Darden Restaurants Q1 2027 Earnings Call: Complete Transcript

Darden Restaurants (NYSE: DRI ) held its first-quarter earnings conference call on Thursday. Below is the complete transcript from the call. This transcript is brought to you APIs. For real-time access to our entire catalog, please visit for a consultation.

2 billion, driven by positive same-restaurant sales growth and 53 net new restaurant openings. Olive Garden's same-restaurant sales grew by 1%, with strategic promotions like the Calabrian Summer and Season of Garlic, though the brand faced challenges due to lettuce concerns. 8% increase in same-restaurant sales, attributed to quality and simplicity-focused strategies, while Yard House achieved a 10% growth, benefiting from events like the World Cup. 8%, consistent with the previous year.

35, with strategic focus on brand growth, guest loyalty, and community service initiatives. Full Transcript 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 Aquilla.

Thank you. You may begin. Courtney Aquilla, Investor Relations 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.

com. 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 18th 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 help account for the one-week shift and are intended to provide a clearer year-over-year comparison. 2% during our first quarter. During today's call we will be referring to payroll 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. Rick Cardenas, President and CEO 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 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. The 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. 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 buy-ups for unlimited protein toppings with Never Ending Pasta Bowl.

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.

S. 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. 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 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 and Shrimp Bucatini that has quickly become a guest favorite. 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. 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. 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. 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.

5 million. I'm proud of what Brian Clements and the team at Yard House have accomplished. Just last week they reached $1 billion in sales for the trailing 52 weeks, becoming Darden's third billion-dollar brand. Stepping back, I'm pleased with the progress our teams made during the quarter.

The performance across our portfolio reinforces the importance of having distinctive brands, each with a clear strategy supported by Darden 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 first quarter, 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's on their mind is invaluable. 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 remaining disciplined. 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, 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.

Of course, our philanthropic giving would not be possible without the passion 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'll turn it over to Raj. Raj Vennam, Chief Financial Officer Thank you, Rick, and good morning, everyone.

The first quarter was another strong quarter for Darden Restaurants, 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've seen this trend further accelerate into September. 2 billion of total sales. 1% higher than last year, driven by positive same-restaurant sales growth and the addition of 53 net new restaurants. 2%.

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. 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 improvement and the mix of sales growth across brands. Restaurant expenses were flat as inflation was offset by pricing. Marketing expenses were also flat.

We had incremental marketing activity in the quarter that was funded by cost savings from the prior year initiatives that began in the second quarter last year. 8% for the quarter, flat to last year and consistent with our expectations. Pre-opening costs were 10 basis points higher as we continue to ramp up new restaurant growth. 9%.

3% of sales. 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. 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. 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.

They also lapped a prior 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. 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 the lighter portion section to the menu.

8% and the addition of 29 net new restaurants. LongHorn 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. Segment profit margin was 18%, 60 basis points above last year.

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. 5%, as the permanent closure of Bahama Breeze restaurants more than offset the addition of 16 net new restaurants at the other brands. 8%, 30 basis points lower than last year driven by the costs associated with winding down Bahama Breeze.

35 for the year. 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. 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.

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 Darden's strategy and consistent execution enable 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'll take your questions.

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