Highlights from Darden Restaurants' Q2 '23 Conference Call

Same as it ever was, same as it ever was- Talking Heads

There are always a few companies in an industry that to me are “must read” conference calls because management gives helpful commentary on industry trends and go into detail on the “how and why” of how they run the business to deal with those trends. Darden is one of those companies in the restaurant industry. Below are the comments and insights I thought were interesting from their call last week.

Highlights

• Industry Same-store sales decreased 1.3% and same-restaurant guest counts decreased 4.8%.

  • Darden Same-store sales +2.8% and guest traffic -1.1%. Guided flat to negative traffic for the year.

    • Olive Garden

      • 6.3% total sales growth

      • Same-store sales growth 4.1%

      • Same-store guest count flat.

    • Longhorn

      • 7.1% total sales growth.

      • Same-store sales growth 4.9%.

      • Restaurant profit margin 17.4%, up 310bps.

    • Fine Dining

      • Total sales “negative”.

      • Restaurant profit margin “lower”.

• Total restaurant level EBITDA 18.8%, +230bps driven by improved food costs.

• 15 Million Olive Garden eClub members.

• Inflation has “peaked”.

• Price increases cumulative 17% since 2019.

  • Full-service CPI 24% since 2019.

• Off premise sales

  • Olive Garden 23% off premise.

  • Longhorn 14% off premise.

• Marketing $35-$40M a year.

  • Promotions must do three things. All casual dining chains promotions should be viewed with this lens.

    • Elevate brand equity.

    • Simple to execute.

    • Not at a deep discount.

• “We are steadfast in our resolve to stay out of third party delivery.”

Company Specific Commentary:

Guest satisfaction at all-time highs:

Food Inflation was flat, labor still running 5% and Utilities experiencing deflation.

The “Consumer” commentary.

Shift in marketing to digital