Darden Restaurants, Inc.

Hello, and welcome to the Darden Fiscal Year 2024 Second Quarter Earnings Call. Your lines have been placed on a listen-only mode until the question-and-answer session. To ask a question, you may press star 1 on your touch-tone phone. We ask that you please limit yourselves to one question and one follow-up, then return to the queue. This conference is being recorded. If you have any objections, please disconnect at this time. I'll now turn the call over to Mr. Kevin Kalachak. Thank you. You may begin.

Thank you, Kevin. 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 the 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. 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 that presentation. Looking ahead, we plan to release fiscal 2024 third quarter earnings on Thursday, March 21st, 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, Casual Dining Benchmark, excluding Darden, specifically Olive Garden, Longhorn Steakhouse, and Cheddar Scratch Kitchen. During our second fiscal quarter, industry same restaurant sales decreased 1.3%, and industry same restaurant guest counts decreased 4.8%. This morning, Rick will share some brief remarks on the quarter, and Roger will provide details on our financial results and an update to our fiscal 2024 financial outlook. Now, I'll turn the call over to Rick.

Thank you, Kevin. Good morning, everyone. I'm pleased with our results this quarter, which outperformed the industry benchmark for same-restaurant sales and traffic. Total sales were $2.7 billion, an increase of 9.7%, and adjusted diluted net earnings per share were $1.84. We opened 17 restaurants during the quarter. Fiscal year to date, we have opened 27 restaurants in 16 states, four of which were reopenings. We continue to stick to our strategy, driven by our four competitive advantages of significant scale, extensive data and insights, rigorous strategic planning, and a results-oriented culture. And our brands are relentlessly focused on executing our back-to-basics operating philosophy anchored in food, service, and atmosphere. This focus on being brilliant with the basics enables our brands to consistently perform at a high level Our internal guest satisfaction metrics remain strong across all of our brands. In fact, Olive Garden, Longhorn Steakhouse, Yard House, Cheddar Scratch Kitchen, Season 52, and Bahama Breeze reached all-time highs for overall guest satisfaction during the quarter. Longhorn also ranked number one among major casual dining brands in six of the seven key measurement categories within Technomics Industry Tracking Tools. including food, service, atmosphere, and value. Longhorn's continued adherence to their strategy is driving strong execution, which can also be seen in the fact that they established an all-time high Stakes World Correctly score. During the quarter, Olive Garden ran Never Ending Pasta Bowl. It was offered at the same price point as last year, making it an even stronger value. Guest demand was higher this year, and our restaurant teams did a great job delivering outstanding guest experiences, achieving the highest refill rate ever. This performance was driven by our focus on ensuring every guest is offered a refill, whether it's a limited-time offer like Never Ending Pasta Bowl or our Never Ending First Course, which is offered every day. This iconic promotion also satisfies all three of our marketing activity filters. It elevates brand equity, it's simple to execute, and it's not at a deep discount. Also, I'm excited to share that during the second quarter, and for the first time in their history, Olive Garden surpassed $5 billion in sales on a trailing 52-week basis. The holidays are the busiest time of the year for all of our restaurant teams, and they embrace the opportunity to perform at their best. On Thanksgiving Day, our teams at Ruth's Crisp, the Capital Grill, Eddie V's, and Seasons 52 did just that, with each setting a new daily sales record. And while we experienced some softness at our fine dining brands during the quarter, we are encouraged by the strong holiday bookings we are seeing. Now let me provide a brief update on Ruth's Crisp. Even in the midst of the integration, I'm really proud of how the entire team has remained focused on the guest experience. During the quarter, Ruth's Chris achieved the top overall rating score among all full-service dining brands within Technomics Industry Tracking Tool. From an integration perspective, things are progressing well, and we are on track to complete the major systems changes by the end of the fiscal year. During the quarter, we closed their former corporate office, and the Ruth's Chris support team moved into our restaurant support center. We are excited to have them here. In October, we successfully transitioned 21 restaurants to one of our distribution centers, and we plan to transition the remaining company-operated restaurants to our distribution system between January and March. This phased approach allows us to gather learnings and improve the transition for the other restaurants while capturing supply chain synergies. We are deliberate with the timing of any changes to ensure that we minimize the operational impact as much as possible. We are on track to deploy our people management systems by the end of the calendar year and begin rolling out our proprietary point of sale system after Valentine's Day, with the goal of completing all systems integration by the end of the fiscal year. As part of the investments we announced on our last call, we have made some strategic decisions at company-owned restaurants that will impact total sales in the third quarter. First, we stopped third-party delivery. Second, we eliminated lunch wherever possible, and we will be closing most restaurants on Christmas Day. I can't say enough about the tremendous partnership between the Ruth's Chris team and our integration team. Integration is never easy, but it has been a collaborative process, and I am happy with the progress we are making. We have reached the halfway point in our fiscal year, and I'm pleased with our performance thus far. All of our brands remain focused on managing the business for the long term, and the power of Darden positions us well for the future. We also continue to work in pursuit of our shared purpose, to nourish and delight everyone we serve. One of the ways we do this for our team members and their families is through our Next Course Scholarship Program. Applications opened last month for the program, which awards post-secondary education scholarships worth $3,000 each to children or dependents of Darden team members. Last year, we awarded nearly 100 scholarships to children of team members at both our restaurants and our support center. The Next Course Scholarship creates a lasting impact on the lives of our team members' families. and I'm excited that we are offering the program for a second year. Finally, as I said earlier, the holidays are the busiest time of the year for our restaurant teams. I'm so proud of the focus and commitment that all our teams continue to have every day. On behalf of our senior leadership team and board of directors, I want to thank our more than 190,000 team members for everything you do to delight our guests and help create special holiday memories. I wish you and your families a wonderful holiday season. Now I will turn it over to Raj.