Darden Restaurants (DRI) Q1 2027 earnings call

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Thank you, Donna. Good morning, and thank you for participating on today's call. Joining me are Rick Cardenas, Darden's president and CEO, and Raj Rnam, 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 the presentation.

Looking ahead, we plan to release fiscal 2027 second quarter earnings on Friday, December 18th, 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, on a calendar-aligned basis. Darden's transition from a 53-week fiscal year last year to a 52-week fiscal year this year has created an offset of one week between our reported fiscal periods and the comparable calendar periods used in the industry benchmark. As a result, industry trends should be compared to Darden's comparable calendar results, which helps account for the one-week shift and is intended to provide a clearer year-over-year comparison. On a comparable calendar basis, average same restaurant sales for the industry increased 2.4%, and average same restaurant guest counts decreased 0.2% during our first quarter.

During today's call, we will be referring to comparable calendar periods when discussing our same restaurant sales results. This morning, we will share some brief remarks on the quarter and provide details on our financial results. Now I will turn the call over to Rick.

Thank you, Courtney. Good morning, everyone. The first quarter was a solid start to fiscal 27. Results were in line with our expectations, and each of our segments delivered positive same-restaurant sales. Throughout the quarter, our restaurant teams did a great job of controlling what they can control. They remain focused on strong operating fundamentals, and guest satisfaction scores across our brands remain at or near record highs for the quarter. Equally important, they continue to advance their strategic priorities to support long-term growth.

Olive Garden grew same restaurant sales by 1% for the quarter. The brand continued to pair menu innovation with compelling value. Their Calabrian summer promotion introduced differentiated flavors at an accessible starting price, while their Season of Garlic promotion provided guests with additional choice and multiple protein-forward offerings. During the quarter, Olive Garden was prepared to communicate about one of its core brand equities, unlimited soup, salad, and breadsticks, but quickly pivoted away from their planned marketing support in response to external events that led to broader consumer concern about lettuce.

Olive Garden is a brand that is well-positioned to leverage news to drive traffic, and there is no better example than their signature promotion, Never Ending Pasta Bowl. This year's offer launched at the beginning of Q2, and we are very pleased with the early results. Adding to the excitement this year are two new bold menu additions, spicy Alfredo sauce and crispy shrimp Frita as a protein topping.

Guest preference for the protein forward options remain strong, and Olive Garden has seen increased buy-ups for unlimited protein toppings with never any possible. In support of the launch of NEPB, Olive Garden brought back their Never Any Pasta Pass after a six-year hiatus. The Olive Garden team drove significant social media buzz as three million devices logged in for the Pasta Pass sale.

All 10,000 passes sold out immediately. More broadly, the response demonstrated the deep connection guests have with the brand and the value in abundance found at Olive Garden. This demonstrates the popularity of Olive Garden, which was further reaffirmed in YouTube's, UGov's Best Sites 2026 report ranking U. S. restaurant brands. The report ranked them the number one casual dining brand for consideration when dining out by multiple generational cohorts, including millennials.

Olive Garden also ranked number one among casual dining brands for service, dining experience, and value. While Olive Garden has delivered strong sales growth over the past several years, the weekday lunch day part remains a meaningful opportunity. I'm excited about several initiatives the team is working on that are designed to reinforce their value proposition and drive additional traffic. Later in our current quarter, Olive Garden will activate the previously planned marketing support behind its iconic unlimited soup, salad, and breadsticks lunch offering at a compelling price point. The team also plans to test a new lunch platform that delivers a highly competitive value proposition and includes the abundance that differentiates the Olive Garden.

At dinner, the team continues to test additional protein-forward dishes to build on the success of new core menu items like collaborating steak and shrimp bucatini that has quickly become a guest favorite.

Longhorn Steakhouse delivered same restaurant sales growth of 6.8% for the quarter. However, their momentum has been powered by disciplined adherence to a clear strategy, focused on quality, simplicity, and culture over many years. Sustaining that momentum is not easy, and the team continues to have a relentless focus on consistently executing 14 great shifts every week.

Longhorn also continues to invest in food quality and will be introducing new menu items and menu enhancements during the second quarter, designed to strengthen value and variety at both lunch and dinner. Our other business segment delivered same restaurant sales growth of 4.5%. This was driven by very impressive same restaurant sales growth of 10% at Yardhouse.

A broad menu and socially energized bar makes Yardhouse a natural gathering place for group occasions like sporting events. This was true for the World Cup, which presented a great opportunity for Yardhouse to deepen connections with their loyal guests. It also grew brand awareness by bringing in many new guests who got to experience all the new menu enhancements the team has introduced over the past few years, including the new burger, pizza, taco, and pasta platforms.

Yard House is a high-potential growth brand with plans to open 13 new restaurants this fiscal year, giving even more guests an opportunity to experience the brand. Five of the openings will be conversions of Bahama Breeze restaurants, and half of the other locations will utilize the new, smaller Yardhouse prototype. This will be the primary prototype going forward, helping lower construction costs, enabling the brand to consider even more sites, while still delivering their impressive AUV of $10.5 million.

I'm proud of what Brian Clements and the team at Yardhouse have accomplished. Just last week, they reached $1 billion in sales for the trailing 52 weeks, becoming Darden's third billion-dollar brand.

Stepping back, I'm pleased with the progress our team has made during the quarter. The performance across our portfolio reinforces the importance of having distinctive brands, each with a clear strategy supported by Darden's scale and other competitive advantages. Our focus remains the same. We will now turn the call over to management for the Darden Restaurants. I saw strong engagement and alignment around what success looks like in fiscal 27.

The message was clear. Our brands are aligned and on remaining disciplined. Our success goes beyond the four walls of our restaurants. There's a larger purpose to what we do, and that is to nourish and delight everyone we serve, which includes the communities our guests and team members call home.

One way we serve our communities is working to help end hunger. This year, the Darden Foundation and Penske are helping seven more Feeding America food banks add refrigerated trucks to support food distribution in communities with significant need. With these additions, more than 60 Feeding America food banks will have received a truck through the program during the last six years.

Of course, our philanthropic giving would not be possible without the passion of restaurant teams for nourishing and delighting our guests. On behalf of our leadership team and board of directors, I want to thank our more than 200,000 team members for the care and commitment they bring to serving our guests and communities every day.

Now we'll turn it over to Raj. Thank you, Rick, and good morning, everyone. The first quarter was another strong quarter for Darden, with sales and earnings growth meeting our expectations. The World Cup positively impacted Yardhouse Same Restaurant sales by approximately 180 basis points. However, the tournament negatively impacted the rest of our brands, resulting in a net negative impact to Darden Same Restaurant sales of approximately 80 basis points.

This impact was concentrated earlier in the quarter, which is evident in the sequential improvement of traffic throughout the quarter. We've seen this trend further accelerate into September. In the first quarter, we generated $3.2 billion of total sales. This was 5.1% higher than last year, driven by positive same-restaurant sales growth and the addition of 53 net-new restaurants. On a comparable calendar basis, same-restaurant sales grew 3.2%. Deluded net earnings per share from continuing operations were $2.05, an increase of 4.1% over last year's adjusted net earnings per share.

We generated $464 million in EBITDA and returned $406 million to shareholders through $184 million in dividends and $222 million of share repurchases. Looking at our margin analysis compared to adjusted performance for last year, food and beverage expenses were 30 basis points higher. Our pricing was in line with commodities inflation of 3.5%. The cost of sales increase was driven by the mix of sales growth across brands with a greater contribution from brands that operate with higher food and beverage costs than the company average. Restaurant labor was 30 basis points lower, driven by productivity improvement and the mix of sales growth across brands.

Restaurant expenses were flat as inflation was offset by pricing. Marketing expenses were also flat. We had incremental marketing activity in the quarter that was funded by cost savings from the prior year initiatives that began in the second quarter last year. All this resulted in restaurant-level EBITDA of 18.8% for the quarter, flat to last year and consistent with our expectations.

Pre-opening costs were 10 basis points higher as we continue to ramp up new restaurant growth. G&A expenses as a percent of sales were flat to last year, and our effective tax rate for the quarter was 12.9%. In total, our earnings from continuing operations were $234 million, which was 7.3% of sales.

In the first quarter, all of our segments grew total sales and generated positive same-restaurant sales growth. Longhorn continued its strong momentum, Fine Dining delivered another quarter of positive same-restaurant sales growth, and Yardhouse led the growth within the other business segment. While segment profit margin performance varied across the portfolio, strong margin expansion at some of our brands helped offset the margin investment at Olive Garden and the impact of winding down Bahama Breeze, resulting in consistent year-over-year restaurant-level margins at the consolidated level. This is a testament to the power of our portfolio. Olive Garden increased total sales for the quarter by 2.2% with the addition of 20 net new restaurants and comparable calendar same restaurant sales growth of 1%, despite several unique headwinds during the quarter.

Same restaurant guest counts were negatively impacted by 150 to 200 basis points from the World Cup and heightened consumer concerns regarding lettuce. In addition, the lighter portion section of the menu created a 50 basis point mixed headwind to the check. They also lapped a high growth quarter last year that included the Uber Direct 1 million free deliveries promotion and one week of never ending possible in the comparable calendar period.

On a two year basis, Olive Garden same restaurant sales increased 7%, reinforcing the brand's continued strength. Olive Garden continues to have industry-leading segment profit margin, delivering 20.4% for the quarter.

Segment profit margin declined 20 basis points from last year, which included the margin investment of approximately 30 basis points related to the addition of lighter portion section to the menu. At Longhorn, total sales increased 10.9%, given by comparable calendar same restaurant sales growth of 6.8%, and the addition of 29 net new restaurants. Longhorn continues to increase market share and delivered its 22nd consecutive quarter of positive same restaurant sales growth. Over the past three years, same restaurant sales have increased 17%, with minimal marketing spend, highlighting the strength of the brand strategy. Segment profit margin was 18%, 60 basis points above last year.

Total sales for the fine dining segment increased 6.2%, driven by positive, comparable calendar same restaurant sales of 1%, and the addition of six net new restaurants. Segment profit margin was 50 basis points lower than last year.

Total sales for the other business segment increased 3.6%, driven mainly by positive comparable calendar theme restaurant sales of 4.5%, as the permanent closure of Bahama Breeze restaurants more than offset the addition of 16 net new restaurants at the other brands. Segment profit margin was 15.8%, 30 basis points lower than last year, driven by the costs associated with winding down Bahama Breeze.

Finally, as shared in our press release this morning, we are reaffirming all aspects of our financial outlook for fiscal 2027, culminating in diluted net earnings per share between $11.10 and $11.35 for the year. As a reminder, Thanksgiving shifts from our fiscal third quarter last year into our second quarter this year. We expect this calendar shift to create an approximately 1% headwind to second quarter sales with an offsetting benefit in the third quarter. The impact will vary across brands based on holiday operating schedules, benefiting our fine dining brands, Seasons 52, and Yardhouse in the second quarter, while creating a headwind in the second quarter for the remainder of our brands in our portfolio.

This calendar shift is reflected in our full year guidance and is simply a matter of quarterly timing. In closing, this quarter is further proof that adherence to our strategy and consistent execution enabled our teams to navigate unexpected headwinds and deliver results in line with our expectations.

Yeah, Chris, good morning. So if you think about the last time we increased the price at Olive Garden on NEPB was when we brought it back after COVID, and it was $13.99 for almost five years, basically. And so, you know, when you look at what we've done with pricing over time, we've been very disciplined in thinking about, you know, how to make sure the consumer is still feeling good about the value and abundance they receive.

So part of what we've done here is actually, you know, added more to the offer. So if you think about some of the additions we made to the Never Ending Possible, including the Spicy Alfredo, the addition of Shrimp Prita, protein add-ons, those are also helping. And by the way, we didn't actually raise the price on a protein buy-up, which is unlimited proteins for $4.99. So it's a compelling great value, and I think our performance quarter to date at Olive Garden indicates that that was a great decision.

And then you mentioned lunch as an opportunity at Olive Garden. Can you maybe describe the recent traffic trends at that date part and maybe expand on your comments about improving value there? Thanks.

Hey, Chris. This is Rick. Without getting into recent traffic trends, it's been a longer-term traffic trend at Olive Garden ever since COVID ended. So if you think about what we had done before COVID, we had marketed our lunch platform quite a bit, whether it was soup, salad, and breadsticks or sandwich platform. And then we stopped our marketing, and after COVID, we hadn't put it back in. And so we've seen a little bit more deterioration at lunch than we have in any other place. And so we thought it was time, and it was already in our five-year plan to work on lunch. We thought it was the right time to talk about it and do more things with it.

Unfortunately, in the quarter, we had a challenge that we couldn't promote the lunch offer that we were hoping to promote, and so we're doing it this quarter. On variety, we also had reduced some variety at lunch when we simplified our menu, and so we're going to be testing some offers that add variety to the lunch menu with still a compelling value. So we feel really good about it. Raj and I had the food yesterday. It's amazing. We feel really good about what that offer will be as we start testing sometime in this quarter, And we hope that after a successful test that we'll be talking more about it in the back half of this fiscal year.

Thank you. Thank you.

Let me start with the question around the guidance of that, and then if Rick wants to jump in about the performance on NEPV, we'll get there. So from a quarter perspective, as I mentioned in my prepared remarks, we actually saw trends improve throughout the quarter. I think on a calendar basis, when we look at August, it was our strongest, and September is actually even stronger than that.

I don't want to get exactly into the numbers, but I can tell you that the positive traffic has actually further accelerated into September, so we feel good about just the underlying business trends we're seeing.

And I'll add to that with never any pasta bowl. As we said in the prepared remarks, we sold 10,000 pasta passes in the second, and we've seen a lot of guest reaction to that and seen a lot of redemption in that pasta pass. That said, we've also seen a little bit better results than we expected in the beginning of Nevening Pasta Bowl this quarter. So all of that's contemplated in our guide for the year, but we feel really good about where NEPB has started. Our buy-ups are a little bit higher than they were before, and as Raj mentioned in an answer a second ago, we didn't raise the price on the protein buy-ups, and that protein is unlimited, too.

So the spicy Alfredo sauce is doing really well. So guests have really, really jumped on to the new things we've added, and NEPB is doing well for us.

Got it. Thank you. And then maybe just related to just the protein comments there. Rick, I think you mentioned in your prepared remarks the opportunity at Olive Garden with more protein-forward options. So how are you thinking about that longer term? And then any comments on just kind of implications there for check or margins of the brand will be helpful. Thank you. Yeah, long-term we're going to continue to look for some more items that have some protein in it at Olive Garden. The second promotion we did this year with the garlic promotion had many protein options on it, and some of them, our highest priced item on that promotion did the best. So I think people, guests are looking for great value at an appropriate price for what they're being offered.

I won't comment on what the margin implications will be down the road on what we do or the check implications because we still have other things that we're looking at. But as we get closer to those things, we'll let you know. But the promotion was strong for us, and the protein was a well-received hit, including an appetizer that has some protein on it, too.

Great. Thank you. Thank you.

Hey, Brian, I'd say it's a little bit of both. There are some external factors, and I mentioned, you know, a tougher wrap as we started the quarter, but also the World Cup and then some concerns around letters. These are all things that were, you know, hurting a little bit earlier in the quarter, but as they eased, we saw our underlying trends continue to improve. And then there are actions we've taken. I think we just talked a lot about what we did with NeverEnding Possible. I think a lot of activity around How we launched, the investments we're making in ensuring that the offer is still compelling and justifies the price. And Rick just talked about the proteins.

I mean, that is still a huge value for a guest when you can get unlimited proteins for $4.99. And we added shrimp frida as another protein option, and that's doing really well, too. So there are things that are actions our teams are taking that are helping.

Sure, Brian. So let me start with the pricing. I think the further quarter pricing was basically, first quarter was 3-7. And I expect that to moderate as we go through the year, coming down to basically low to mid twos by Q4. So expect slightly moderating as we go through the year. So second quarter will probably be in that kind of call it mid three range, and then it will go down as we go through the year.

From a commodities inflation perspective, for the year we're still expecting 3%. And I would expect second quarter to be in the 2.5 to 3 range, and then back half to be closer to 3. And so, you know, right now, commodities are fairly in line with what we expected going into the fiscal year. While there is some movement between the categories, in aggregate, we're trending pretty close to where we thought we would be at the beginning of the fiscal year.

Great. Thank you. Thank you.

Hey, Andrew, I don't know if you're wearing a headset or something, but your line is kicking back and forth, so it's hard to understand your question. Can you try that one again?

No. If you go slow, go slow, then maybe we can get it.

Okay. I think we got it. So, correlation is pretty low, and I would say that the impact on gas prices isn't necessarily any different for Olive Garden And other brands, except for maybe that consumer that has to drive farther to go to an Olive Garden than some others. But as you can see, as gas prices continue to grow throughout the quarter, Raj had mentioned that our performance got better throughout the quarter, and we're seeing some pretty good performance in the first part of the second quarter at Olive Garden. So gas prices don't seem to be a challenge, and for a few reasons. One, gas prices at $4 a gallon or more aren't a shock to people as they were the last time gas prices spiked years ago, and the percent of people's wallet in gas is lower today than it was 10, 15 years ago.

So it doesn't seem to be as big of an impact, but if gas prices stay high for a long time, then there could be a chance that it starts to weigh in the category. Last, I think it does impact that consumer at the bottom quintile consumer that really we don't have as many of those coming to us in our mix as other categories in dining.

And on the fuel stuff, yes, we do have some variable fuel charge that is depending on where the diesel prices are. We have contemplated some of that into our guidance, but if the prices stay elevated throughout the year, if I have to just quantify at a high level the risk, we're talking about tens of basis points, incremental inflation on commodities.

But when you think about as a percent of sales for Darden, you're probably talking somewhere around 10 to 15 basis points at a very high level, elevated level, $6 plus diesel prices for the whole fiscal year type of thing.

Thank you. Thank you.

Yeah, John, I won't get into individual brands, but I will say that all of our brands have a strong social media presence, and it's reflected in how big their audiences are and how much engagement and passion they have for our brands. Our social media strategy is anchored in bringing our brands to life in authentic ways, so without trying to be too shoppy about it. It's authentically how do those folks in social media or those people think about our brands and channels that are most relevant to our guests.

So we do have influencer partnerships. We do partner with influencers who already have a love and affinity for our brands. And you can see that in some messages that go out on Instagram and TikTok and other things. But there are other people that aren't influencers that have a lot of views just because they love our brand. So we're working with social media in ways.

And also, lastly, we're not focused necessarily on a certain age cohort, but we are on TikTok. All of our casual brands are on TikTok, and we're rolling it out to the rest of them. You'll see more of us with social media over the next year or so as we continue to move some more marketing into the digital space. But we're really pleased with what we're doing and being authentic in how we use that.

John, I would say Longhorn is still holding up. Longhorn has had strong momentum with traffic and sales, and I mentioned in my prepared remarks, they have grown their sales on the same restaurant basis from three years ago by 17%. And if you look at how much they've grown since COVID, you're talking 40-plus percent. And so, yeah, so, you know, I don't want to get too specific into the exactly, and they've done all of that without any marketing. I mean, they're basically spending, you know, less than, basically 0.4% of sales in marketing. And a lot of that is just the basic stuff that has to be, whether it's menus and things like that.

Thank you. Thank you.

And we always come back to we know that casual dining or dining out, whether it's casual or full service, remains the number one category where customers want to treat themselves and actually splurge. And so we're going to continue to focus on what we can control, delivering an excellent experience and providing value to every guest. So if the consumer is wavering, we're not seeing it.

Yeah, David, thanks for questions on some of the brands. So Yardhouse, we're really pleased, and both brands, Yardhouse and Shadows of Gas specifically. I'll start with Yardhouse. Yardhouse, we're really pleased with performance. You saw the 10% comp that we just had. We are ramping up unit growth, and we've been working on that over the last few years. With a new prototype, we're actually going to open more than single digits this year just because of the conversions of Bahama Breeze restaurants.

But our goal would be in the higher single digits for Yardhouse, not double digits in the long term. We do believe that the best way to grow for any of our brands is to stay somewhere below 10% just because of the people that we need to run these restaurants and we need them to understand the brands.

And then for cheddar, and I'll come back to why we think it's working for both. On cheddar, it's the same thing. Cheddar is a little bit less growth still. They will be ramping up growth as they continue to get improved operations, and we should see them in the mid-single digits over time. We're focusing on the new prototype that we had already introduced.

Now, for both brands, what has done that? And that is an intense focus on food. Yard House has made a huge focus on their food, thinking about the platforms that we talked about before, providing a great gross value. And improving service. The same thing happened to Cheddar's. We've been focusing on food. We just introduced new burger, which is amazing. And we just introduced other new items. And with Cheddar's, it's a little bit more about getting into markets that we do really well in because people know who they are versus growing all over the place. So we're focusing our growth at Cheddar's in markets where we have Cheddar's, and we're seeing pretty good results there. And I'll let Raj talk about the ROF.

Thanks, Rick. Just to add to that, part of the reason we're able to do that is, again, because of the benefit of the portfolio, that we're able to take a long-term view and make the right investments at these brands and not have to react to do something short-term. Some of the investments we made over time are helping us get this ROI, pretty strong ROI.

Yardhouse, as we mentioned, at data AUVs, with the investments we have and the restaurant segment profit margins that are high teens, that's actually a pretty compelling return on investment. On Cheddar's intellect markets, they're very successful, so we're focused on making sure that we're going to the right markets and making the right investment. I mean, they've done some work on the prototype, too. And so there's still opportunity, we see opportunity to further improve economics at Shedders, but we feel good about where we are.

Thank you. Thank you.

Yeah, Jim, I think there are two dynamics here to think about, right? One, I want to separate what's happening externally versus what's happening with our own inflation. Part of it is, you know, we give a lot of kudos to our great supply chain team that has done an excellent job over the last few years. And if you look at our performance last year, we outperformed the market, or they did, helped us outperform the market on beef prices meaningfully. And this year, they continue to do that.

You know, some months we may not be as great, as much better with this market as we were last year, but still better than market. So I want to start with that. From an external perspective, there have been a few factors. Obviously, recently, you're starting to see some prices come down, especially on sorority and to some extent tenders, and that was also because last year they were really high during that timeframe, August, September. But as we look at where we thought we would be for beef at the beginning of the year and three months later, we're basically trending pretty much in line with our initial estimate of low single-legit inflation for our fiscal 2027.

Things that are helping this are increased cattle weight, and imports are helping offset some of the lower slaughter levels. And so that's part of it. The other, you know, what we're seeing is from a long term, there are some reasons to believe the beef market will slightly improve. You know, one, you know, packers are not in the black. Production may start to increase, which would provide some pricing relief.

And also beef industry seems to be slowly transitioning towards expansion with half-hour retention up for the first time since 2016. And then Mexican cattle slowly reentering the U. S. right now about 20% of historic volumes, but could reach 70% by the end of fiscal 2020 sale. So there are some reasons to believe that this market could improve.

And by the way, there are no active screw warm cases in the U. S. Okay, that's helpful.

So, from a fine dining perspective, look, you know, traffic is still below where we were pre-COVID. You know, it's been, we're seeing, starting to see gradual improvement, less decline, and, you know, pricing is actually, we've actually been very thoughtful about how much we price. So, you know, our pricing year-to-year might have been a little different, but cumulatively, when you look at versus pre-COVID, we're still well below even full-service CPI, you know, which fine dining, I think, outside of our branch, most of them have taken a lot more pricing.

We are seeing the business spending is still low. We're not, you know, that is still declining a little bit year over year. We're starting to see some growth in private dining. And then there are some things our teams are doing that are helping us. Like for example, Generous 4 was in the quarter, helped quite a bit. Caprogrill had a pretty strong quarter. And there were some things that are on price certainty that we said were important even for those customers. And some of the things we did were helping it. For example, Ruth last year had the 3-4-60, so that kind of stuff. So I don't know if you want to add any. So that's really all we have.

So, you know, there's clearly there's the urban versus suburban that continues to be a little bit of a theme, but nothing more to add beyond that.

Great. Thank you. I'll beg in, too. Thank you.

Yeah, Brian, the smaller portions with great affordable prices have performed as we expected. As you recall, when we launched this, we said this was going to be a long-term investment, and we were using some of the windfall, I wouldn't say, But some of the increased profitability from first-party delivery to help fund it, we had said we were going to use some of that to fund the dining room, and that's what this was for.

So the lighter portion entrees are the preferences higher weekday lunch, I mean weekend lunch, I'm sorry, weekend lunch where we don't have the lunch menu. And that really was part of the beauty of it, is to put something out there that people can get that are a little bit more lunch-appropriate sized, and we are getting preference at dinner as well.

We're still getting great feedback from our guests saying that it's the right portion for what they're looking for, and we are seeing increased frequency for the people that order that versus the people that don't. And that frequency is continuing to build. So we've always said this is a very long-term play, and we may communicate it one day, but right now we're still letting it build the way it is. And we should be wrapping on the full rollout sometime this year. So the margin implication of that will deteriorate over time because it's already been wrapping on itself.

Yeah, I would say for first-party delivery, because of the wrap-on, 1 million free deliveries from a year over year, it was lower. So just to give you an idea, I think last year, first quarter, first-party was basically – our delivery was – Uber Direct was 5.6% of sales. And this year, Q1, they were basically in line with Q3, Q4, around 4, 7, 4, 8. I think we ended up at 4.8, so think of it as 80 basis points lower as a percent of total sales year over year.

But to your point about when we do promote some free delivery, we do see a lift, but it's actually been slowly growing quarter to quarter. So I just mentioned Q3, Q4, we were in the 4.7% of sales, and now we're at 4.8. Q1 tends to be a lower off-prem quarter compared to Q3, Q4, and to be able to maintain that level shows that we're still growing organically a little bit.

Thank you.

Well, Jacob, let me start with the last part first because that's always easy. We always think about the investments we've got to make. We don't, you know, we're just kind of taking all to the bottom line, but always any investment we make has to have a return. We have to believe that that's actually going to help us long term. I would argue that's what helped us over time, grow margins and take market share. So that is a philosophy that we believe in and we'll continue to do that. So from a structural perspective, margin perspective, part of it is just, yeah, as inflation stabilizes a little bit, and we're not getting into that mid-single-digit inflation plus for them, for Longhorn, that would help some stabilizing of the segment profit margins and growth year over year.

Now, there are – the traffic growth is always helpful to margins. Anybody in the restaurant business full service will tell you that helps quite – you know, that's a good leverage to have. And so that's part of it, but part of it is the inflation on the commodities coming down for them.

Well, I would actually say the percentage on EBITDA will not probably change either. There's probably always some mixed shift between COGS and labor.

And, you know, earlier there was a question out on proteins, too. Like, as you think about high COGS, high-price items, you leverage labor. And that's kind of part of how that works. And when you look at our long-term framework, our focus is not on any individual line item. It's on growing earnings after tax margin in a flat to positive at 20 basis points. That's what we do. That's what we'll look at.

Thank you. Thank you.

Peter, let me start with the last question first. No, we're not increasing. We don't change the delivery fees. We have a contract for a certain price, and that's what we're charging. So that's an easy one. From a retail demand perspective, yes, there's still some demand destruction. I think last I checked for the month of August, we got data that's about down 4% on the stakes we look at. But it has come down. It's not as low as it was running 10% decline, I think, a quarter ago when we talked about it for several quarters, for three quarters or so up to that. Now we're starting to see that plateau a little bit, but still down 4%.

Thank you very much. Thank you.

Yes, Sarah. Let's start with the question on the lighter portions. It isn't about price. It's about the right portion size for the right price. And as I said, we're getting a lot more preference at lunch on the weekends than we are at dinner on the weekdays. We are getting dinner on the weekdays, but it is a little bit more about having the right size portion across our menu all the way through the week.

We are seeing people that, as we talked about, and I think when we initially launched it, we've got people that aren't sharing items like they used to, so that might be the folks that are more price sensitive. Now they're getting their own choice for the right portion size for them. But we are also seeing people that when they come out to eat want some things that are either a little bit smaller on the portion size or a little more protein forward, and we have both of those options.

When it comes to lunch, cannibalizing dinner, it's not dramatically a cannibalization that we see. Think about Longhorn. That's the best example we have. Longhorn added new menu items even before COVID at lunch, and it was a slow build for them because they didn't market it. Lunch is still growing, and so is dinner. When you think about some of those brands that talk about lunch cannibalizing dinner, it might be because the price points and the margins are very different. We don't have as big a disparity generally when you think about what we offer.

And it would drive traffic, and that should help our overall margin. Maybe not at the segment, or it would actually at the segment level because it will leverage some of the fixed costs at the restaurant.

And last, I'll go back to when we used to have a bigger lunch program at Olive Garden. We were very profitable, and we feel really good about it. So we're not too worried about cannibalization. If some of it comes, some of it comes, but we would expect to be more traffic in total than not.

Okay, thank you. That's very helpful.

Yes, Sarah. I can tell you the research that we see. We don't necessarily ask our guests specifically if they're on GLP-1s or not, so we don't know which people are ordering the lighter portion, whether this is a GLP-1 thing or not. What I had said earlier in the past was we put this lighter portion menu out there just because we thought we needed smaller portions. It wasn't necessarily to go after the GLP-1 user. I think GLP-1 uses it a little bit more for protein. That said, the data that we have, it's more external data than internal data, is the usage of GLP-1s has been relatively stable since July 2025. So it's about, I think, 12% of U. S. adults are on GLP-1s, and that hasn't changed.

And so as it gets more widespread, what tends to happen is some people come off of it, some people come on it. So we're not seeing overall growth, at least in the data we see, and we're seeing, again, consistently growing preference in the lighter portion, but I don't know if it's tied directly to GLP-1 use. Thank you very much.

Thank you.

Yeah, Andrew, I'll get to the second part and let Raj do the first part. On supply, we're not seeing a dramatic change in restaurant supply. We are seeing some other brands struggling and even closing some units, but there are the stronger brands that are opening units. Will that give us opportunity? Probably so. As we talk about our growth algorithm and increasing our algorithm for unit growth, we would continue to foresee that. We're getting good deals. Landlords come to us pretty quickly because of our investment-grade credit and our great brand. We should feel very confident in our future growth, in our long-term framework.

But now I'll let Raj talk about the first part. Andrew, from a weekday lunch perspective, that's where we're seeing some of the weakness versus pre-COVID, especially when you look at how much that has, how that's performed versus the rest of the day part. It's off by hundreds of basis points.

And so meaningful enough that we see an opportunity to do something there. From a traffic perspective, you want to just quantify high level, Monday through Friday, weekday lunch probably makes up about 20% of total traffic, somewhere in that range.

Okay, great. Thank you. Thank you.

Hey, Danilo. Thanks for the question. I want to ground us in pricing, right? If you just think about everything you mentioned is actually stuff we actually look at. So, if you think about how we price, there's a lot of science, and pricing is always art and science, but we have an analytics team. That looks at pricing sensitivity, elasticity at the item level, elasticity at the category level, elasticity at the restaurant level. So a lot of these factors going into that, in addition to how are we operating at that restaurant level. So there's a lot more thinking that goes into how we price.

And it's been something that we take pride in, you know, handling, in getting better every year, but also making sure that we're actually getting the flow through we expect to get from pricing. And that continues to stay pretty high. For us, you know, anywhere in the 90-plus percent range in terms of that pricing impact. So that tells us that the way we're taking pricing is actually, you know, working. And which also means that we're not seeing that resistance that we are not seeing yet. But I could argue part of that could be because of our discipline strategy from how we priced. So if you – and I want to give you a couple of numbers just so we can quantify this.

So if you look at where we have priced relative to pre-COVID, and you look at how that compares to the overall CPI or full-service CPI or even limited service, which has actually priced even more, we have big gaps. So from an overall CPI, I think we priced about 300 basis points less than the overall CPI over the last seven years, cumulated. When you look at what is grocery, we underpriced by almost 600 basis points. When you look at full service, we are underpriced by 1,100 basis points, so full 11 percentage points. And then when you look at limited service, we are underpriced by 15 points.

So that is part of why we believe we're not probably going to see the same level of resistance some analysts may see, but I can only speak to what we're seeing.

Thank you.

Thanks, Danilo. Yes, this coming up month will be two years since we've owned Chewy's. I think it's in October that we closed that deal. We've gone through integration. They had a more challenging integration than other brands because we gave them our new point-of-sale system when it wasn't fully tested because we had to get it in there quickly. So they had some more challenges. Last year, during that integration, we still had a positive same restaurant sales for Chewy's, even though for us it wasn't technically a comp because we didn't include them in the comps until fourth quarter of last fiscal year. But when you look at Chewy's performance, it's the only brand in its first full fiscal year for Darden that had a positive same restaurant sales.

Any other brand that we bought went negative for a full fiscal year, and Chewy's did not. And they had some challenges through that time, through integration, that we think hurt their sales. We feel really good about where they are. They have a strong team. They've been working on improving consistency, and that's one of the things that they want to do. They want to get more consistent across all of their restaurants, where they've got some that are less consistent every day, certain markets that they're really strong, and because they're more consistent. So that's what we think we can bring to that brand. We can also bring a little bit more branding and marketing to that brand, and we feel really strong about where they're going to be over the next 10 or 15 years.

Now, we're going to continue to grow them. We said that that's a high-growth potential brand for us. And to give an example, we have well over 100 restaurants in Olive Garden in Texas, and we have, I think, about 50 Chewy's in Texas. And many of them are in Austin. And so there's other places that we can grow, even where they already have restaurants, and still provide a tremendous return to our shareholders with Chewy's. It's going to take a little bit of time, though, because it is a smaller brand in our portfolio, and we are, as I said earlier, we don't like to grow brands more than 10%. And so they should be in the high single digits, mid to high single digit growth in the intermediate term and long term, and those margins are in those really great performing restaurants are really strong, and we expect the margins in our new restaurants to do the same thing.

So I feel really good about where that brand is, so thanks for asking about Chewy's. Thank you.

Yeah, John, let's start with the first part about kind of malls, returning to malls, returning to movies. Do I think that's long term? I think it's early to say, but I do know that the youngest consumer, the youngest cohort is starting to go back to malls and visit malls and go out with their friends. They're a little less, I would say a little less reluctant to be outside and be in different places as maybe the cohort right before them. So that could be a long-term positive trend. You're seeing people that are doing online shopping, they still want to go visit and see and touch something maybe before they buy something online. As we think about malls, I think that question might be better for mall developers, but it might be a little too early for us to say that developers are coming with real brand new projects on malls.

There may be some revitalization of some malls. That said, we've got a great portfolio of brands that whenever there's a restaurant site that's available, we're pretty much one of the first phone calls because whether it's a high-end mall or a more mainstream mall, we've got a brand that can go close to it. Now, as we've said many times, our mall strategy is to be outside of the mall unless it's kind of an inline brand. We've got a couple of Capo Grills that are in high-end malls that do really well for us, but we're more likely to be on a pad outside the mall, which means even if the mall is not that busy, we still do okay.

Last on the site availability, I think there's still great site availability. And when the restaurant, the casual dining space or the full service space has some competitors that are challenged, there's more opportunity for us.

And so we have a great cost of capital, so we can usually win the bids that we want to win. We've got an investment-grade credit, so landlords really like us because of that, so we will pay. And so I'm not concerned about us not having enough availability. And to your point, maybe there will be more in the future.

Thank you for that. Thank you.

This concludes our call. I want to remind you that we plan to release second quarter results on Friday, December 18th, before the market opens with a conference call to follow. Thank you for participating on today's call. Have a great day.