Darden Restaurants, Inc.

Good day, everyone, and welcome to the Darden Fiscal Year 2023 Second 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 1 on your touchtone phone. Today's conference is being recorded. If you have any objections, please disconnect at this time. I will now turn the call over to Mr. Kevin Kalachak. Thank you. You may begin.

Thank you, Todd. Good morning, everyone, and thank you for participating on today's call. Joining me are Rick Cardenas, Darden's President and CEO, and Raj Vinam, 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 the 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. We are simultaneously broadcasting a presentation during this call, which is posted in the Investor Relations section of our website at Darden.com. Today's discussion and presentation include certain non-GAAP measurements, and reconciliations of these measurements are included in the present Looking ahead, we plan to release fiscal 2023 third quarter earnings on Thursday, March 23rd, before the market opens, followed by a conference call. During today's call, any reference to pre-COVID when discussing second quarter performance is a comparison to the second quarter of fiscal 2020. Additionally, all references to industry results during today's call refer to Black Box Intelligence's casual dining benchmark, excluding Olive Garden's Longhorn Steakhouse and Cheddar Scratch Kitchen. During our second fiscal quarter, industry same-restaurant sales increased 3.6%, and industry same-restaurant guest counts decreased 5.7%. This morning, Rick will share some brief remarks on the quarter and our focus moving forward, and Raj will provide more details on our financial results and an update to our fiscal 2023 financial outlook. Now I'll turn the call over to Rick.

Thank you, Kevin. Good morning and happy holidays, everyone. I am pleased with our results this quarter. All of our brands performed at a high level by remaining focused on our back-to-basics operating philosophy anchored in food, service, and atmosphere. At the Darden level, we continue to strengthen and leverage our four competitive advantages of significant scale, extensive data and insights, rigorous strategic planning, and our results-oriented culture. Being brilliant with the basics starts with achieving and maintaining appropriate staffing levels in our restaurants. Across our brands, our teams are doing a great job of ensuring we are ready to run 14 great shifts a week. At each of our brands, we are fully staffed at the team member level, and manager staffing is at historic highs. As a result, our teams are executing more consistently, which in turn is driving strong guest satisfaction across our brands, according to both internal and external sources. During the quarter, four of our brands achieved all-time high internal guest satisfaction ratings, and the others remain near all-time highs. Also, within Technomic's industry tracking tool, a Darden brand was ranked number one among major casual dining brands in each measurement category. I am particularly proud of Olive Garden's performance. During the quarter, they brought back their most popular limited-time offer, Never Ending Possible. As you may recall, when I talked last, I shared that any promotional activity our brands introduce should be evaluated with the following three filters. First, it needs to elevate brand equity by bringing the brand's competitive advantages to life. Second, it should be simple to execute. We will not jeopardize all the work we have done to simplify operations, which allows our teams to consistently deliver exceptional guest experiences. And third, it will not be at a deep discount. We are focused on providing great value to our guests, but doing that in a way that drives profitable sales growth. Three years after it was last offered, the 2022 version of Never Ending Pasta Bowl checked all three of these boxes. First, it leveraged Olive Garden's iconic brand equity by perfectly reinforcing their competitive advantage of never-ending, abundant, craveable Italian food. Next, it was amplified by only offering existing menu items with limited add-on choices, which made it easier to execute, resulting in great guest experiences. Finally, it was priced $3 higher than in 2019, which significantly improved the margin of this offer while still providing tremendous value for our guests. Never-ending possible exceeded expectations, and we saw a step change in Olive Garden's positive gap to industry traffic during the seven weeks it ran. I'm even more encouraged by this performance, given that it was supported with about three-quarters of the media of past years. Going forward, the team will build on their learnings and share insights across our brands, but this may be the only limited-time offer we do at Olive Garden this fiscal year. Across our brands, we continue to drive strong execution of the off-premise guest experience through ongoing investments in technology that reduce friction for our guests and our operators. For example, many of our guests still prefer to call in their to-go order. However, taking payment over the phone or when the guest arrives is both inefficient for our teams and inconvenient for our guests. To help address this, we rolled out online payment for call-in orders during the quarter, enhancing convenience for our guests and making our to-go specialists more efficient. To-go sales remain sticky across our core casual dining brands. accounting for 25% of total sales at Olive Garden, 14% at Longhorn, and 13% at Cheddar's. Digital transactions accounted for 62% of all off-premise sales during the quarter, and 10% of Darden's total sales. The holidays are the busiest time of the year for our restaurant teams, and they have enjoyed welcoming even more guests back into their restaurants this season. In fact, the Capital Grill, Eddie V's, and Season 52 enjoyed all-time daily sales records on Thanksgiving Day, and bookings for this holiday season are encouraging. The holidays are also a great reminder that being of service is at the heart of our business, and we embrace a higher purpose to nourish and delight everyone we serve, our guests, our team members, and our communities. One of the ways we serve our communities is through our Harvest Program. One in eight households in our country live without consistent access to food. To help fight hunger, our restaurants donate fresh, unused food to local food banks and nonprofits in their communities on a weekly basis throughout the year. Since the inception of this program, more than 131 million pounds of food have been donated, which is the equivalent of more than 100 million meals. The impact of our harvest program takes on an added significance during the holidays, and I am delighted that our teams are helping to make a difference in so many communities across the country. I'm so proud of the focus and commitment our teams continue to display. Their disciplined approach in executing on our strategy is what enables us to succeed regardless of the operating environment. This is evidenced by the fact that just last week, we surpassed $10 billion in sales on a trailing 52-week basis for the first time in Darden's history. On behalf of our senior leadership team and the board of directors, I want to thank our 180,000 team members everything you do to serve our guests and our communities. I wish you all a wonderful holiday season. Now I'll turn it over to Raj.