DRI - Earnings call transcript Q3 2018 | Darden Restaurants, Inc.

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Operator

Welcome to Darden Fiscal Year 2018 Third Quarter Earnings Call.

Your lines have been placed on listen-only until the question-and-answer session. [Operator Instructions] This conference is being recorded.

If you have any objections, please disconnect at this time. I will now turn the call over to Mr. Kalicak. Kevin

begin. may You

Kevin Kalicak

and for everyone call. on thank morning participating you today’s Good

me are CFO. Rick today the Lee, Joining call and Gene on Darden’s CEO, Cardenas,

a uncertainties Act of include These call statements in during morning to comments filings cause XXXX. Private statements risks subject and the Reform press expectations are as defined described risks could As will Litigation Securities the results are reminder, that actual made forward-looking release was Exchange projections. which and Commission. to its differ materially Those and distributed and Securities this the with from this Company’s in our in

certain are on measurements, these of share a are financial presentation the our followed This We Rick fourth website XXXX and outlook morning, during the market included posted highlights our section business an measurements presentation. quarter opens, will the year. We in Relations fiscal will for brief which and include of June release before our and is discussion a provide earnings update conference call. XXst plan non-GAAP broadcasting performance and Investor Today’s to some at reconciliations on this simultaneously www.darden.com. by results remarks on the Gene call, presentation quarterly about and

Cheddar’s During since Darden’s Scratch for year, Kitchen same-restaurant to today’s fiscal are Darden’s the to brands call restaurants and all sales include references remainder this of legacy will Darden. only new

to over the I’ll Now, call Gene. turn

Gene Lee

everyone. morning, Good Kevin. Thanks,

strategy X%, at operations I negative cost of to last diluted were we and good of per fundamentals adjusted rolled share years $X.XX understand communicate ways to continue and our and impact, on increase see our despite our effectively, three data Total have advantages. scale insights you billion, systematically extensive culture teams As our concentrate continuing grew on results-oriented using Olive $X.XX, operating remain earnings competitive rigorous address year. an process, service to the Rick XX.X% this increase ago, with will in weather strategic proud and Same-restaurant teams the had and to four create to we against our them solid advantages, his out Darden ensuring press from operating executed guests remarks. our significant cultivating Garden focused And planning from atmosphere foods, am net improve were and the sales our our level, which XX.X%. our quarter. through we release sales from enable quarter. people better more morning, another another go had growth. Leveraging brands an our

In fact, growth, December consecutive was the Same-restaurant counts month excluding sales Darden highest the X.X%, XXth grew industry of points. the Darden benchmarks industry by XXX the outperformed in the excluding basis Overall, same-restaurant basis of outperforming guest benchmarks the total by XXX sales history points. brand. quarter

continues Meatball overwhelming lunch pasta guests PR During to passion integrated flawless with Olive during entrée, like quarter excited I We introduced Garden and deliver marketing We the introducing I and members frequency improve strategic were were am deep to him will Pizza core brand’s team among the to chips, drove campaigns to the guests. menu leader of the and have new new our more guests. consistently items attribute most Olive frequency our driving His quarter, team. for his operator Kiernan of was create excitement Dan outstanding by leading both a Garden. able successful appetizer supported buzz. on we execution execution experience, simplification drive guest Bowl, the our the appointed Dan coupled of President understanding an with focus of the loaded to for craveable to This makes with on Olive continue results, perfect that brand strong the and begins that also among Garden. standards. royal the which our focus

doing our have on convenience. previously It’s us. needs our considered meeting capture for just also for not sales enabling that guest is more dining than off-premise would experiences Additionally, guests focus us to

quarter, of quarter. total XX% grew off-premise value sales need for also every and XX% guests, were that continue loyalty the to Building to During our approximately the to deliver means meaningful we sales day.

starting value, we year. Lunch our is $X.XX. Early last starting shows $X.XX industry largest Garden seen campaign Dinner doing awareness new competitors [indiscernible] value data Duos $X.XX, versus quarter, over has in advertising the build During our starting and highlighting resonating, at key work at as launched the The ratings to Duo we for that pasta improvement at are the Olive everyday our

focus value of us promotional everyday year. offers the to simplification on number also this run allowed reduce and we’ll Our has

As long-term fourth its platform a One to for fourth offer And don’t the not exposure. quarter, result, popular promotional us. we Buy a to our want we Take last during one assure the quarter not effectiveness, our most One ran is promotions, One risk Take of during One strong will we over that Buy year.

XXX However, about investing basis we’ll We across progress the points. guest Darden food, not quality encouraged all of making and QX. benchmarks, experience, solid a the outperformed focused excluding guest their LongHorn’s guest experience excluding service impact operations The and Same-restaurant quarter by running simplifying remain am drive traffic on in our investing on X%, of the industry to XXth strategy XXX the against points. counts Olive consecutive that of the team three by leveraging increase ensure points, in at same-restaurant growth, industry member decisions have basis to Darden LongHorn grew LongHorn continues in make touch unique this the culture guests execution guest promotion Garden’s engagement. short-term win. atmosphere. long-term sales our by I benchmarks think may to team outperforming Steakhouse’s momentum and

our has been making our we’re three on areas, all quality across increasing of focus While investments primary food. the

every of one the of two our In over fact, cut size nearly or increased steaks last the the we’ve improved years.

top support of to is more number food ranked LongHorn’s of needed team That’s competitive levels by its of team leading And quality the offers LongHorn driving on by execution fact the management restaurants. the producing our higher member our member focus Our consistency on inside retention focused evidenced to promotional on engagement. levels set simplification new remain lead items scores. while we industry, a that

each we’re a During with to the our quarter, engagement we for strong Steak provides annual And Master’s off new entire kicked culinary trading program our future and LongHorn team pipeline creating our This openings excitement members, competition. building exceed expectations, and finally, for third while increasing intense growth. our and continue restaurant. our team

of and and we on sales more improve the will Same-restaurant over take system. the These create progress and change manage decline amount last is on Operations X,XXX guest This teams at by focused primarily in strengthening to with Cheddar’s the concentration than essentially months. was that Kitchen the Same-restaurant have driven leadership franchise guests simplification. some the restaurant place our a across taking franchised through we acquired brand with per the address, restaurants to operational working is week. that will management you two previously as flat. challenges serves operational Now, excellence strong systems time I’ll update the on the that locations. high unique been counts integration. legacy that were sales the the X.X%, Cheddar’s XX Cheddar’s decline XX Scratch restaurants XX

the integration. since time. the acquired to It’s team a of pleased that with and Cheddar’s, we I’m in year than Turning less has integration accomplished everything been amount

major successfully year. Cheddar’s We system, utilizing full are we is of milestone are fiscal transitioned distribution now And in network. of last our which POS in on of integration. complete our we by Darden end final platform the systems expect stages the to payroll rollout All the proprietary The the restaurants the December. to

insights familiarizing from we’re and teams and that fully restaurants it still restaurant systems take are themselves and into them. will Darden before processes, with using our they’re feedback pleased we’re receiving the are infrastructure. managers But, fully with the integrated Our time comfortable and the

be we’re previously, I’ve teams worth process. know is will know, at restaurant is complicated distractive. long-term a benefit business. having short-term the the on confident As But lot we we’re and this it’s this the throwing the impact said We a

to guests to our leverages just a with featuring Burger provide enjoy limited This of Now, menu burger Burger. create in a guests way Capital very to called The The for Capital Grille wine a service Capital market Capital respond. let will expertise the open on Washington is The Capital me Grille how more bar-centric and The burgers. is of as limited with our is quick restaurant see capacity. extraordinary experience. am busy excited an exceptional restaurant our their Capital we steak extension as in which that The a brand a D.C., in retardant well Grille’s I D.C., update Burger signature

dining, it of a Best ensure can People culture for the having We teams management people restaurant for results-oriented tremendous the one all recognized and award. Practices congratulate Capital remains am apart as Being work the in dining is as Olive to a competitive honor. want proud our XXXX Grille workplace brands best winning the the does sets I our truly advantage of I our and eight know fine Finally, at and each culture Garden Report’s Darden. casual the

over it to turn will I Now, Rick.

Rick Cardenas

this sales quarter experienced basis with net strong and last the XX winter the by was Adverse Thank was negatively Cheddar’s XX.X%, We impact of and growth total line addition by January five in from X%. good XXX you, quarter Gene, average of XX.X% sales other points. quarter XX had February. with in impacted another same-restaurant negative and growth over Weather the for morning, growth of restaurants, everyone. driven weather years. sales same-restaurant The the and new

were last unseasonably quarter weather in winter However, wrapping third we on the mild year.

from diluted million per increase million from capital quarter year-to-date. repurchased this paid $XXX last in million $XX earnings were and in over dividends and net of earnings to share of our shares, XX.X% operations $XX fiscal returning a approximately million shareholders $X.XX, quarter adjusted continuing an $XX We year’s per share. Second

our notes We of and million cash coupon during the approximately of financial tendered hand that the new Additionally, X.X%. strengthened commercial XX-year associated further million premium of $XXX tender, paper. interest outstanding and had position replacing fees, our million X.XX%, quarter, with of at on funded $XXX a the by issuing debt with we $XXX rate X.X% and higher

leverage, synergies the going basis other were a Looking small more basis several margin last last beverage, at variances on labor, of XXX P&L year-over-year inflation was year beverage am year and and relatively focus favorable expense on on points to labor was I Restaurant X%. G&A and savings, all basis. lines to commodities XX below tax, offset factors. as to for points and due as analysis, pricing restaurant the than Food cost food unfavorable

was to leverage that we favorability and partially approximately offset from First, improvement. picked X% only by pricing inflation continue of the see productivity elevated wage we

Cheddar’s. from mix Second, brand still we are experiencing negative

were this General and million most to based our elevated the related mark-to-market for General consequently there in equity workforce Partner I’ll explain and Last, of G&A, awards, impacted in fiscal this in January, quarter, line. EBIT. year in deferred that this equity restaurant significant liability reducing primarily related was mark-to-market quarter, driven this investment headwinds we equity expenses, amount administrative mark-to-market appreciation further our the and by which of Next, markets the other quarter. programs, expense increased which moment. expenses in labor approximately we in Managing to compensation our million incurred The $X and of detail Manager $XX a announced expenses

details by mark-to-market entirely in the line. total of impact the basis reduce labor posted we show third our expenses tax offset almost million. expense compensation margin $X.X I the due the to website, expense points volatility restaurant it mentioned, quarter. EBIT we to Market-based this that by way $X increased hedged is by the administrative in earnings quarterly and hedge. of million this the EBIT presentation and this quarter is on Including reduced In after general previously XX tax, However,

while inverse our hedge after-tax by earnings income resulting price $XXX,XXX. overall, equity EBIT quarters should approximately the expense would be tax in a of the flat. market $X after-tax tax in would would declines, have relationship relatively But, unfavorable. benefit, reduced stock Our which be line positive and/or In net a true, impact overall earnings be million, the

due We Turning effective to quarter to this low income abnormally of had tax several tax an expense. factors. performance-adjusted rate X.X%

percentage our application rate QX the in lower reduced of the points by and earnings new quarter. First, the X tax QX rate in

the reduced quarterly Next, matters points. these in X the contemplated tax our percentage in impacts of resolution of we rate provided Both other favorable guidance by January. were updated

our After from January the have deferred three the normalized guidance. by tax was the Finally, tax explained adjusting quarter approximately I lowered our in approximately hedge compensation impact percentage X not rate contemplated points. would these rate just factors, for This been XX%. the for

increased segment by year other brands same-restaurant Dining the even primarily segment, adding the sales in due performance. points and brand due LongHorn quarter. points quarter, for Segment last Garden, as basis by at new each Yard driven Cheddar’s sales goods to same-restaurant of of restaurant primarily and Breeze. segment margin at and as Cheddar’s to the workforce sorry, segment, was our packaged quarter, margin effectively. this the restaurants. Fine of Olive profit than last the other last lower all margin segment net investments was Garden. consumer and addition new sales lower XXX year the segments, growth Sales Oliver growth impacting well business Segment growth XXX I’m in moving the to of at to -- leveraging of mix grew at sales and Now positive XX.X% grew managing last Bahama profit to incremental House cost the than same-restaurant the year, basis last and Similar similar profit these out

Additionally, fiscal average the from $X.XX shares XXXX This driven previous earnings adjusting X%. $X.XX. $X.XX approximately with morning’s growth $X.XX assumes share sales our XXX increased outlook year between this for approximately to per is the and same-restaurant million by adjusted and we to of announcement,

including restaurant of into franchise approximately QX we Cheddar’s not sales New acquired of and XX approximately the XX%. growth XX, total growth restaurants

effective also to from XX% be We approximately down XX%. and updated tax rate our between XX.X%,

approximately the $XXX guide brought we bottom at million. previous of to Finally, range CapEx annual the end our

and and to is is of of wanted provide $XXX we related to million million, currently to spending. remodels, guidance some to ongoing Garden restaurant $XXX XX capital XX, preliminary and XXXX. $XXX for million between other $XXX additional million gross new restaurant and million spending technology Olive openings of We maintenance, anticipate $XXX fiscal related total $XXX between ahead, million Looking which to

providing CapEx items quarter unique given other third additional announcement, addition and we and In we a typically guidance to unit XXXX, for challenges. fiscal the reform are new our during give few modeling tax

our effective to anticipate XX%. range tax First, annual XX% rate we and between

also annual We run addition we we investments fiscal workforce in is are Act. from $XX Tax investments $XXX $XX for to of making million million investments. related of the $XX the an a make additional making This million are -- savings to the expect in in P&L investments of XXXX, to million million to $XX the -- additional workforce of total rate

your average common XXXX outstanding diluted fiscal approximately shares And expect with to be we million. Finally, for XXX that, questions. we’ll take

Operator

David speakers. you, question [Operator Tarantino comes Thank from from Baird. instructions] Our first

Your open. line now is

David Tarantino

promotion. mentioned the Gene, comparison, Buy then Hi. you views current environment casual in the sort And looks on QX, And noted. One Garden. of you ask momentum not as out issues Olive Good what morning. more, viewing Take of weather repeat in how you a on the do just like and of tougher specifically, have the you’re dining to One that for within especially factoring going you’re wanted to business some underlying light I the about your

wondering the should the on to sustain play your thoughts quarter we expect comparison your promotion? in about positive to just tough eliminating momentum ability how and fourth out despite that So,

Gene Lee

morning, Good David. Yes.

the Let’s start with industry.

and been is we and is change we average are last up of be the has growing analyze momentum see strategy. is the little benchmarks a we’re seeing, check more don’t some uptick appears real that to seeing point, it as as it’s feel, we the over up the for But, really way We that look a we’re bit taking X% And that, analyze the we bit in good to in trying a some promotional is that almost little steam. that there, At change pullback traffic. whether picked that average on XX check do it is days. industry but pricing, have this discounting, at

a in that’s the move but overall a up rate significant tick seen at up. sales. we’ve So, And traffic as not same

gave think We we decisions. value at We long-term we’re and think I making in we tough quarter, We fourth high we’re -- range. there’s we’re made the as that some think a far we’ve executing that laps. do think operating the have menu. guidance good in As -- we mean, comfortable our that level. But,

think -- comfortable forth. obviously, we’re just guidance very with put that we’re So, the I we

the you introduce weather to know make fourth issue. did You quarter comments the

in every media hurricanes impacts weather hype We is have day. they and greater of ago, -- think than because week, major add we’ve around the for the been quarter XX the are we impact today years snow situation. one during least this added -- had a this I I X or will were that at and

and tough to in this quarter. been fourth about around for only to of tough weather be the impacts I’ll read common March. us It’s kind of would get make us -- type fourth so, for quarter, of And the because any

David Tarantino

Just Gene. a follow-up,

Buy On run in are place not you’re from that in situation that level major a to the to alone to promotion, would Take elimination where be… the of have the One is And One fourth of the quarter. promotion you planning way a that like something factor impact going what any it or gauge else

Gene Lee

No.

I calendar; actually, X think we to that I a think we X gone that’s mean, believe we taken to going promotions promotion. huge benefit. have operational the from run We year. this promotional we’ve we’re --

do promotional our up promotions is have the timing great lining So, weeks. exactly in not start last We at with year. two

think So, that really will strong. we be

right little media cadence group we’re the more promotion quarter. a on to we got analyze we we’ve a which And the fourth promotional bit we’ve But, the got the cadence, media plan. change for ability of our change also business our we As difficult. think half week-to-week or back makes that confident

guidance And we you. incorporating so, the that’s gave all but

Operator

Levy comes from next Deutsche Brett from Bank. Our question

open. now Your line is

Brett Levy

outperformance And What concerned? incremental where aside is to can you of beginning Olive you to a the what your to look a what back quarters to about and sense XX that I’m do Is when same-store ago. Garden, your seen just trying try better sales we’ve the seems do offset what from -- incremental just us you for look on to done you. If start get help the we to labor, you retention? can what where you at get you about -- if number of at training, gap at we’ve technology look drive leveragability there Thank be it greater either line? to think run creep,

Gene Lee

have would framework and a the back -- deliver as we’re lot and lot that look our didn’t stack, back to point guest in long-term stack, We consistent play appear also we point say would, momentum a on lost I’d to lose and a of will the momentum two-year and on less to competitors, is our at on lot over I that to compared attention much far out go X% As on a about gap same-restaurant and a thing And less I a our great between a is the you basis. concern long-term. GAAP. a we I know, really there we which focused two-year lot our of menu trying sales X% price count. think would

prepared door. to don’t that the a labor our flat we’re come to I starts my think what there good offset that improvement processes going us thought back your I to as menu, remarks, to at going that’s near-term. belief rate your as line keep there that simplify so showed businesses. is some we’re not of look on. as a labor and equipment there. or back graph But, we in And the help I sure in going getting efficiencies with starts it done leverage continue our I that it to wage some be trying try that’s your here focus possibly is as us My piece And help goes, to in our that productivity shows belief simplification. key simplify is It’s increase. it to going improve, are we’re technology far to I’m As always we’ll menu and of we’ve all a the we Rick his that And to and we products processes. procedures your improve any job. out the our think can. with And

Operator

comes from question from next Our Sara Bernstein. Senatore

open. Your line is now

Anna Papp

Good morning. actually Papp, This Sara. representing Anna is

significant us how markets that surprised what modest inflation the how I’m this how it and the checkouts up. and you commodity think to if we industry typically there that So, and to might Because contracting type remind in happen prices. increases should seems plays your [ph] say, taking the about aggressively, been across we’d food has Can like appears of about costs into lag more expect be as the commodity inputs? you is industry are despite between

Gene Lee

the Anna, question. thanks for Yes.

supply to team On We’ve different year. cetera. the chain commodity at is of right when time decides front, we rates a times contract forward looking at the et buy, that the got great

We haven’t lot seen a inflation. of commodity

slightly were the in from seeing as up, to we is What some said, has below quarter. we’ve necessarily is we picked up. competitors more X% commodities. not the has picked the know As What that you’re pricing say labor, the also cover supply of would is demand I probably

single The on distribution it’s food helped bit back that in It’s side. inflation show and also of quarter keep one getting little there. is dramatically. to low we’ve find the we a the drive back in trucks. place bit So, in our appendix little in seeing digits. an expected a inflating And in to inflation We’ve tougher presentation last from the got the got are -- we tougher commodities people the the

seeing cost. distribution driven not we’re expense, that’s food So, bit of by the a necessarily but labor, little

Operator

you. Thank

Bittner Our from comes Brian next Oppenheimer. from question

Your line is open. now

Brian Bittner

Thanks. the into on several Rick, Good morning, items. appreciate guys. initial look XXXX I line

synergies. from related we the regarding pieces the say million And Cheddar’s XXXX? XXXX, What’s for expected didn’t follow-up. now you all tax have $XX the for benefit of that savings investments redeployment. together I the put as But year-over-year incremental the to highlighted a You anything

Rick Cardenas

of to fourth we by million said year be the $XX question. have run-rate last and the In Yes. Cheddar’s Brian, next was to what synergies. of this close expect expect quarter to to million relation the year, quarter we total $XX for we synergies to thanks

we’re be incremental synergy a So, to of to range doing answers going But to closer also synergies. $XX expect $XX the million next end the your high to question. year be million in that math, our little million. now of $XX we below the Hopefully

Brian Bittner

on on when And you the line, mark-to-market basis labor in out recently is relative that deleverage line. we’ve labor the Is changing line? there quarters kind XX seen more inflation picking Yes. investments just deleverage back up to past to, anything or the just the something that to of like stuff, That’s close there, trend points. than else you in point was can the changing

Rick Cardenas

No, nothing in Brian, the inflation. is changing

little growth or there’s We’re of X% lower past. a in inflation. the did franchisees to than X% in as we more dramatically And still quarter we wage little the we than check the we different. in as bit more But, bring in mix QX. in past, might in have in there, seen we the seeing franchisees Cheddar’s pricing have in we brought did the a have really other and We than had that, nothing bit

Operator

from from question Will next comes Our Stephens. Slabaugh

is line now Your open.

Will Slabaugh

to on Olive all or if recent around that even Me curious is your go just dinners and you rate call thoughts, impact on And if Kachina with [ph] question overall you’re mix? mix you okay value A here? of Garden. more campaigns advertising want so, what you’d of the the the $X.XX direction that’s at Did

Gene Lee

to a Early clientele I X has only an It’s some don’t when really that Olive is [ph]. from mean, had X. offering is the opportunity just time Me I it’s only on rolling Kachina lot attract looking -- impact for think we Duos of capacity. during that value Garden Dinner the to Yes. see

trading we’ll it anybody at -- build as. over see this just we into over coming of next eating. now people that we zone. time for the years, X.XX, in couple that were this earlier hope value visit think around shift and is coming they backfill they’re real we when just at is time-sensitivity is we really some a think time, opportunity this growth But And people for So, there Obviously, us aren’t down who to an we they’re X.XX.

to is a we when very full. aren’t great consumers of offer way our period So, this time to a in think, our value restaurants

Will Slabaugh

quick And if just a could. the I on guidance, clarification

rate, be high? what So, the looks if on clarify you’re It for it fourth did tax would closer curious what to XX% wanted that like it’d implying I and quarter. the climb just to reason be the

Gene Lee

hear normalized if what rate talked our quarter. Well, the the prepared have It about remarks, been XX. we you in about would was third

would been if math to and what get around doing QX. getting you’re our different So, that XX to the really from not XX, you’re XX.X the to it’s to rate have in

Operator

The next question from comes from John Glass Morgan Stanley.

is line now open. Your

John Glass

to I change laps specifically you around lapping from do first broadly, that to uneven number And wanted can XXXX? XXXX out. the as that is that activity? in the does Does promotional you more move you one, impact maybe guess, just called right the -- for Garden. sales X think what change Olive the that just now and you And or as back as create might if X to to I think talk you you promotion go promotion promotions. about specifically, in cadence think about example about half that in promotional of or the change

Gene Lee

I’ll answer year. working we’ll been We’ll of question the this I this. last not part We’ve first lapped completely part of the year. all have first. the change mean, next

of most Take for to One be we’re We to much one not promotions. out One this about we’re able time, sure it primarily really be because competitive well how is we’re to to how haven’t our going talked it reasons. going that. -- successful And call We Buy want offset did to too able

the you guidance. that We’ve from into full fourth to as taken in account we the more guidance color our I’m think give and some not removing going it’s headwinds giving As back far to our on all point will be is into any what quarter, promotion, that. guidance. I’d

John Glass

market And before bear this just hasn’t new? to is Rick, volatility about before. I mark-to-market will. two modeling been it if heard program. One you and to coming haven’t be this questions, Is there

So, is should this understand the make just this this And there first time-to-time reinvestment the from just that then, as I program, or just workforce a sure new is time call a to want out? we year. surfaced anticipate I

$X million $XX and said that make correct. is just million the to You sure this then an XXXX? quarter, $XX quarter so quarter, want million anticipated fourth I in next

Rick Cardenas

workforce million The QX. and was it $X be this $XX million would Yes. quarter about investment in

the was As was for basis a just new impact a far mark-to-market, program than that it’s run as lot at market in us this our in with same price but markets years equity the this caused the one stock seen our quarter mark quarter. it quarter just for with more pretty impact for had was up and before. the -- We’ve time not on a significant going the significant this to we’ve on

Operator

question comes Farmer next Fargo. Wells from Our from Jeff

open. Your now line is

Jeff Farmer

you. guys Thank impact but the you mean as versus you into on interest might trying to Was some XXXX gave expenses Just FYXX? I to interest move that rates? Did out; you that comment as into actual rates, head on expense refi interest what interest lower us potential figure you think XXXX?

Rick Cardenas

little the next $X a interest you out, take year call about if of net to that million when it math, include Yes. fact a expense we We commercial do it’s didn’t had you on the reduction for in but paper. bit

Jeff Farmer

Any unrelated on that? coming toward pursuing just Okay. additional years. of And acquisition philosophy or appetites concepts thinking one in then, updated question. Turn

Gene Lee

Yes.

growth really it on focused brand integration. else. consider that we before get we now, on Cheddar’s continuing path solid right we’re the foundation building -- for I just and ensuring think doing And we’re anything the right the

Operator

Guggenheim Our Securities. question Matt comes next from from DiFrisco

line Your is open. now

Matt DiFrisco

promotion in was have to it for the guess, change a With also, simplifying you’re and sounds just overly a I quarter Thank customer you. first losing discounted in fourth it follow-up then for a -- the question. like lack the I respect probably that place.

So, XX less to to that would up to would deleverage, be the your about back promotional have a less if favorable have go because labor question Brian’s margin? basis getting activity? quarter of fourth in deleverage you points set affect So, you’re the theory

Gene Lee

prepared Buy meal it heavily One that’s soup, very, is it breadsticks. One because salad going the profitable No, consumer and it’s with home a not home without opposite. exactly the platform Take discounted, very and goes is and that’s a

actually. overall very the it’s package So, -- additive

it’s So, I average -- it’s believe also it’s on powerful construct. guest a promotional and driver an driver type average,

Matt DiFrisco

I or with customer? investment. a I’m -- on the wondering are bit be million that more in you us Glad could in that With benefits what of they purely just the where higher Can respect question. the sales is detail for it to of in will essence what facing more Is XXXX. give deployed? things or customer million little that have type service or asked driving $XX wages $XX hours

Gene Lee

Yes.

competitive overall the our We’re And for -- our detail where we’re or whole They’re to talk members. specifics team improve are for a quarter, that. to go to last going dollars not going about experience about of go. not going in not to reasons, investment as we’re lot our talk those going guests of to

Operator

Our Francfort next of from comes from Gregory question Bank America.

Your line now open. is

Gregory Francfort

differently labor just bridge a of of new think, -- was I on existing to can Are one One doing some maybe significantly I stores? what just presentation. labor productivity they existing gave doing? had two And on those stores apply new are stores, in And your guess restaurants. the and you your of the than the I learnings components the maybe are questions. the mixing lower you is

Rick Cardenas

new Rick. is is productivity This Greg. restaurant. Hey, The net of

higher. was productivity So,

continue they restaurants forward. as when as the they And on add they will move normally efficient board, to mix. into not be, as they come are new We

showed. that the X.X without than would new productivity restaurants So, been higher have we

Gregory Francfort

a And for question Gene then, maybe you.

probably ongoing understand how Just drag Cheddar’s Is goes guys that average process? help plays you’re you But, stores early stores Can a taking thinking driven books would business check that have is this for you’re that terms and about I the away of mostly is how seems on while. coming a the maybe on down. sort the comps, from negative Cheddar’s kind in me by like come franchise when this sort And or the maybe comps of franchise it the you an of dynamic saying ‘XX of at the on? comps? out remember be Cheddar’s ICR,

Gene Lee

believe an This great I this my system, a to comments. is think, tried doing ongoing it’s at it’s complex prepared in is I we -- and to on the key. there And processes. I simplify guests. simplification focused now And I think is We’ve In being almost to that we’re the think of allude acquired, question. I look a a the the It’s fundamentals. got overall after for lot the involve the really we’ve restaurants year, recently business; process. when

to getting in managers great general on focused these We’re continuing develop -- businesses.

the that we’ve in have some acquired challenges We recently. restaurants staffing

basics time. the right we and think at in team about have scheduled back getting number sure have to place, making the right I the management of employees we right So,

of small owners the lot of you the and And where operating I more in bit motion than learned business is they thought. a buy is that heart we’ve a you you little a the and this owners a aren’t they’re when financiers, one and really might when a remove soul operate these but think things there franchisee businesses. of them, turnover you is have their

restaurants -- to And bit going integrate to and that’s you system. after bought, significant really even think we’re corporate rebuild in These These what have volume we of going high restaurants. system still at or I those traditional take really they’re Georgia. restaurants little the issues. is XX with time there them out the through. think a have it’s And And You into this. some XX cultural average are decline, that a I

get really in the we’re excited about to there. So, opportunity

huge because resources businesses. of our have to our in Atlanta, in We excess base other

the of we the it’s time. bit business at we when look take about would a to that going it, opportunity. I more bought today were But, we’re than So, little optimistic say

the put basic to operations delivery we I consumer. significant on table have believe the for can’t impact on get we the you. and a restaurant can time a it and overall experience So, improve

hard need working to really You we’re doing know that just these things. basic

I the As almost integration. say, we’re through

the they Next won’t talking even integration referring The to the we be restaurants. going year, to They’ll integration. management know. won’t systems of be be about

we’re So, what excited and we’re of But, where work at got to about a I really do. lot we’ve think the opportunities are.

Operator

Greg The from Badishkanian Citigroup. next question comes from

Your line now open. is

Fred Wightman

reform. actually of taken on wait benefits Greg. for approach and the guys. you’d In any tax to Hey, It’s a the Wightman sort see from consumer Fred past,

it’s a we’re paychecks across seeing safe pay sort that about some tax of and talked you’ve see and the think that industry, home in higher check increases at the starting level? benefit consumer Now to we’re to say average do take you

Gene Lee

I the business interruption it’s because on way think, again, I based significant last had week too weeks a early three of we to the weather. haven’t into fact, haven’t And had our we say where a that. would,

my equations much belief But into And to flows extra get take for so, how time into incentive to get into system, I this news it’s it it’ll of think it’s that our to us. as economy. I to And got to I well-positioned look overall -- good our from value be great opportunity think go And have benefit. think portfolio, benefit the I are our at to the brands with I’ll this. back going when we

Fred Wightman

Great. year, like saw million And be what’s we to going of a see $XX should or XX-XX cadence this Should in then we hit of that sort year? XQ investment for that next the like? split, all

Rick Cardenas

be should spread It the Rick. pretty it’s throughout Fred, consistently year.

Operator

you. Thank

Howard from Penney from comes question next Hedge. Our

Your now line is open.

Howard Penney

traffic for the the the improved too have because profitability change. of cadence, changed brands is thinking trends question. may change for promotional certain in the Olive In Garden? the when you’ve about I’m compromised previous promotional you Thank you a but significantly in also in would the you LongHorn, it Olive -- that and quarter, expect promotion My for past, other question Garden

Gene Lee

No.

still different I -- very, very we’ve time Take deep is This One cadence. offer. of seen that it’s like I in to as a One just year. and this are know expect off once point Buy change. that One we throughout some of at a in One value of Buy anything a different. believe we platform LongHorn little going We once to promotion. think, dramatically to a range, And And run overexposing bit was year. it. we’ve type was We different just changed coming only value the that year wouldn’t a that were same We Take Pasta, need Neverending the the successful. type -- we’re we run a we’re

this So, expect of big the I change. in wouldn’t profitability swing because

from into play, come labor the we’re less X profitability does standpoint. as AXnd we X around. move from moving Now is where to product a

less roll all product. having new We’re meetings team out to

that’s embedded So the year. in our throughout P&L been

Operator

next from question from Stifel. comes O’Cull Our Chris

line Your now open. is

Chris O’Cull

Take that we a data risk be lapping in Thanks. that seen be morning, I could you Gene, question. at guys. the are And One I believe follow-up last overexposed? that what causes had promotion Buy One of that to Good you now. right concerned to have being the

issues for and are the other think true comparison So, about that any should is quarter? there we

Gene Lee

No, correct. you are are -- we

We’re lapping that promotion from last year.

promotion. XX more And drivability think over of we lose us effectiveness. wanted was got we its you’ve know our that of it’s run intuition integrity if to a told that And time. if just to I going to a you traffic weeks And the it we protect it year, on. this some these promotions long-term is to have continue great its --

Bowl, a got make once Pasta it it So, going about then, got it once and enjoy it you’ve can’t you -- it’s think -- year Neverending it’s all the run on. it’s it to powerful, to take you’ve when to to great there me you a be To got to got promotion, but And time. away.

Chris O’Cull

on the G&A thanks much And looks than higher the running year-over-year. Any trend it’s do suggest. expect the explanation -- G&A the then, G&A increase and would Rick, fourth? the it the But, the other in for for quarter like to of increase reoccur still increase you’re you in how explanations

Rick Cardenas

Yes, Chris.

it impacted G&A investment was line, said, million. we labor impact $X $X.X the restaurant And the about just also workforce to didn’t million As mark-to-market million. $X

we we weren’t those we’re -- take were where QX. you pretty things out, in that if So, off

we market. stock the So, predict can’t

happen third predict the similar in investment be should to So, what’s quarter the we quarter quarter the in on in fourth fourth G&A workforce in can’t line. was it But the to going mark-to-market. what the

Operator

Our from Markets. Capital next BMO question Strelzik comes Andrew from

now is line open. Your

Andrew Strelzik

It -- just in-store been to saw you with? the it is relative business among the see price to was the has that Garden. seen I in-store the gave you seems kind continue change -- you’re the a okay to of you there? in-store If seems like like to industry. And know back the numbers any to wanted the out something narrowing. on less have I business seems question been, relatively industry, Olive has off-premise like growth business but taking on Is that ask you’re flat, it the which similar the as I off-premise, in-store strong and trade-off gap at

Gene Lee

would thrilled business is say -- in-restaurant we’re that continuing. I obviously,

the of Well, which sign the across I did made compared the our think were it got little actually growth fantastic. lot to that grow equal up is bit, it you all table the the was takeout holding actually too. has industry industry. in to And in-store here grew, a -- a industry they’re think restaurant saying I analysis

So that’s really not a fair comparison.

its is it on focused people deliver want we’re in Garden, goal today. understand convenience they when about experience where However, our and is to We it. a And when totality. we Olive to Garden big state Olive need think

look it we at so, And totality. its in

room because no in a to busy; So, Valentine’s like our day day to of Garden, I we’re Olive would year. there takeout Day, so go guess, I the dine busiest when is it’s

way they experience it. want able the can’t going to it into the Garden consumer And an to so, They deliver in home. take get to they’re Olive we’re restaurant; a

in its trying states think the totality. two need different a got the on to I stake. it definitely is I focus There think on to we at off-premise. continued So, isolate is look And

really provide the tells there. we’re to a our great in-restaurant opportunity those our maximize for will still a win. we on research the making great to creating in-restaurant experience our who that’s is business. sure But, focused biggest trying us, and We’re consumer of experience; looking because continue it, are part And

Andrew Strelzik

I that. perspective LongHorn actually. in If more on the one on appreciate squeeze I could

should been of a up. construct the same increases decision as ticking quarters, of couple the similar been on the kind last time conscious that kind and growth we manage we has a the the of have lower price of Is mix to bit expect seen progress... at check check pricing growth You’ve a

Gene Lee

what pressure, selling we definitely is components. are form And of We creating our simplification actually reduction the and value a more couple just a the another coming of of part mix goes in also discounting. biggest as and to trying it LongHorn is increasing coming in create our which The we’re But, continue doing menu standpoint. It’s pricing the product reduce quality watching guest. is add-ons. of a positive, discounting to the mix value from we’re to for our from from

counts look feel doing I mix I when [ph] really discounting, So, we’re price, guest I’m the a doing for flat good. at -- the and LongHorn quarter, less X.X with X%, lot this

Operator

John Ivankoe from Thank you. JP comes The from question next Morgan.

Your line is now open.

John Ivankoe

What Hi. significantly who’s seeing? about And I independent context being Thank you. that there of some guys taking conflicting out I chains curious asked dynamic. share was versus you are there independent. versus chain the of data -- this whether the that’s question in or share who’s

and cycles there’s opinion, through independents? an as which And have many different I thought of you your switches pendulum XXXX the to outlook get on guys been your chains also, if that. before or in So, on wanted somewhat side XXXX

Gene Lee

picking little the am seeing on But, that I a CREST CREST actually we’re again, And donating what chains recently been and recent is directional. large data. small up data briefed independents is share. share and chains Yes.

a There independents huge trend. not and Not recent XX like swing. I it’s mean, the small the it XX, does seem on chains But, chains movement. talking points. of And most we’re coming basis so, XX, large that’s is lot a growing. with

should I look we an if and -- to businesses mean, take we players think as our into share, continue cost that’s to will standpoint, that a advertising hard do from large -- to the manage from As have far continue I an advantage effectively. -- as continue future, the standpoint

John Ivankoe

just also, like preferences better is to a question context even this there operator the owner asked and independent one-off there of smaller, the I -- discussion ability generational market restaurants being before have of in of And also type lot a some about Gene, truly restaurants. that for

to that still Garden relying or XXXX that think there’s appreciates a level the just LongHorn this Do Olive again, swap that’s So, XXXX a overall or in experience that your case. broadened of on population can in that just not consistency true and necessarily hold of high if but you on industry, share?

Gene Lee

a happening in on all, secondly, as the end first growth, not the coastal much independent think It’s problem. Two there’s we’re cycle. at And Middle of it’s America. Yes. I thoughts, really also top of the that happening coast;

any and them these down out growth And I out. withstand lot of and think restaurants to XXXX in saw we ‘XX And independent we capital and a a And this XXXX as capital ‘XX, open most a where people there’s slows as for of lot independent cannot in ‘XX of shock. that down. lot type restaurants. there saw fell of usually, slows

to we So, think on economic a the overall lot is depend forward, I I think as going environment. look

Operator

from Our next question comes from Stephen Group. Anderson Maxim

now is Your line open.

Stephen Anderson

still have Yes. spend any to Cheddar’s. is are to you prototype? I Thank like estimate Cheddar’s regard thought wanted kind out there? you I gave older Good ‘XX of franchise there fiscal not renovate older you. to as And would some On the on that units a to discuss CapEx. of what the morning. with current Do lot side, to that you may up guidance the

Gene Lee

Yes.

There been -- there some condition. the we stand a but buildings think design for that’s one there do the bought do equipment is is kitchen have is program that refresh. changes. is that’s a buildings. durability They’ve test be think, great new that not with But capital restaurants that of will bit great I We time. minimal. into are there, of And things that any with most to got in don’t have remodel some transformational got we’re little we’re part, able We type to the some some most of the signage, reporting in impressed the needed. and I the some work of of Cheddar’s that their

Operator

The next from question comes Scott from Jeremy Mizuho.

Your line open. is now

Jeremy Scott

level. the board. different wondering, that this the has how thought in impact you when just events, you’ve quarter many the XX weather is weather we But, maybe Garden in have bps fact with fact realize Maybe delivery? five that business reach offset at pipes -- your laid I takeout bigger years of impact the high wondering was media across Olive home. because a then can any like I it and to your just so And your performs the now that changes the customer’s by focus, some today process than of primarily around is comment ago,

Gene Lee

Yes.

that I are hasn’t always all, close. this that that from we do I’ll But, very close. of get in weather of a helped we’re restaurants -- us can’t of not team pattern say a take our First is I very, safety the takeout a We that seriously question. point certain members a it’s mean, with either. in -- takeout restaurants, where there. close weather standpoint the lot to we We and our so takeout

of question around we that towards have attitude a delivery. party say on our a second huge Olive I see focused would The catering. on large as the Garden that part opportunity. We

that. to the We’re really develop beginning in parts starting of

are, I’ve order said We on these. average The side focused $XXX. again, as before, we’re is

some business, As we it continue to grow has that impact.

And to going is out. with our We’re third-party delivery doing companies still understand lot shake all of a trying to testing, own this how we’re talking delivery.

So, information a we’ll our of a we’ve right And the have right analyze that and enough for business. conclusion. things us continue lot we’ll right we the to it leads got make we have happening to now. And -- decision

Jeremy Scott

of the any in growth Garden. quarters? that of takeout was seen How Olive think, half you trended last other your of you I time LongHorn Have couple brands? is last the in mentioned

Gene Lee

Yes.

all especially consumer obviously growth good convenience. demands takeout LongHorn seeing our of as brands, the in We’re

our focused And maximize food opportunity on we story And we of packaging. the the so the all in so, unique businesses. it’s believe, have because still we’re focused is travel of a significant growth Garden, -- But part we’re in Olive well.

We have offering. product a unique

more we to focus other with consumer growing would And that’s so, there a the I businesses, think is we’re and demand going the of on the place be. that. say really lot in

Operator

The next Raymond question James. comes from from Vaccaro Brian

Your is now open. line

Brian Vaccaro

supply your teams rationalization next industry and if morning. that’s some up industry Good indications seeing hearing be field, finally question you. growth. with seems of the view on seeing some over also your It from in and Gene, you’re also quarters. to Thank in couple we’re perspective I the supply curious And and John’s growth consistent on your follow to wanted get on what years. that recent

Gene Lee

supply think we’re On I seeing some growth, we’re we’re some good is rationalization and what growth. seeing seeing

growth are the in and some year-over-year. last out; close growing the a we’re back was restaurants; CREST data, independents So, strong basically growing is the start recent I was we’re and net seeing what we’re -- seeing that restaurant restaurant for weaker seeing come restaurants new that in. some But they are -- saw increase a seeing we’re fall to it then, we’re reason. players And brands are we’re no

So, create $X.X we like to the didn’t use when example in is that we $X.X a you stole I in and million; house marketplace, open we it’s in redistributed. do million sales, yard been million sales $X.X that

a opening. less of They some me bit to performing their tell closer environment we to continue it well so does lose on is they as that that that likely new little malls, And new put is so, may our to about are it used or business. been months thing the restaurants where distances restaurants to be we’ve little And some our pleasantly continue to the will how into upside which where to travel people I’ve see we And power. we’ve economically. stronger that last improving the XX a does players noticed these build to that in especially tells surprised gives the that got additional restaurants our open, one confidence drawing the pressure are me to somewhat live. these are I But, travel, better. belief you feed

Brian Vaccaro

two tax million of in the reinvestment, quick just then, the quarter. cadence And savings follow-ups, million helpful. third $XX saw in I the we clearly fourth the quarter, if expected That’s Rick, $X could.

wouldn’t As correctly? on fiscal of we I’m not the think year about $XX the in impact, million sort loaded of XXXX sort thinking or year be that about front-end

Gene Lee

no The last this investments loaded QX we year front-end or in fiscal but wouldn’t QX. $XX XXXX, in be and million year had

see So, we increase. an will

to so. if that’s $XX made through that we million then So, million through also you assume $XX about naturally naturally and year, this going year, flowing will next just the the flow year think next start

Brian Vaccaro

it. Got

on And would me, you’ve if in for how year, fourth normalized one to? Would perfect. year seen much quarter it and that weather you that the knock not weather on wood, assume equate March, then, sort April headwind a the for of May last be… but to of obviously Okay,

Gene Lee

Weather that We week out worry and control all there’s That’s is we too. storm that last your York guidance incorporated saw in yesterday. don’t in nothing all you our Again, can today. New about -- hoping said it. we’re our of last -- we

We’re think, focused in on running mean his we’re normalized are saw a -- when his of on the our third more winter restaurants; focused said that is give the I in this when statement couple of and great a to we color -- some bit, down benefit safe. event, get as done. end weather upside little a couple I comments, people winter. have got ensuring turn the we’ll that when quarter. mild February quarter Rick is We’ve And through March and we normal the of in winters looked at but March you it, the past in fourth a of we years. a may

Operator

The from DiFrisco Securities. last Matt Guggenheim question comes from

line is now Your open.

Matt DiFrisco

question a to had sales. with just respect the off-premise I

I comments Is Olive with on curious, give bit in think some just so. said seen if House a guys other or you that it got XX% can there? you some up and Garden was delivery on brands, about little I’ve you pop that. Grubhub more Yard and

Gene Lee

we’re products. way That’s a are don’t seeing inclusive that know test They menus of marketing And, either just we with pop via off-premise. yes, and all the Matt. up us them. of you participating have taking or Yes,

for sales of thought of I total the was quarter that’s And from takeout. inclusive that’s yes, So XX%. impressive our anything, XX% number the were

Matt DiFrisco

So, you Olive taking Grubhub? listening you Garden with just you agreement and have on They then and an there? don’t are

Gene Lee

In we mean, Well, right now. markets it West is little And there do. depends. there some yes, I Wild Wild out a

Operator

show speakers. time. further no We questions you, Thank at this

Kevin Kalicak

the Thursday, That in you June right. today’s call. fourth for participating market results remind to our Thank plan quarter I to follow. with that you. conference All release XXst want opens concludes you the Thank on before call. to we call

Operator

participation. that today’s your Thank you. Thank conference. for concludes you And

You disconnect. may now

Darden Restaurants (DRI) 22 Mar 182018 Q3 Earnings call transcript