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

Sep 19, 2019 • 08:30 am ET

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

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Executive
Gene Lee

nearly 10%, outperforming the industry benchmark by 840 basis points.

Olive Garden's results were driven by the team's ongoing focus on flawless execution, everyday value and convenience. Guest satisfaction ratings remain impressive and catering delivery metrics reflect the highest intent to recommend within the brand giving us confidence that our teams are delivering great experiences inside and outside the four walls of our restaurant.

The Olive Garden team made a strategic decision to change the order of their first quarter promotions. This was necessary to separate their two strongest value promotions; Buy One Take One, and Never Ending Pasta Bowl to more evenly deliver the value messaging throughout the year. While this change along with associated media shifts and weakening industry trends resulted in lower traffic than last year, it was the right strategic decision for the long-term. Recognizing the strength of Buy One Take One promotion, Olive Garden added a $5 take-home entrees to the Everyday value lineup, which was supported with national advertising to drive awareness. It has been met with strong guest demand and it will be a catalyst to continue to grow the off-premise business.

Everyday value was also strengthened with the introduction of a new weekday lunch menu with 21 options under $10, including guest favorites like Chicken Parmigiana and items from the taste of the Mediterranean menu like Chicken Margarita. This initiative was supported by integrated marketing and resulted in stronger weekday lunch traffic and guest preference.

Finally, the Olive Garden team remains focused on their off-premise capabilities to meet their guests' needs for convenience. A key part of that focus has been optimizing the digital sales channel for both mobile and desktop. During the quarter, digital sales grew by more than 30% and represented approximately 40% of To Go sales. Overall, off-premise sales grew 12%, representing 14% of total sales. Olive Garden remains a truly iconic and broadly appealing brand and the team is doing an excellent job of focusing on their strategy in competing effectively.

LongHorn Steakhouse had a strong quarter as well. Total sales grew 4.6%, driven by 2% growth from new restaurants and same-restaurant sales growth of 2.6%, the 26th consecutive quarter same-restaurant sales growth. On a two-year basis, LongHorn grew total sales by 11%, outperforming the industry benchmark by 940 basis points. The LongHorn team remains focused on their long-term strategy of investing in the quality of guest experience, simplifying operations to drive execution, and leveraging their unique culture to increase team member engagement.

During the quarter, the LongHorn team ran two successful menu promotions; Grill Master favorite and fire crafted flavors, which was supported by their award-winning You Can't Fake Steak advertising campaign. They also supported these promotions by reinforcing their quality storage through multiple guest touch points. The team also continue to focus on ensuring To Go experience equals their in-restaurant experience for guests who choose this convenience. The team simplified the online ordering process, which significantly reduced the order time.

During the quarter, digital sales grew