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

Sep 19, 2019 • 08:30 am ET


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


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Gene Lee

almost 50% and represented more than one-third of total To Go sales. Additionally, they have now completed a dedicated to go area more than half of their restaurants. These actions led to continued improvement in guest satisfaction scores for order accuracy and timeliness and helped to drive to go sales growth nearly 12%.

Finally, LongHorn's industry-leading retention rates continue to even get better despite the tight labor market. Team member turnover during the quarter was 68% compared to approximately 120% for casual dining and management turnover during the quarter was 13% compared to approximately 36% for casual dining. We know that engaged team members provide better guest experiences and the LongHorn team's ongoing focus on retention and culture building is a key driver of the strong business performance.

Cheddar's Scratch Kitchen total sales decreased 2%, driven by same-restaurant sales decline of 5.4%, and partially offset by sales growth from new restaurants of 3.4%. The trend change was driven by reduced marketing efforts and overall industry softness in the quarter. In addition, the same-restaurant sales decline continued to be more pronounced in the former franchise locations. These restaurants experienced significant disruption during the quarter as they were the last restaurants to complete the kitchen transformation project.

While it's disappointing to see the sales trend decline, the Cheddar's team made significant progress against their priorities during the quarter. At the beginning of the new fiscal year, they established three new strategic priorities; create a people focused results-oriented culture, reduced friction in the guest experience, and build a brand people talk about with the goal of building on the progress that made last year repairing fundamental elements of the business and improving the sales trajectory.

During the quarter, the Cheddar's team continue to see improvements in both the manager and team member turnover trends as they implemented initiatives that led to higher retention levels. Overall, staffing levels for both the manager and team members improved during the quarter. Because of the progress made this quarter in staffing and intention, the Cheddar's team was able to better execute operational improvements designed to enhance the guest experience.

For example, they implemented standard that significantly upgraded their abilities to successfully serve large parties. With these and other improvements, they saw a better guest experience results compared to last year across all key metrics. Near the end of the quarter, Cheddar's introduced the new menu with more price diversity within categories and they launched their Quick Pick Lunch Combos starting at $5.99. These combos are generating strong preference at lunch and have led to higher value and intend to return ratings compared to last year. I recognized there's still a lot of work to do, but the progress the Cheddar's team has made operationally and their improved HR metrics are encouraging. Now that they feel they're moving in the right direction from an operation and staffing perspective, they will begin to increase their working media spend.

Cheddar's has the highest guest frequency of any Darden brand and