Darden 4Q16 Earnings Call Notes

Gene Lee

Outperformed peers

“Thank you, Kevin, and good morning everyone. Thanks for joining us. We had a strong quarter with each of our brands, significantly outperforming the industry benchmarks as we continue to focus on improving our execution. Same-restaurant sales grew 2.6% with positive same-restaurant sales in each of our brands. It was a volatile quarter as a result of multiple holiday and calendar shifts, including Easter, Memorial Day and spring break vacations, which we believe negatively impacted comps across the industry.”

The labor market is tight

“I’ll close by saying, and maybe preempt some other questions on labor, is that labor market is tight and it continues to be tight in specific markets, which is driving a little bit more inflation. But as I’ve said many times on this call, I prefer to operate in an environment where labor is tight. I think that will lead to demand into the future.”

Wage inflation is 2.5%-3.5%

“We’re seeing 2.5% to 3.5% wage inflation depending on where we are, in which brand and which part of the country. We’ve not seen a major tick-up in any of our turnover. Actually, our turnover remained strong. We believe in our employment proposition.”

Guests continue to gravitate towards value

“I think the way I would talk about consumer behavior is that guest continues to look for value, and affordability is only one component of that value but it’s not really enough to drive sustainable traffic growth. ”

I think we’re executing better

“I think there’s a few. First, I want to start with, I think we are executing better and I know sometimes we want to look for some other things but I want to pivot back to I think Dave George and Danielle Kirgan, the team at Olive Garden have just done a great job improving the day to day executions.”

Investing in guest experience is yielding pricing power

“There is a lot of talk about how promotional the environment is right now, but the facts are the industry still charging the guest 2 plus percent more than they did last year for the experience, and we believe that 2017 with what we know right now is the year to invest, continue to invest back into the guest experience to continue to grow market share. ”

I don’t want to comment on June

“I really don’t want to comment on June. You guys have access to different benchmarks. At this point I want to talk about fourth quarter and fiscal 2016 and we’re not going to talk about what’s happening in the industry in June.”

To GO is a trend that could benefit the whole industry

“I do think there’s an opportunity for everybody in the industry to capture this. Where we believe that Olive Garden is better situated is the kind of food that we serve. And so, if you are Bar & Grill, it’s not like you can put 20 hamburgers in a container and send the rolls home and have them put everything together and still have a quality product, but we can send at home pans of lasagne, pans of chicken parmesan. I think the style of food that we serve really lends itself to this trend that’s taking place. And so I think at Olive Garden we are better situated.”