Darden Restaurants, Inc.

Please stand by. Your program is about to begin. If you need assistance on today's call, please press star zero. Good day and welcome to the Darden Fiscal Year 2023 Third 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 touchstone phone. Please note 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.

Thanks, Todd. Good morning, everyone, and thank you for participating on today's call. Joining me today 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 presentation. Looking ahead, we plan to release fiscal 2023 fourth quarter earnings on Thursday, June 22nd, before the market opens, followed by a conference call. During today's call, any reference to pre-COVID when discussing third quarter performance is a comparison to the third quarter of fiscal 2020. Additionally, all references to industry results during today's call refer to black box intelligences, casual dining benchmark, excluding Darden, specifically Olive Garden, Longhorn Steakhouse, and Cheddar Scratch Kitchen. During our third fiscal quarter, Industry same restaurant sales increased 7.2%, and industry same restaurant guest counts decreased 3%. 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.

Thanks, Kevin. Good morning, everyone. We had a strong quarter on both the top and bottom lines. We significantly exceeded the industry benchmarks for same restaurant sales and traffic, outperforming more on traffic than we did on sales. We also continued to underprice inflation, resulting in lower overall check growth relative to the industry. Our ability to make this investment and provide strong value to our guests reinforces the power of our strategy, which comes to life through our four competitive advantages and executing our back-to-basics operating philosophy. I am particularly proud of the way our restaurant teams continue to execute at a high level by being brilliant with the basics. This intense focus on providing great food, service, and atmosphere enables them to consistently create memorable guest experiences. During the holiday season, Olive Garden and Longhorn Steakhouse set new all-time weekly sales records, only to break them during Valentine's week. In fact, all of our brands achieved record total sales for the quarter. Of course, none of this would be possible without having the right people in the right roles ready to serve our guests. Our restaurants continue to be well-staffed, and our manager staffing remains at historic highs. Our leaders work hard to ensure each of our restaurants is a great place to work. During the quarter, several of our brands were recognized as industry leaders by Black Box Intelligence. Longhorn and ADVs received the Best Practices Award, which evaluates a brand's employee retention as well as sales and traffic performance. Olive Garden, the Capitol Grill, and Seasons 52 were honored with the Employer of Choice Award, which is based on workforce data, including employee turnover and gender and racial diversity. We know from our recent engagement survey results that our overall level of engagement is very high, and our team members understand what is expected of them at work. This is helping drive high guest satisfaction metrics, both internally and externally. Data from the American Customer Satisfaction Index shows customer satisfaction is down across all industries. However, across all of our brands, our internal guest satisfaction ratings remain exceptionally strong. In fact, Cheddar Scratch Kitchen, Yardhouse, and Bahama Breeze achieved all-time highs during the quarter. Additionally, for the second consecutive quarter, a Darden brand was ranked number one among major casual dining brands in each measurement category within Technomics' industry tracking tool. Even with the traffic growth we achieved during the quarter, to-go sales remained strong, accounting for 26% of total sales at Olive Garden, 14% at Longhorn, and 12% at Cheddar's. We continue to leverage technology to make it easier to order, pick up, and pay without having to pass the added expense of third-party delivery onto our guests. Our teams are executing the off-premise experience at a high level. For example, to-go orders accounted for 33% of Olive Garden's total sales on Valentine's Day, and they significantly improved their ratings for both on-time and order accuracy for that day. For the quarter, digital transactions accounted for more than 62% of all off-premise sales and 10% of Darden's total sales. Finally, we opened seven new restaurants during the quarter across seven states. Our new restaurant opening teams continue to do an excellent job of hiring and training new team members and successfully opening these locations. We are on track to open 25 net new restaurants during the fourth quarter, and I am confident in our ability to do so because of our well-prepared leadership pipeline and the tremendous support teams we have in place. We are fortunate to have the best team members in the industry, and I am proud of the focus and commitment they continue to display. On behalf of our senior leadership team and the board of directors, I want to thank all of our team members for everything you do to nourish and delight our guests and each other. Now, I will turn it over to Raj.