Darden Restaurants, Inc. (NYSE:DRI) Q1 2020 Earnings Conference Call - Final Transcript

Sep 19, 2019 • 08:30 am ET

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Darden Restaurants, Inc. (NYSE:DRI) Q1 2020 Earnings Conference Call - Final Transcript

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Presentation
Executive
Rick Cardenas

below the range in our annual guidance. We still anticipate our effective tax rate to be between 10% and 11% for the fiscal year. Overall, I'm pleased with our performance this quarter and impressed with our strong EAT margin of 8.1%.

Turning to our segment performance. Olive Garden grew sales and profit in the quarter, driven by positive same-restaurant sales and net new restaurant growth. Segment profit margin increased 40 basis points, by leveraging the same-restaurant sales growth and managing cost-effectively. LongHorn also grew sales and profit in the quarter, driven by positive same-restaurant sales and net new restaurant growth.

Segment profit margin decreased slightly, due to elevated beef inflation and continued investments during the quarter. Fine Dining grew sales and profit in the quarter as well, driven by a positive same-restaurant sales and net new restaurant growth. Segment profit margin decreased because of higher pre-opening expense and inefficiencies related to three new restaurants. Sales for our other business segment grew 1.8%, driven by net new restaurants. Both segment profit dollars and margin decreased this quarter due to margin deleverage from negative same-restaurant sales growth in the quarter.

As you saw in the press release, we reiterated all aspects of our fiscal 2020 outlook. Looking ahead at our second quarter performance, there are two things I would like to address before we open up the call for questions. Both of which are contemplated in our annual guidance.

First, the timing of the Thanksgiving holiday this year, relative to last, is shifting from the second quarter, into the third quarter. Since we are closed in the majority of our restaurants on this day, this shift should positively impact Darden's second quarter same-restaurant sales, by approximately 80 to 100 basis points with a corresponding offset in the third quarter.

Second, given a prolonged media coverage and the storms duration, Hurricane Dorian had a meaningful impact on the first two weeks of our fiscal second quarter. We are currently estimating a drag of 20 to 30 basis points to same-restaurant sales in the second quarter.

And with that, we'll take your questions.