guests specifically if they're on GLP-1s or not, so we don't know which people are ordering the lighter portion.

Rick Cardenas: Yes, Sara. I can tell you the research that we see. We don't necessarily ask our guests specifically if they're on GLP-1s or not, so we don't know which people are ordering the lighter portion, whether this is a GLP-1 thing or not. What I had said earlier in the past was we put this lighter portion menu out there just because we thought we needed smaller portions. It wasn't necessarily to go after the GLP-1 user. I think GLP-1 users are a little bit more for protein. That said, the data that we have, it's more external data than internal data, is the usage of GLP-1s has been relatively stable since July 2025. It's about, I think, 12% of US adults are on GLP-1s, and that hasn't changed.

Speaker #4: Whether this is a GLP-1 thing or not, what I had said earlier in the past was we put this lighter portion menu out there just because we thought we needed smaller portions.

Speaker #4: It wasn't necessarily to go after the GLP-1 user. I think GLP-1 users are a little bit more for protein. That said, the data that we have—it's more external data than internal data—is that the usage of GLP-1s has been relatively stable since July 2025.

Speaker #4: So, it's about, I think, 12% of U.S. adults are on GLP-1s, and that hasn't changed. As it gets more widespread, what tends to happen is some people come off of it, and some people come on it.

Rick Cardenas: It's about, I think, 12% of US adults are on GLP-1s, and that hasn't changed. As it gets more widespread, what tends to happen is some people come off of it, some people come on it. So we're not seeing overall growth, at least in the data we see. We're seeing, again, consistently growing preference in the lighter portion. But I don't know if it's tied directly to GLP-1 use.

Rick Cardenas: As it gets more widespread, what tends to happen is some people come off of it, some people come on it. So we're not seeing overall growth, at least in the data we see. We're seeing, again, consistently growing preference in the lighter portion. But I don't know if it's tied directly to GLP-1 use.

Speaker #4: So we're not seeing overall growth, at least in the data that we see. And we're seeing, again, consistently growing preference in the lighter portion.

Speaker #4: But I don't know if it's tied directly to GLP-1 use.

Speaker #5: Thank you very much.

Sara Senatore: Thank you very much.

Speaker #1: Thank you. The next question is coming from Andrew Strolzik of BMO Capital Markets. Please go ahead.

Operator: Thank you. The next question is coming from Andrew Strelzik of BMO Capital Markets. Please go ahead.

Speaker #6: Hey, thanks for taking the questions. First, on lunch at Olive Garden—just going back to that quickly—did you share where mixes are now versus pre-COVID, or can you share that?

Andrew Strelzik: Hey, thanks for taking the questions. First, on lunch at Olive Garden, just going back to that quickly, did you share where mix is now versus pre-COVID, or can you share that? My other question is on the restaurant supply outlook. On one hand, you have some larger brands that are looking to accelerate kind of unit openings. On the other side, you have higher inflation, tough consumer environment. I am just curious, maybe in that portion, if you are seeing anything notable in terms of supply rationalization that could create an opportunity for share gains for Darden incrementally. Thanks.

Speaker #6: And then my other question is on the restaurant supply outlook. On one hand, you have some larger brands that are looking to accelerate unit openings.

Speaker #6: On the other side, you have higher inflation and a tough consumer environment. I'm just curious, maybe in that portion, if you're seeing anything notable in terms of supply rationalization that could create an opportunity for share gains for Darden incrementally.

Speaker #6: Thanks.

Speaker #4: Yeah, Andrew, I'll get to the second part and let Raj do the first part. On supply, we're not seeing a dramatic change in restaurant supply.

Rick Cardenas: Yeah, Andrew, I will get to the second part and let Raj do the first part. On supply, we are not seeing a dramatic change in restaurant supply. We are seeing some other brands struggling and even closing some units. But there are the stronger brands that are opening units. Will that give us opportunity? Probably so. As we talk about our growth algorithm and increasing our algorithm for unit growth, we would continue to foresee that. We are getting good deals. Landlords come to us pretty quickly because of our investment grade credit and our great brand. We should feel very confident in our future growth as hitting our long-term framework. But I will let Raj talk about the first part.

Speaker #4: We are seeing some other brands struggling and even closing some units, but there are stronger brands that are opening units. So, will that give us opportunity?

Speaker #4: Probably so. And as we talk about our growth algorithm, an increasing our algorithm for unit growth, we would continue to foresee that. So we're getting good deals.

Speaker #4: Landlords come to us pretty quickly because of our investment-grade credit and our great brands. So we should feel very confident in our future growth and in hitting our long-term framework.

Speaker #4: But now I'll let Raj talk about the first part.

Speaker #3: Andrew, from a weekday lunch perspective, that's where we're seeing some of the weakness versus pre-COVID, especially when you look at how much that has performed versus the rest of the daypart.

Raj Vennam: Andrew, from a weekday lunch perspective, that is where we are seeing some of the weakness versus pre-COVID, especially when you look at how that has performed versus the rest of the day part. It is off by hundreds of basis points. So meaningful enough that we see an opportunity to do something there. From a traffic perspective, you want to just quantify high level, Monday through Friday, weekday lunch probably makes up about 20% of total traffic, somewhere in that range.

Speaker #3: It's off by hundredths of basis points, and so meaningful enough that we see an opportunity to do something there. From a traffic perspective, if you want to just quantify high level, Monday through Friday weekday lunch probably makes up about 20% of total traffic—somewhere in that range.

Speaker #6: Okay, great. Thank you.

Andrew Strelzik: Okay, great. Thank you.

Speaker #1: Thank you. Our next question is coming from Danilo Gargiuo of Bernstein. Please go ahead.

Operator: Thank you. Our next question is coming from Danilo Gargiulo of Bernstein. Please go ahead.

Speaker #7: Thank you. I have two questions. I'm going to start with the first one on pricing and specifically, if you can share any kind of early indication on the consumer resistance to the incremental prices that you're taking so far.

Danilo Gargiulo: Thank you. I have two questions. I am going to start with the first one on pricing, and specifically if you can share any kind of early indication on the consumer resistance to the incremental prices that you are taking so far. I do not mean by that at a broad level, because obviously from a traffic standpoint, you are seeing some acceleration, but your pricing approach is more strategic and you go item by item, restaurant by restaurant. Can you maybe share on a more granular level whether you are seeing any early signs of price resistance and how much confidence do you have that you could be potentially pursuing the pricing strategy for the rest of the year? Then I have a follow-up. Thank you.

Speaker #7: And I don't mean by that kind of at a broad level because obviously from a traffic standpoint, you're seeing some acceleration. But your pricing approach is more strategic and you go item by item, restaurant by restaurant.

Speaker #7: So, can you maybe share on a more granular level whether you're seeing any early signs of price resistance, and how much confidence do you have that you could potentially pursue the pricing strategy for the rest of the year?

Speaker #7: And then I have a follow-up. Thank you.

Speaker #3: Hey, Danilo, thanks for the question. I want to ground us in pricing. If you just think about everything you mentioned is actually stuff we actually look at.

Raj Vennam: Hey, Danilo. Thanks for the question. I want to ground us in pricing. If you just think about everything you mentioned is actually stuff we actually look at. If you think about how we price, there is a lot of science, and pricing is always art and science, but we have an analytics team that looks at pricing sensitivity, elasticity at the item level, elasticity at the category level, elasticity at the restaurant level. A lot of these factors go into that, in addition to how are we operating at that restaurant level. There is a lot more thinking that goes into how we price.

Speaker #3: So if you think about how we price, there's a lot of science and pricing is always art and science, but we have an analytics team that looks at pricing sensitivity, elasticity, at the item level, elasticity at the category level, elasticity at the restaurant level.

Speaker #3: So a lot of these factors go into that, in addition to how we are operating at the restaurant level. So there's a lot more thinking that goes into how we price.

Speaker #3: And it's been something that we take pride in handling and getting better at every year, but also making sure that we're actually getting the flow-through we expect to get from pricing.

Raj Vennam: It has been something that we take pride in handling, in getting better every year, but also making sure that we are actually getting the flow-through we expect to get from pricing, and that continues to stay pretty high for us, anywhere in the 90%-plus range in terms of that pricing impact. That tells us that the way we are taking pricing is actually working, which also means that we are not seeing that resistance, that we are not seeing yet. I could argue part of that could be because of our disciplined strategy from how we priced. I want to give you a couple of numbers just so we can quantify this.

Speaker #3: And that continues to stay pretty high for us—anywhere in the 90-plus percent range in terms of that pricing impact. So, that tells us that the way we're taking pricing is actually working.

Speaker #3: And which also means that we're not seeing that resistance that we are not seeing yet. But I could argue part of that could be because of our discipline strategy from how we priced.

Speaker #3: So, if you and I—let me give you a couple of numbers just so we can quantify this. If you look at where we have priced relative to pre-COVID, and you look at how that compares to the overall CPI, our full-service CPI, or even limited service, which has actually priced even more, we have big gaps.

Raj Vennam: So if you look at where we have priced relative to pre-COVID, and you look at how that compares to the overall CPI, our full-service CPI or even limited service, which has actually priced even more, we have big gaps. From an overall CPI, I think we priced about 300 basis points less than the overall CPI over the last 7 years cumulatively. When you look at versus grocery, we were underpriced by almost 600 basis points. When you look at full service, we were underpriced by 1,100 basis points, so 11 full percentage points. When you look at limited service, we were underpriced by 15 points. That is part of why we believe we are not probably going to see the same level of resistance some others may see, but I can only speak to what we are seeing.

Speaker #3: So from an overall CPI, I think we priced about 300 basis points, less than the overall CPI over the last seven years cumulatively. When you look at versus grocery, we wonder priced by almost 600 basis points.

Speaker #3: When you look at full service, we are underpriced by 1,100 basis points. So full 11 percentage points. And then when you look at limited service, we wonder priced by 15 points.

Speaker #3: So, that is part of why we believe we're probably not going to see the same level of resistance that some others may see. But I can only speak to what we're seeing.

Danilo Gargiulo: Thank you. My follow-up is on the other business. The other business usually starts small, but over time end up really creating some incremental diversification from Olive Garden as they keep growing. My focus now is on Chuy's. We are getting close to a 2-year anniversary. Maybe can you help base us on the sales trends evolution since you acquired them? If you were to think about the multiple you effectively paid based on the value that Chuy's is contributing in today's term, what would that be and what expansion plans do you see for the brand now? Thank you.

Speaker #7: follow-up is on the other business. So the other business usually starts small, but over time end up really creating some incremental diversification from Olive Garden as they keep growing.

Speaker #7: And so, my focus now is on choice. We're getting close to a two-year anniversary, so maybe—do you have data on the sales trends' evolution since you acquired them?

Speaker #7: And if you were to think about the multiple you effectively paid, based on the value that choice is contributing in today's term, what would that be and what expansion plans do you see for the brand now?

Speaker #7: Thank you.

Speaker #4: Thanks, Danilo. Yes, this coming up month will be two years since we've owned Chewies. I think it's in October, that we close that deal.

Rick Cardenas: Thanks, Danilo. Yes, this coming up month will be 2 years since we have owned Chuy's. I think it is in October that we closed that deal. We have gone through integration. They had a more challenging integration than other brands because we gave them our new point-of-sale system when it was not fully tested because we had to get it in there quickly. So they had some more challenges. Last year, during that integration, we still had a positive same restaurant sales for Chuy's, even though for us it was not technically a comp because we did not include them in the comps until Q4 of last fiscal year. When you look at Chuy's performance, it is the only brand in its first full fiscal year for Darden that had a positive same restaurant sales. Any other brand that we bought went negative for a full fiscal year, and Chuy's did not.

Speaker #4: We've gone through integration. They had a more challenging integration than other brands because we gave them our new point of sale system when it wasn't fully tested because we had to get it in there quickly.

Speaker #4: So they had some more challenges. Last year, during that integration, we still had a positive same restaurant sales for Chewies, even though for us, it wasn't technically a comp because we didn't include them in the comps until fourth quarter of last fiscal year.

Rick Cardenas: Last year, during that integration, we still had a positive same restaurant sales for Chuy's, even though for us it was not technically a comp because we did not include them in the comps until Q4 of last fiscal year. When you look at Chuy's performance, it is the only brand in its first full fiscal year for Darden that had a positive same restaurant sales. Any other brand that we bought went negative for a full fiscal year, and Chuy's did not.

Speaker #4: But when you look at Chewy's performance, it's the only brand in its first full fiscal year for Darden that had positive same-restaurant sales.

Speaker #4: Any other brand that we bought went negative for a full fiscal year and Chewies did not. So and they had some challenges through that time, through integration that we think hurt their sales.

Rick Cardenas: They had some challenges through that time, through integration, that we think hurt their sales. We feel really good about where they are. They have a strong team. They have been working on improving consistency, and that is one of the things that they want to do. They want to get more consistent across all of their restaurants, where they have got some that are less consistent every day. There are certain markets that they are really strong and because they are more consistent. That is what we think we can bring to that brand. We can also bring a little bit more branding and marketing to that brand, and we feel really strong about where they are going to be over the next 10 or 15 years. We are going to continue to grow them. We said that that is a high growth potential brand for us.

Speaker #4: We feel really good about where they are. They have a strong team. They've been working on improving consistency and that's one of the things that they want to do.

Speaker #4: They want to get more consistent across all of their restaurants, where they've got some that are less consistent every day, and there are certain markets where they're really strong.

Speaker #4: And because they're more consistent. So that's what we think we can bring to that brand. We can also bring a little bit more branding and marketing to that brand.

Speaker #4: And we feel really strong about where they're going to be over the next 10 or 15 years. Now, we're going to continue to grow them.

Speaker #4: We said that that's a high growth potential brand for us. And to give you an example, we have well over 100 restaurants in Olive Garden in Texas and we have, I think, about 50 Chewies in Texas.

Rick Cardenas: To give you an example, we have well over 100 restaurants in Olive Garden in Texas, and we have, I think, about 50 Chuy's in Texas, and many of them are in Austin. There are other places that we can grow, even where they already have restaurants, and still provide a tremendous return to our shareholders with Chuy's. It is going to take a little bit of time, though, because it is a smaller brand in our portfolio, and we are, as I said earlier, we do not like to grow brands more than 10%. They should be in the high single digits, mid to high single digit growth in the intermediate term and long term. Those margins in those really great performing restaurants are really strong, and we expect the margins in our new restaurants to do the same thing.

Speaker #4: And many of them are in Austin. And so, there are other places where we can grow, even where we already have restaurants. And so, we provide a tremendous return to our shareholders.

Speaker #4: With Chewies, it's going to take a little bit of time, though, because it is a smaller brand in our portfolio. And we are, as I said earlier, we don't like to grow brands more than 10%.

Speaker #4: And so they should be in the high single digits, mid to high single digit growth in the intermediate term and long term. And those margins are in those really great performing restaurants, are really strong, and we expect the margins in our new restaurants to do the same thing.

Rick Cardenas: They should be in the high single digits, mid to high single digit growth in the intermediate term and long term. Those margins in those really great performing restaurants are really strong, and we expect the margins in our new restaurants to do the same thing. So feel really good about where that brand is. Thanks for asking about Chuy's.

Speaker #4: So feel really good about where that brand is. So thanks for asking about Chewies.

Rick Cardenas: So feel really good about where that brand is. Thanks for asking about Chuy's.

Speaker #1: Thank you. The next question is coming from John Ivanko of JP Morgan. Please go ahead.

Operator: Thank you. The next question is coming from John Ivankoe of JP Morgan. Please go ahead.

Speaker #5: Hi, thank you. The question is really on suburban full-service restaurant visits. And Rick, the question I'll ask is: Do you think the return to malls and the return to movie theaters is a long-term sustainable trend, or might there have just been catch-up in 2026?

John Ivankoe: Hi, thank you. The question is really on suburban full-service restaurant visits. Rick, the question I will ask is, do you think the return to malls, the return to movie theaters is a long-term sustainable trend, or might there just been catch-up in Q2 2026? Do you think that kind of happens longer term? On that basis, I think more importantly for you, are developers beginning to rethink how they build centers like this that might be a new build type of construction where Darden Restaurants could be appropriate? That is the first question. Secondly, what are you seeing in terms of overall competitive restaurant supply, whether it is those that you are competing with sites against or maybe some others that are actually older brands that have not been taken care of, brands that are actually leaving the market that might be giving you an opportunity?

Speaker #5: Do you think that kind of happens longer term? And on that basis, I think more importantly for you, are developers beginning to rethink how they build centers like this that might be new build type of construction to where DARDEN restaurants could be appropriate?

Speaker #5: So that's the first question. And then secondly, what are you seeing in terms of overall competitive restaurant supply, whether it's those that you're competing with sites against, or maybe some others that are actually older brands that haven't been taken care of, brands that are actually leaving the market that might be giving you an opportunity?

John Ivankoe: That is the first question. Secondly, what are you seeing in terms of overall competitive restaurant supply, whether it is those that you are competing with sites against or maybe some others that are actually older brands that have not been taken care of, brands that are actually leaving the market that might be giving you an opportunity? So just a kind of a broad question on longer-term site availability, just based on how the consumer might be pivoting. Thank you.

Speaker #5: So just a kind of a broad question on longer-term site availability just based on how the consumer might be pivoting. Thank you.

John Ivankoe: So just a kind of a broad question on longer-term site availability, just based on how the consumer might be pivoting. Thank you.

Speaker #4: Yeah, John. Let's start with the first part about malls—returning to malls, returning to movies. Do I think that's long-term? I think it's early to say, but I do know that the youngest consumer, the youngest cohort, is starting to go back to malls, visit malls, and go out with their friends.

Rick Cardenas: Yeah, John. Let's start with the first part about returning to malls, returning to movies. Do I think that's long term? I think it's early to say, but I do know that the youngest consumer, the youngest cohort, is starting to go back to malls and visit malls and go out with their friends. They're, I would say, a little less reluctant to be outside and be in different places as maybe the cohort right before them. So that could be a long-term positive trend. You're seeing people that are doing online shopping, they still want to go visit and see and touch something maybe before they buy something online. As we think about malls, I think that question might be better for mall developers, but it might be a little too early for us to say that developers are coming with real brand-new projects on malls.

Speaker #4: They're a little less, I would say, a little less reluctant to be outside and be in different places as maybe the cohort right before them.

Speaker #4: So that could be a long-term positive trend. And you're seeing people who are doing online shopping—they still want to go visit and see and touch something, maybe before they buy something online.

Speaker #4: As we think about malls, I think that question might be better for mall developers, but it might be a little too early for us to say that developers are coming with real, brand new projects on malls.

Speaker #4: There may be some revitalization of some malls. That said, we've got a great portfolio of brands that whenever there's a restaurant site that's available, we're pretty much one of the first phone calls because whether it's a high-end mall or a more mainstream mall, we've got a brand that can go close to it.

Rick Cardenas: There may be some revitalization of some malls. That said, we've got a great portfolio of brands that whenever there's a restaurant site that's available, we're pretty much one of the first phone calls, because whether it's a high-end mall or a more mainstream mall, we've got a brand that can go close to it. Now, as we've said many times, our mall strategy is to be outside of the mall unless it's a kind of an in-line brand. We've got a couple of The Capital Grilles that are in high-end malls that do really well for us. But we're more likely to be on a pad outside the mall, which means even if the mall is not that busy, we still do okay. Last on the site availability, I think there's still great site availability.

Speaker #4: Now, as we've said many times, our mall strategy is to be outside of the mall unless it's kind of an inline brand. We've got a couple of Capital Grilles that are in high-end malls that do really well for us.

Speaker #4: But we're more likely to be on a pad outside the mall, which means even if the mall is not that busy, we still do okay.

Speaker #4: Last on the site availability, I think there's still great site availability. And when the restaurant the casual dining space or the full-service space has some competitors that are challenged, there's more opportunity for us.

Rick Cardenas: When the restaurant, the casual dining space or the full-service space has some competitors that are challenged, there's more opportunity for us. We have a great cost of capital, so we can usually win the bids that we want to win. We've got an investment-grade credit, so landlords really like us because of that, so we will pay. I'm not concerned about us not having enough availability. To your point, maybe there'll be more in the future.

Speaker #4: And so we have a great cost to capital, so we can usually win the bids that we want to win. We've got an investment-grade credit so landlords really like us because of that.

Speaker #4: So we will pay, and I'm not concerned about us not having enough availability. To your point, maybe there'll be more in the future.

Speaker #5: Thank you for that.

John Ivankoe: Thank you for that.

Speaker #1: Thank you. Ladies and gentlemen, at this time, I'd like to turn the floor back over to Ms. Aquila for closing comments.

Operator: Thank you. Ladies and gentlemen, at this time, I would like to turn the floor back over to Ms. Aquila for closing comments.

Speaker #6: This concludes our call. I want to remind you that we plan to release second quarter results on Friday, December 18th, before the market opens with the conference call to follow.

Courtney Aquilla: This concludes our call. I want to remind you that we plan to release Q2 results on Friday, 18 December, before the market opens, with a conference call to follow. Thank you for participating on today's call. Have a great day.

Speaker #6: Thank you for participating on today's call. Have a great day.

Speaker #1: Ladies and gentlemen, this concludes today's event. You may disconnect your phone lines or log off the webcast at this time. And enjoy the rest of your day.

Operator: Ladies and gentlemen, this concludes today's event. You may disconnect your phone lines or log off the webcast at this time and enjoy the rest of your day.