Darden Restaurants, Inc. (NYSE:DRI) Q1 2024 Earnings Call Transcript - Page 10 of 19 - InvestingChannel

Darden Restaurants, Inc. (NYSE:DRI) Q1 2024 Earnings Call Transcript

Joshua Long: Thank you.

Operator: Thank you. Our next questions come from the line of Dennis Geiger with UBS. Please proceed with your questions.

Dennis Geiger: Great. Thanks, guys. Wondering if you could speak a bit more or a bit to the dining room traffic levels broadly across the portfolio or even an Olive Garden specifically. And sort of how you think about where those dine-in traffic levels are currently, where they can go relative to the to-go business? Have we normalized or is there still an opportunity to see more dine-in recovery gains on the traffic side at this point?

Raj Vennam: Yeah, Dennis. Our off-premise has gone quite a bit from where we were before COVID. So from a traffic perspective, yeah, we’re probably in that 80% range in terms of traffic relative to pre-COVID at our largest brand in Olive Garden. But from a sales perspective, we’re probably closer to where we were before COVID. Now with that said, but part of that is, as we talked about, we made a conscious decision to pull back a lot on promotional activity, couponing and marketing dollars that we spend at Olive Garden. So we’re a healthier business. And so we like where we are. From the — but also — it also gives us opportunity, right? There is capacity in the dining room, which provides us more opportunity, but we’re going to go at it in a way that’s durable.

That is actually not a one-time get people in the door, but we want to build it over time. That’s why we’re so focused on core menu, everyday value and executing at the highest levels we can so that we can slowly build back.

Dennis Geiger: Helpful, Raj. And then just one quick one, just on the quarter itself. Anything to notable to call out either traffic or on the mix side of things at Olive Garden or LongHorn?

Raj Vennam: Well, I would say, our traffic was actually a little bit better than we thought going into the quarter, but our mix was a little bit worse. So what we’re seeing is from a check perspective at Olive Garden and LongHorn, a little bit of pullback in alcohol sales and some entree mix — negative entree mix. But that’s really what I can share at this point.

Dennis Geiger: Great. Appreciate it, Raj. Thank you.

Operator: Thank you. Our next questions come from the line of Danilo Gargiulo with Bernstein. Please proceed with your questions.

Danilo Gargiulo: Good morning. Can you comment on the level of absolute pricing you’re facing versus your local peers? And why is a prudent strategy for Darden to be increasing prices above inflation. I know that you spoke several times about how you might deviate from pricing below inflation in specific period, but why now? Is it a prudent strategy?

Raj Vennam: So Danilo, let me start with saying where we are from a pricing standpoint. Our overall pricing in the quarter was about 6%, as we said. We expect the full year to be closer to mid-3%s maybe closer to 3% to 4%, 3.5% to 4%. That said, when you look at where we are related to pre-COVID, our pricing over that time frame is in that 17% to 18%, including this quarter that we just talked about is 18%. Where the peers are, on average are about 600 basis points to 700 basis points higher than us over that time frame, which means that we have created a gap. Now most of our pricing this quarter is a wrap from pricing actions we took last year. In fact, I think the impact from this year — the actions this year make up less than 10% of our total pricing.

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