Darden Restaurants, Inc.

Hello, and welcome to the Darden fiscal year 2026 third quarter earnings call. Your line has been placed on listen only until the question and answer session. To ask a question, you may press star one on your touchtone phone, and we ask you to please ask one question, one follow-up, then return to the queue. This conference is being recorded. If you have any objections, please disconnect at this time. I will now turn the call over to Ms. Courtney Aquila. Thank you. You may begin.

Thank you, Kevin. 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 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. A supplemental materials presentation containing information shared on today's call is available on the Financials tab in the Investors section of our website at Darden.com. Today's discussion includes certain non-GAAP measurements, and reconciliations of these measurements are included in that presentation. Looking ahead, we plan to release fiscal 2026 fourth quarter earnings on Thursday, June 25th, 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. During the fiscal third quarter, average same restaurant sales for the industry decreased 1.2%, and average same restaurant guest counts decreased 3%. Additionally, median same restaurant sales for the industry increased 0.6%, and median same restaurant guest counts decreased 2.9%. This morning, Rick will share some brief remarks on the quarter, and Raj will provide details on our third quarter financial performance and share our updated fiscal 2026 financial outlook. Now I will turn the call over to Rick.

Thank you, Courtney. Good morning, everyone. We had a very strong quarter. We generated $3.3 billion of total sales, 5.9% higher than last year, driven by same-restaurant sales growth of 4.2%. We've been consistently outperforming industry same-restaurant sales, and this quarter our gap widened as each of our four largest brands exceeded the industry by more than 400 basis points. All of our segments delivered positive same-restaurant sales as our restaurant teams continued to be brilliant with the basics, once again leading to impressive guest satisfaction scores. Our restaurant team's ability to consistently deliver exceptional guest experiences is enabled by historically high team member and manager retention levels that we are seeing across our businesses. We began the quarter with very strong holiday sales, and several of our brands generated record Valentine's Day sales, reinforcing that guests choose the brands they trust for these special occasions. We also opened 16 new restaurants during the quarter, and we remain confident in our ability to deliver our planned openings for the fiscal year. Olive Garden delivered positive same restaurant sales of 3.2% for the quarter, driven by strong operational execution, even with three fewer weeks of price-pointed promotions than last year. The restaurant teams are focused on ensuring every guest is offered a free refill on breadsticks and soup or salad, This led to new all-time high guest satisfaction score for service and matched their all-time high for overall guest satisfaction. In January, Olive Garden completed the rollout of the lighter portion section of their menu, adding seven more dishes under $15. This platform provides their guests with more choice by offering additional smaller portions of popular dishes at a lower price and is offered in addition to the Olive Garden's regular portion sizes. Since these are existing menu items, there is minimal operational complexity, and the restaurant teams can execute at a high level. The lighter portion section of the menu is clearly resonating with our guests and their restaurant teams. In February, fan favorites returned with four cheese manicotti for a limited time starting at $12.99. Olive Garden also reintroduced two past favorites, ravioli de portobello and braised beef tortelloni. meeting strong guest affinity for familiar, craveable dishes. Building on last year's successful reintroduction, Olive Garden recently launched Buy One, Take One and is extending the offer for one additional week versus last year. With the same starting at price point of $14.99, guests can choose one entree for their dining experience and then take a second entree home. To give guests even more reasons to enjoy it, This year's offer features a new rigatoni olive vodka entree for a limited time. Olive Garden is supporting buy one, take one with increased media. At Longhorn Steakhouse, strict adherence to their strategy rooted in quality, simplicity, and culture continues to drive their momentum as they delivered same restaurant sales growth of 7.2%. The Longhorn team is deeply committed to ensuring every item they serve meets their high quality standards. Already this year, they have recertified every manager on their culinary standards, and during the quarter, their directors of operations completed hands-on culinary training in order to expertly assess and coach the behaviors that drive consistent execution. Longhorn's people bring the brand to life in their restaurants, and their culture remains a clear differentiator in earning strong team member loyalty, which in turn helps drive guest loyalty. During the quarter, Longhorn was recognized as one of the best places to work by Glassdoor. This award is particularly meaningful as winners are determined solely based on the feedback provided by team members. Longhorn also celebrated five new Grillmaster Legends during the quarter. This program is a great example of the intersection of quality and culture, celebrating team members who have each grilled more than one million steaks over the course of their career, a milestone that typically takes more than 20 years to reach. Same restaurant sales for the fine dining segment grew 2.1% for the quarter. All three brands in the segment delivered positive same restaurant sales, driven by strong private dining sales growth at the Capital Grill and AVs, and the continued success of the three-course fixed-price menu at Ruth's Chris Steakhouse. Within our other business segment, same restaurant sales grew 3.9% during the quarter, driven by very strong performance at Yard House and positive same restaurant sales at Shedder Scratch Kitchen and Seasons 52. The Yardhouse team has done a great job of leveraging their competitive advantages of a socially energized bar and distinctive culinary offerings with broad appeal to drive strong demand for Yardhouse as a social gathering space. During the quarter, more than half their restaurants set new daily sales records on Valentine's Day. At Cheddar's, the team remains focused on strengthening their competitive advantages of wow price and speed. During the quarter, they maintain their number one ranking for affordability among major casual dining brands within Technomics Industry Tacking Tool. I am proud of our performance this quarter and confident in our ability to build on our sales momentum. We remain focused on executing our proven strategy, enabling us to grow sales, increase market share, and make meaningful investments in our business while returning capital to shareholders. We also continue to work in our 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. Next month, the Darden Foundation will award more than 90 post-secondary education scholarships worth $3,000 each to the children of Darden team members. This is the fourth year of the program, and over that time, we have awarded more than $1 million worth of scholarships, helping them reach their educational goals. Finally, I want to thank our team members for their continued hard work and dedication to creating memorable experiences for our guests every day. On behalf of our leadership team and the Board of Directors, thank you for everything you do. Now I'll turn it over to Raj.