Darden Restaurants Aktie

Hello, and welcome to the Darden Fiscal Year 2026 Third Quarter Earnings Call. [Operator Instructions] This conference is being recorded. If you have any objections, please disconnect at this time.

I will now turn the call over to Ms. Courtney Aquilla. Thank you. You may begin.

Thank you, Kevin. Good morning, everyone, and thank you for participating on today's call. Joining me are Rick Cardenas, Darden's President and CEO; and Raj Vennam, CFO.

As a reminder, comments made during this call will include forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. These statements are subject to risks and uncertainties that could cause actual results to differ materially from our expectations and projections. Those risks are described in the company's press release, which was distributed this morning and in its filings with the Securities and Exchange Commission.

A supplemental materials presentation containing information shared on today's call is available on the Financials tab in the Investors section of our website at darden.com. Today's discussion includes certain non-GAAP measurements, and reconciliations of these measurements are included in that presentation.

Looking ahead, we plan to release fiscal 2026 fourth quarter earnings on Thursday, June 25, before the market opens, followed by a conference call. During today's call, all references to industry results refer to the Black Box Intelligence casual dining benchmark excluding Darden.

During the fiscal third quarter, average same-restaurant sales for the industry decreased 1.2% and average same-restaurant guest counts decreased 3%. Additionally, median same-restaurant sales for the industry increased 0.6% and median same-restaurant guest counts decreased 2.9%.

This morning, rick will share some brief remarks on the quarter.and Raj will provide details on our third quarter financial performance and share our updated fiscal 2026 financial outlook.

Now I'll turn the call over to Rick.

Thank you, Courtney. Good morning, everyone. We had a very strong quarter. We generated $3.3 billion of total sales, 5.9% higher than last year, driven by same-restaurant sales growth of 4.2%. We've been consistently outperforming industry same-restaurant sales, and this quarter our gap widened as each of our 4 largest brands exceeded the industry by more than 400 basis points.

All of our segments delivered positive same-restaurant sales as our restaurant teams continue to be brilliant with the basics, once again, leading to impressive guest satisfaction scores. Our restaurant team's ability to consistently deliver exceptional guest experiences is enabled by historically high team member and manager retention levels that we are seeing across our businesses.

We began the quarter with very strong holiday sales and several of our brands generated record Valentine's Day sales, reinforcing that guests choose the brands they trust for these special occasions. We also opened 6 new restaurants during the quarter and we remain confident in our ability to deliver our planned openings for the fiscal year.

Olive Garden delivered positive same-restaurant sales of 3.2% for the quarter driven by strong operational execution even with 3 fewer weeks of price pointed promotions than last year. The restaurant teams are focused on ensuring every guest is offered a free refill on breadsticks and soup or salad. This led to new all-time high guest satisfaction score for service and matched their all-time high for overall guest satisfaction.

In January, olive Garden completed the rollout of the lighter portion section of their menu, adding 7 more dishes under $15. This platform provides our guests with more choice by offering additional smaller portions of popular dishes at a lower price and is offered in addition to the Olive Garden's regular portion sizes. Since these are existing menu items, there is minimal operational complexity and the restaurant teams can execute at a high level. The lighter portion section of the menu is clearly resonating with our guests and our restaurant teams.

In February, Fan Favorites returned with Four-Cheese Manicotti for a limited time starting at $12.99. Olive Garden also reintroduced 2 past favorites, Ravioli di Portobello and Braised Beef Tortelloni, meeting strong guest affinity for familiar craveable dishes. Building on last year's successful introduction, olive Garden recently launched Buy One, Take One and is extending the offer for 1 additional week versus last year. With the same starting at price point of $14.99, guests can choose 1 entree for their dine-in experience and then take a second entree home.

To give guests even more reasons to enjoy it, this year's offer features a new Rigatoni alla Vodka entree for a limited time. Olive Garden is supporting Buy One, Take One with increased media.

At LongHorn Steakhouse, strict adherence to their strategy rooted in quality, simplicity and culture continues to drive their momentum as they delivered same-restaurant sales growth of 7.2%. The LongHorn team is deeply committed to ensuring every item they serve meets their high-quality standards. Already this year, they have recertified every manager on their culinary standards. And during the quarter, their directors of operations completed hands-on culinary training in order to expertly assess and coach the behaviors that drive consistent execution.

Longhorn's people bring the brand to life in their restaurants and their culture remains a clear differentiator in earning strong team member loyalty, which in turn helps drive guest loyalty. During the quarter, LongHorn was recognized as one of the best places to work by Glassdoor. This award is particularly meaningful as winners are determined solely based on the feedback provided by team members.

Longhorn also celebrated 5 new Grill Master Legends during the quarter. This program is a great example of the intersection of quality and culture, celebrating team members who have each grilled more than 1 million steaks over the course of their career, a milestone that typically takes more than 20 years to reach.

Same-restaurant sales for the Fine Dining segment grew 2.1% for the quarter. All 3 brands in this segment delivered positive same-restaurant sales driven by strong private dining sales growth at The Capital Grille NAVs and the continued success of the 3-course fixed price menu at Ruth's Chris Steak House. Within our Other Business segment, same-restaurant sales grew 3.9% during the quarter driven by very strong performance at Yard House and positive same-restaurant sales at Cheddar's Scratch Kitchen and Seasons 52.

The Yard House team has done a great job of leveraging their competitive advantages of a socially energized bar and distinctive culinary offerings with broad appeal to drive strong demand for Yard House as a social gathering space. During the quarter, more than half of their restaurants set new daily sales records on Valentine's Day. At Cheddar's, the team remains focused on strengthening their competitive advantages of wow price and speed. During the quarter, they maintained their #1 ranking for affordability among major casual dining brands within Technomic's industry tracking tool.

I am proud of our performance this quarter and confident in our ability to build on our sales momentum. We remain focused on executing our proven strategy, enabling us to grow sales, increase market share and make meaningful investments in our business while returning capital to shareholders.

We also continue to work in our pursuit of our shared purpose: to nourish and delight everyone we serve. One of the ways we do this for our team members and their families is through our Next Course Scholarship program. Next month, the Darden Foundation will award more than 90 postsecondary education scholarships worth $3,000 each to the children of Darden members. This is the fourth year of the program, and over that time, we have awarded more than $1 million worth of scholarships, helping them reach their educational goals.

Finally, I want to thank our team members for their continued hard work and dedication to creating memorable experiences for our guests every day. On behalf of our leadership team and the Board of Directors, thank you for everything you do.

Now I'll turn it over to Raj.

Thank you, Rick, and good morning, everyone. As Rick mentioned, in the third quarter, we generated $3.3 billion of total sales, 5.9% higher than last year driven by same-restaurant sales growth of 4.2% and the addition of 31 net new restaurants. Our same-restaurant sales exceeded the industry benchmark by 540 basis points during the quarter. Our sales momentum was strong throughout the quarter as we further expanded our positive gap to the industry.

Winter weather negatively impacted same-restaurant sales by approximately 100 basis points for the quarter with more than 40% of our restaurants having to close temporarily in January during winter storm [ Thorne ]. Same-restaurant sales adjusted for weather were greater than 5%, a strong performance in what is traditionally a high-volume order. Overall, our teams did a great job managing the business through the volatility created by weather.

Third quarter earnings were in line with our expectations, delivering mid-single-digit earnings per share growth. Adjusted diluted net earnings per share from continuing operations of $2.95 were 5.4% higher than last year. We generated $579 million of adjusted EBITDA and returned $300 million to our shareholders this quarter by paying $173 million in dividends and repurchasing $127 million in shares.

Now looking at our adjusted margin analysis compared to last year. Food and beverage expenses were 50 basis points higher, primarily due to elevated beef cost driving total commodities inflation of approximately 5% for the quarter. Restaurant labor was 20 basis points lower driven by productivity improvement as pricing was in line with total labor inflation of 3.3%. Marketing expenses were 10 basis points higher, consistent with our expectations due to incremental marketing activity. Restaurant expenses were 10 basis points lower due to sales leverage.

This resulted in restaurant level EBITDA of 21%, 30 basis points lower than last year as our pricing was 40 basis points below inflation. Adjusted G&A expenses were flat to last year. Leverage from sales growth was offset by 20 basis points of unfavorable mark-to-market expenses on our deferred compensation. Due to the way we hedge mark-to-market expense, this unfavorability is fully offset in taxes. As a result, our adjusted effective tax rate of 12.1% was 130 basis points lower than last year. We generated $341 million in adjusted earnings from continuing operations, which was 10.2% of sales.

Looking at our segments. All segments grew sales and segment profit dollars for the quarter driven by positive same-restaurant sales. As Rick mentioned, we continue to make meaningful investments in the business, such as the lighter portion section of the Olive Garden menu. This, along with our measured approach in reacting to elevated beef costs, resulted in headwind to segment profit margin for the quarter relative to last year.

Total sales for Olive Garden increased by 4.7% driven by strong same-restaurant sales growth as well as the addition of 17 net new restaurants. The sales momentum continued from prior quarters with same-restaurant sales that outperformed the industry benchmark by 440 basis points. Olive Garden delivered a strong segment profit margin of 23% for the quarter, which was only 10 basis points below last year. This includes approximately 40 basis points of margin investment related to the addition of the lighter portion section of the menu and the impact of delivery fees.

At LongHorn, total sales increased 11.2% driven by same-restaurant sales growth of 7.2% and the addition of 22 net new restaurants. The sustained sales and traffic outperformance resulted in same-restaurant sales exceeding the industry benchmark by 840 basis points and same-restaurant traffic exceeding by 640 basis points. The LongHorn team remains focused on their strategy driving strong results, delivering segment profit margin of 18.6% despite elevated beef costs.

Total sales at Fine Dining segment increased 4.3% driven by positive same-restaurant sales of 2.1% and the addition of 2 net new restaurants. The segment profit margin of 22% was 50 basis points lower than last year. The Other Business segment sales increased 3.2% with positive same-restaurant sales of 3.9%, partially offset by the permanent closure of Bahama Breeze restaurants. Segment profit margin of 15.6% was flat to last year.

Turning to our financial outlook for fiscal 2026. We've updated our guidance to reflect year-to-date results and expectations for the fourth quarter. We now expect total sales growth for the year of approximately 9.5%, same-restaurant sales growth of approximately 4.5%, approximately 70 new restaurant openings, commodities inflation of approximately 4%, an effective tax rate of approximately 12.5% and adjusted diluted net earnings per share of $10.57 to $10.67, including approximately $0.25 related to the additional 53rd week.

For the fourth quarter specifically, our annual outlook implies total sales growth of 13% to 14.5%, which includes the extra fiscal week. Same restaurant sales growth of 3.5% to 5% incorporates the strong trends we have seen through the first 3 weeks of March. We expect adjusted diluted net earnings per share between $3.59 and $3.69.

As previously announced, we've completed the exploration of strategic alternatives for the Bahama Breeze brand and determined that 14 locations will permanently close and the remaining 14 will be converted to other Darden brands over the next 12 to 18 months. We believe the commercial locations are great sites that will benefit several of the brands in our portfolio.

Our team members remain a priority throughout this process. A majority of team members, including more than 70% of managers who are impacted by the permanent closures, have already been placed in new roles within the Darden portfolio. Additionally, we intend to keep the restaurant teams from the conversion locations with the new brand or other Darden brands. We do not expect these actions to have a material impact on our financial results.

Now looking forward to fiscal 2027. I would like to provide our thoughts on a few items. First, we expect to open between 75 and 80 new restaurants in addition to converting 14 Bahama Breeze locations to other Darden brands. Next, we expect to spend approximately $850 million of capital on the following: approximately $475 million for new restaurants, approximately $25 million for the 14 Bahama Breeze conversions and approximately $350 million related to ongoing restaurant maintenance, refresh and technology. Finally, we anticipate an effective tax rate of approximately 13.5% for fiscal 2027 and total interest expense of approximately $200 million.

In closing, I want to commend our teams for their outstanding efforts in serving our guests. Their dedication is reflected in the strong financial results we delivered and our continued outperformance to the industry. We remain confident in our ability to grow sales, manage costs and deliver value to our guests and shareholders.

Now we'll take your questions.

[Operator Instructions] Our first question today is coming from Brian Bittner from Oppenheimer.

Just as it relates to your same-store sales guidance, the implied outlook for the fourth quarter is that 3.5% to 5% range, which is very impressive. And that's happening despite much tougher comparisons, I think, of nearly 400 basis points in the fourth quarter. I think investors in general have been pretty worried about this multi-quarter stretch of tougher comparisons upcoming. So can you help us understand what do you believe is driving the ability to lap these, so far at least with such ease, particularly at Olive Garden?

Brian, let me start. So as we look at guidance for next year, I think people are looking at this quarter-to-quarter tougher comparisons towards this last year. But the way we think about it is what are the drivers of the business and how do we continue to build growth or gain growth over time through the initiatives we have? And I think we've shown that over time, we achieve what we commit to. We've been able to show that we can grow.

And so as we look at specifically with respect to Olive Garden last year, you said it's a tougher compare. But if you think about the drivers of growth last year were primarily true, too. One was Buy One, Take One coming and returning for the first time since COVID and second was the third-party delivery. Well, guess what? Those 2 are still in place today. And we are extending our Buy One, Take One by an additional week and, Rick mentioned, we're also supporting that with additional media.

So we build a plan and we build an estimate based on the initiatives we have in place, taking into consideration the macro factors. And I think we feel good about what we're guiding here. And I don't know, Rick, if you want to...

And just my quick follow-up is just related to the relationship of pricing and inflation. Can you talk about that as we're moving forward into fourth quarter and then into 2027? I know you're not giving exact guidance obviously for next year yet. But you had some pretty meaningful gaps in that dynamic throughout this year, which seem to be narrowing now. So maybe you can just put some color on that for us.

Yes, Brian. Look, I think we've had a pretty big underpricing of inflation through the first 3 quarters. As we get to Q4, we expect our pricing to catch up to inflation. We expect overall inflation to be in the mid-3s and our pricing to be in that mid-3s. And I think if you look at our implied guide for Q4, you can see the power of that, right? When we start coming close to pricing close to inflation, you see the margins grow meaningfully. And that's what you're seeing in the implied guidance for the fourth quarter.

We'll share more about next year. But I think the way to think about it is we've given ourselves a lot of flexibility by underpricing inflation over several years. And we feel like we have -- across the industry when you look at, we have more power than anybody else in terms of being able to price to cover inflation. It's more of how we choose to run the business. And we've always been focused on long term. And I think to the extent we're achieving our long-term framework of 10% to 15% TSR by not having to price as much, then we do that.

But I think you'll hear more in the June call. But our framework costs were 10% to 15%, and that's what we aim to deliver.

Our next question is coming from David Palmer from Evercore ISI.

Quick question and a follow-up. How would you generally explain the same-store sales growth gap between LongHorn and Olive Garden? Is that really simply about the energy around protein and perhaps a little bit of the underpricing of beef costs lately? Or do you think there's something else that would explain the gap that we see between those 2 brands in terms of comps?

Yes, David, I'll start by saying Longhorn has been on a very long path to continue to improve their business to make sure that the guests get a great quality product every day, and you heard that in some of the prepared remarks. They've also significantly underpriced beef costs in the grocery store over time. So the guests are getting an amazing value when they go to Longhorn to eat. Going back to the quality, they've done an amazing job in cooking their steaks. Guests want to come to a restaurant. And if you can't cook a great steak, why do you open?

And LongHorn cooks a great steak well, very close to 100% of the time. And when they don't, they take care of the guest. So the gap between Olive Garden and LongHorn is it fluctuates. And this quarter, LongHorn, I think, had a little bit more pricing than Olive Garden did. They had a little bit more traffic growth than Olive Garden did. And I'm not sure they were impacted quite as much by the weather as Olive Garden.

But so as you think about all of those things, we don't worry about one brand outperforming another brand. We have a portfolio of great brands. And there's going to be quarters that one brand outperforms another one just like we generally outperform the industry. So we're very pleased with both of our brands, both Olive Garden and LongHorn and the performance they've had. But I think those can explain some of the big differences. And if Raj wants to add anything else.

No. The only thing I'll just add is, as Rick mentioned, we also manage the brands just like -- some of the things we do are depending on how we look at our performance across the portfolio. So there were 3 fewer weeks of price-pointed promotion at Olive Garden. And that's a decision we made because of how strong we felt the quarter was going to be. And that alone is probably about 100 basis points impact to Olive Garden's comps.

Great. That's helpful stuff. Do you see the gap between those 2 brands growing? Or I mean, you just called out something of a reason why it might narrow, but we see that the comparisons getting tougher for Olive Garden. So I know that there's going to be concern that, that growth gap will widen against the tougher comparisons. Do you see that gap widening or perhaps narrowing off of some of those artificial hurts that happened last quarter? And I'll pass it on.

Well, David, again, we're not as concerned with the gap widening or narrowing in our brands as long as the brands continue to grow. And the important gap widening for us is Olive Garden's gap to the industry. And Olive Garden's gap to the industry widened in our third quarter. LongHorn's gap widened even more. In the long run, though, law of large numbers, Olive Garden and LongHorn will probably converge over time. I can't say it's going to happen in Q4. I can't say it's going to happen next year.

But over time, as long as we're not doing anything significantly different in promotional cadence or other things, you would expect those gaps to narrow a little bit. But maybe LongHorn will be above Olive Garden for a while. We just can't tell you exactly when that will converge.

Next question today is coming from Lauren Silberman from Deutsche Bank.

Congrats on the quarter. I'm going to start with just the increasing gas prices. It sounds like you really haven't seen much of an impact given the quarter-to-date strength. But any thoughts on whether there could be a delayed reaction from consumers? And any color on what you've seen historically with high gas prices and how that's impacted different brands?

Yes, Lauren, as quite a few of you have written, the data doesn't show a really strong correlation between gas prices and restaurant spending. I would say historically, higher gas prices had more of an impact on durable goods and less of an impact on services. And I've been through a number of these cycles. I don't know how many. When there is a sudden and significant price increase in gas, there can be a brief pullback. But that's usually in a few weeks.

And if you recall, the sudden increase in gas prices were a couple of weeks ago, and we still had a pretty darn good quarter. The biggest driver we see in traffic for restaurants is GDP. So if gas prices remain high for a long period of time and make a big effect in GDP, there may be some softness. But in general, we're not too worried about gas prices and we'll be able to react however we need to if they stay really high for a while.

Great. And just a follow-up on the Q4 guide, the 3.5% to 5%. It's a fairly wide range. Any color on what you're embedding through the rest of the quarter? I know there's a lot of moving pieces. Just trying to understand high end versus low end versus current trends.

Yes. Lauren, I think it's just, look, what we're trying to embed is just there's still some uncertainty and the range is there to kind of capture that level of uncertainty. But we feel like we're in a good place quarter-to-date and that's taken into consideration. But we're also taking into consideration just the environment out there and just trying to make sure that we don't overpromise. So we're just trying to make sure that we're being thoughtful and taking into consideration all the factors that are out there.

Next question is coming from Christine Cho from Goldman Sachs.

I would like to discuss beef prices particularly as we look ahead to FY '27. I think last call, you've mentioned you're starting to see some green shoots, but seems spot prices are still trending upwards and news of the strike also seems to be an incremental headwind. Could you kind of share your directional thoughts on these and your locked in rates for the next few quarters ahead?

Christine, so let me start by saying, look, as far as fiscal 2027, we want to wait until June to provide more specifics. But I can tell you, for Q4, we have 85% fixed price coverage. So we have actually -- this is really pretty strong coverage relative to recent past. We haven't been able to cover that much in the last several years. So that's a good thing.

The other thing is we are starting to see some willingness from suppliers to contract further. So we have started to lock in some things for fiscal '27 probably well ahead of where we would have been a year ago or the last few years with respect to the next year. But I want to wait until June to really share more specifics.

Now the other thing around the price, look, there are a lot of dynamics in terms of happening on the supply side. And so we're not expecting things to get significantly better on the supply side. But look, there's still double-digit demand destruction that we're seeing even in February in retail, right? So I think, ultimately, where it lands will depend on what happens with demand as prices go up.

I'd like to also circle back on the lighter portion menu rollout at Olive Garden. Any color on how the incident rates trended since the launch? And is the mix impact kind of tracking in line with your expectations? Also any new learnings on the guests that are choosing these items? Does the uptick appear primarily value-driven or more kind of health or GLP-1 motivated?

Christine, I would say we finished the launch in mid-January of this year with the rest of the divisions going live. And those divisions are seeing kind of the same trends as the divisions that we launched earlier. The good news is we're seeing increased frequency in the guests that are ordering these lighter portions. We're seeing huge value scores and huge scores for portion size. So it's a combination of many things.

We do know that the Olive Garden menu has abundant portions, and abundant means different things to different people. And so when you get as much soup or salad as you want and as many breadsticks as you want, a lighter portion is maybe all that you're looking for, whether it's GLP-1 related or not. I don't think it's just GLP-1s. I think a lot of people want smaller portions if you get all these other things. And as I said, portion size ratings have gone up significantly and value ratings have gone up significantly for those items.

And we have seen increased frequency in the guests that are ordering it. It's a significant increase in frequency. Last, I'll say, is a lot of the preference is happening at the weekend lunch when we don't have a lunch menu. So there's a good reason for this lighter portion menu. Finally, the mix impact is about what we thought it would be. And Raj mentioned what the margin impact of the mix was, but the mix impact is about where we thought when we first launched the menu.

Next question today is coming from Chris Carril from KeyBanc Capital Markets.

So how should we think about marketing expense now in the 4Q in the context of the updated guidance you provided this morning? And I presume you'll wait to provide any detail on marketing expense for fiscal '27 in June. But any thoughts on how you're thinking about marketing at a higher level here in a potentially more volatile macro backdrop would be helpful.

Yes, Chris, I think we've been very clear throughout the year that we expect marketing to be between 10 basis points as a percent of sales last year. And that's really how we're looking at it because one of the things we had this year that we mentioned on the call was we had an RFP for a media buy that translated into meaningful cost saves, actually north of 10 basis points as a percent of sales. So that's actually helping us increase marketing activity even in quarters. Where you don't see a growth as a percent of sales, we're actually buying more because we had those savings to help.

Okay. Got it. And then, I guess, maybe to give Olive Garden a little bit of a break here but maybe changing directions a little bit. Can you comment on the improvement that you saw in the Fine Dining segment? How are you thinking about the segment going forward? And how much of a benefit to the comp in the quarter was from the strong Valentine's Day that you mentioned?

Yes. Chris, as we mentioned, Fine Dining, all 3 Fine Dining brands were positive same-restaurant sales in the quarter. It wasn't just driven by Valentine's Day. I don't even think that would be meaningful, maybe tens of basis points for the whole quarter for Valentine's Day. We had a really good private dine, as we mentioned, Capital Grille and Eddie V's.

And I will say this 3-course price fixed menu for Ruth's Chris is really resonating. We ran it for, I think, 5 or 6 weeks this quarter, and it's resonating with guests. We're seeing guests that were lapsed to Ruth's Chris come back and we're seeing guests that have ordered that come back. So we think this is a good platform for them. And we're really pleased with the fact that all the brands in Fine Dining were positive this quarter. It's been a little bit of time since that's happened.

And we can't tell you what we think going forward. But everything we have is contemplated in our guide, and our guide is a pretty strong guide. So I would think that Fine Dining would be doing okay in the fourth quarter.

Our next question today is coming from Sara Senatore from Bank of America.

Quick housekeeping. I think I missed it. Can you run through the price and mix that were in the comp? And maybe give a little bit of color on, I think you mentioned, LongHorn have more price than Olive Garden, but just how the brands compared to the average?

Yes, Sara. So at the Darden level, our comps were 4.2%, our check growth was 3.5%, our pricing was basically 3.4%. So I think 10 basis points of positive mix. When you look at Olive Garden, their pricing was 2.8%, but they also had catering help. Catering grew by about 130 basis points, which we don't count it as traffic, but that's really for all practical purposes, that is increasing traffic.

So if you take that into consideration, their traffic was up basically 100 basis points. And then they had some investment, like we talked about the investment in lighter portions impacted the check by roughly 60 basis points. Uber fees helped a little bit with about 50. So I mean, the way we look at it is Olive Garden's comps, while the traffic we print might be negative 0.4%, when you add back the weather and the catering, that's basically a positive 2 comp on traffic.

And for LongHorn, the same-restaurant sales of 7.2% included traffic of 3.3% and the check growth of 3.9%, pricing was 4.4%. So they had a negative mix of 50 basis points.

Okay. That's very helpful. And then I guess just in terms of the decision to run fewer weeks of price point and promotions as you said, maybe 100 basis points, but then this quarter running an extra week of the Buy One, Take One and supporting it with more marketing. Presumably, all those things were planned well in advance.

But I just wanted to kind of confirm that because I wasn't sure if the decision to go from fewer weeks last quarter to 1 more week this quarter indicated something about kind of the promotional intensity or what the results were versus your expectation. Just trying to kind of reconcile those 2 decisions or maybe just tougher compares or something else entirely, but just curious about that.

Yes, Sara. I would say, as big as Olive Garden is, we can't move on a real big time here. We had planned both of those things quite a while ago. So we had planned running fewer price pointed weeks in Q3 and planned on adding a week of Buy One, Take One in Q4 well early in this fiscal year, maybe even before the fiscal year started. And the reason that we moved 3 weeks out, we eliminated a promotion in the third quarter because we believed that weather would get back to a normal 5-year average and so we'd have some weather tailwinds for us this quarter.

Well, there were headwinds. So that was just something that happened. And Raj kind of mentioned what would have happened if there wasn't that kind of weather headwind. We would have had a 2 comp in traffic. So we planned these long time ahead of time. This is not a reaction to promotional intensity anywhere else. If you recall, when we added Never Ending Pasta Bowl, we came back, I think, it was 7 weeks, maybe 8 weeks. And then within a year or 2, it was up to 12.

So that was a decision and a planned decision we made. I can't tell you that Buy One, Take one will get to 12 weeks. But I can tell you that when we launched Buy One, Take One last year, we never intended it to be as short as it was.

Next question today is coming from Jon Tower from Citi.

Maybe starting, could you dig into the delivery at Olive Garden during the quarter? I think you've been running about 4% mix last period. Did much change? And going forward, how are you thinking about pulsing it as you move into the fourth quarter? Obviously, there's a different macro dynamic happening right now and at a higher price -- well, not high. There's the delivery fees on top of it. So I'm just curious if it's going to be a brighter spotlight on that relative to previous quarters.

Yes, Jon, a couple of things. Uber was 4.7% of sales for Q3. Now we did do CS support. So when we took that 4 week promotion out, so 3 weeks less price pointed when we took that one out in January, we replaced it with just a delivery message that had no offer. It was just, hey, olive Garden delivers. And then in February, we added an offer to the Olive Garden delivery to free delivery like we did last year. And so last year in Q3, we were roughly 0.8 in delivery. Last year in Q4, we're 3.5%.

So you saw that big jump when we started marketing delivery in Q4. So I would say that in Q4 this year, I'm not going to tell you if we're going to do marketing for delivery. But if we do, it would be a secondary message. And I would think that the jump in delivery from Q3 this year to Q3 last year won't be the same in Q4 because that's when we had the big spike. But we still believe that delivery should be a little bit higher than last year.

Okay. Great. And maybe, obviously, it sounds like the lighter fare or lighter portion menu at Olive Garden, it sounds like it's a pretty good success early on. I'm just curious, as you're looking across the rest of your brands, I know each one is a little bit different, but is that an opportunity to bring to other brands within the portfolio? Or is the guest just a little bit different?

Yes. We've said this before. I think LongHorn has done some of this already. LongHorn did this at lunch years ago and lunch is growing pretty fast. And with a good lunch platform, smaller items, sandwiches, et cetera, that's grown over time. And they already have different sizes of some steaks. So if you think about their filet, they've got 2 different sizes of filet. They got sirloins. They've got 2 different kind of ribeyes, one's bone-in and one's not. They've got different sizes for chicken, different sets for salmon.

So they kind of have a lot of that already. But they are looking at other things that they can do to bring portions that might not be as big for people that don't want such a big portion. The same thing with Ruth's Chris. If you think about the price fixed menu at Ruth's Chris, it's one of their smaller filets, et cetera. So we have opportunities in all of our brands to look at something like this. It might not be as broad as we do at Olive Garden because most of these menus in the other brands have kind of variety of size.

Next question today is coming from Brian Harbour from Morgan Stanley.

I guess maybe just the income cohort question. Anything that you'd call out about some income bands that may have shifted in the quarter? And also in Fine Dining, is there any group that you think has kind of come back more?

Brian, so from an income perspective, what we're seeing is there is growth across all households with income above $50,000. And the biggest growth is coming from households over $150,000. That's just generally what we're seeing across all brands. As we look at Fine Dining, we're seeing decent growth as we start to go above $150,000 as well, but $200,000 plus is where we're seeing the most growth. And that's where we see even bigger disparity between the below $75,000, below $100,000 and then the above $150,000.

Okay. Got it. Raj, just directionally, so it's still your expectation, I think that food cost pressure kind of continues to diminish a bit into the fourth quarter. I guess, also, is there any reason that with the sales you're doing, there wouldn't be a little bit more leverage on the other restaurant expenses at this point?

So I think we would expect to get -- I mean, look, let me step back. I hate for us to talk about a specific line item on the P&L because there are multiple variables that can play a role in where we land for the end of the quarter. But as we look at the business, the guidance that we provided for the fourth quarter implies margin growth. And we're going to get it from, at this point, probably pretty much every line on the P&L. But it doesn't have to end up that they way. We're okay. Ultimately, we look at what's the bottom line, right? I think we're going to show good margin growth.

Our next question is coming from Jeffrey Bernstein from Barclays.

Great. First question is just on the fiscal '26 guidance. I know there's only 1 quarter remaining, but you raised the total revenue growth guidance, you raised the comp and the unit growth guidance. But ex the incremental $0.05, I guess, from the 53rd week, it seems like the implied fourth quarter EPS guidance is still somewhat in line with The Street. I'm just wondering how you think about maybe what's preventing the greater EPS upside, especially as total inflation guidance seems to be unchanged? Just trying to get a sense for how you think about that going from the top line to the bottom line as we think about at least the upcoming quarter. .

Jeff, look, I don't want to explain the Street's model, right? I'm focused on what we built as a plan. And if you look at our initial guidance at the beginning of the year, we said our guidance was $10.50 to $10.70. And as we got through the year, our inflation was a lot higher than we thought and we didn't price for all of it. But we had better comps than we thought in the plan. And so we took our comps to reflect that. But ultimately, we're still delivering on the higher end. If you take the midpoint of it, it is higher than the midpoint of what we had initially guided.

The delta on the 53rd week is just a function of we had approximately $0.20 and now we're seeing approximately $0.25. If you think about the how rounding works, a couple of pennies could make it approximately $0.20 versus approximately $0.25. So don't read this as a $0.05 delta. It could be 1 to 2 because of how it rounds. And that's why we said approximately. So I'll leave it at that.

Got it. So it sounds like greater comp, greater inflation, net-net, still a strong earnings year. And then as I think about that going into next year, I appreciate the color on the unit growth and the CapEx spend. But maybe more broadly speaking, and I know it's just directionally at this point, and maybe you mentioned it earlier, is it fair to assume you think fiscal '27 growth in line with your long-term algo? It seems like you're entering fiscal '27 with comps above the 1.5% to 3.5% long-term target. Maybe you could share the current annual EPS sensitivity to an incremental point of comp. Any color at least directionally on how we should think about fiscal '27 versus the long term would be great. .

Well, Jeff, I would say we'll share more about fiscal '27 later, but I think what we're targeting is trying to stay in that frame or at least achieve what we said as part of the framework, so 1.5% to 3.5% for comps and 3% to 4% for a new restaurant growth. And as you look at what were the initial indication for fiscal '27, excluding the Bahama Breeze impact, we would expect it to be in that range of 3% to 4% for new unit growth contribution. And then part of the that framework is keep margin flat to positive 20 basis points to get us to that EPS growth plus dividend yield of 10% to 15%. And I think that's kind of what we would plan for. Any given year it might be a little bit different, but that's what we target long term. At this point, I don't see a reason why we wouldn't be there, but who knows? We'll give you an update in June. .

Our next question today is coming from Jim Salera from Stephens.

Raj, earlier, you had talked about double-digit demand destruction at retail for beef. And I can't help but draw a line between the strong results at LongHorn and then that commentary. So are you able to give us any context? Are you seeing consumers who forego buying beef at the grocery store then showing up at LongHorn in a way that's actually a tailwind to your traffic at LongHorn because they're nervous about preparing it so they show up to have you prepare it for them instead?

Jim, this is Rick. In times of high prices in the grocery store, you generally see a little bit more consumer going to a restaurant to get their steak. When a consumer has to cook a very expensive steak at home and they mess it up, they still have to eat it. When a consumer goes to a restaurant and orders a steak and we mess it up, we eat it and they still eat a great steak. So I think that's part of the reason, but I can't tell you that we have data to say that consumer says, I saw this price in the grocery store, I decided not to do it. I'm going to go to LongHorn instead. I mean, we've got great data. We've got the best data and insights in the space. But we don't ask I guess that question so we don't know. .

And then maybe one follow-up question given the traffic outperformance for the Darden as a whole relative to the industry. How much of that is incremental frequency from existing guests who are just satisfied with the menu innovation and some of the portion size offerings versus you winning share from other peers within the group?

Yes. Look, we're getting from both. When we look at our frequency, we are seeing frequency increase across the portfolio from the guests. But we're also getting new guests. So it's a combination of that. The data that we look at probably shows that a little bit more from increased frequency, call it, 60-40, I guess, 65-35, in that range.

Our next question today is coming from Andrew Charles from TD Cowen.

Rick, catering Olive Garden continues to grow pretty nicely despite lapping several quarters since the large growth began. So what do you attribute that to?

Andrew, growth at Olive Garden is about execution. So I didn't hear the very first word. So I want to make sure I'm answering what growth you're talking about at Olive Garden.

It was catering.

Catering growth. Catering growth, it's a great deal at Olive Garden. And we do an amazing job at getting it to the guest at the exact time they want it, and we have a good digital platform to do it. So catering is a very strong support for us and it's probably one of the best values at Olive Garden. And then we have a delivery part of catering that we do our self-delivery. It's our highest-rated part of anything we do at Olive Garden. So what guests want for catering is they want to make sure they get the food that they ordered, they get it on time and it's a great value. And Olive Garden checks all 3 boxes every time.

Got you. And then, Raj, is it fair to assume that a good portion of the converted Bahama Breezes will be Olive Gardens just given similar square footage combined as well as Olive Garden is one of your highest ROIC brands for new stores?

Yes, Andrew, this is Rick. I wouldn't say it's fair to assume that most of the conversions will be Olive Garden. There's 14 conversions. Olive Garden is pretty much almost everywhere Bahama Breeze is. So I would say it's fair to assume that Olive Garden will have a couple maybe, but they won't have a lot of them.

Our next question is coming from David Tarantino from Baird.

First, a clarification on Raj's comments about next year and the total shareholder return being in line with your normal. Are you adjusting for the lapping of the 53rd week or maybe you don't need to adjust and still hit that target range? But I guess, could you clarify whether we should be making any adjustments to your comment?

Yes, David, I would say we always look at it on a 52-to-52 because that's the right comparison. But versus the 53rd, what is it going to look like, I mean, you'll find out in June. I mean, at this point, long term, it's really 52 to 52 is the right comparison.

Great. And I guess my real question, Raj, is about the commodity cost outlook. I appreciate you don't want to give specifics for next year. But just wondering directionally if the spike in oil prices, and hence, distribution costs is going to have any material impact on the outlook for commodity cost for you and for the industry for that matter and, I guess, you would probably have a competitive advantage with your supply chain. But just any thoughts on that topic would be helpful.

David, I don't want to speculate. But if you look at where we are expecting the inflation for commodities for this year to be, which is 4%, our thinking from where we're sitting now for next year directionally should be better than that even with some of the recent news. But we'll provide an update in June.

Our next question is coming from Danilo Gargiulo from Bernstein.

Rick, I was wondering if you can elaborate more on the turnover rate being particularly low. Is that a function of what you're doing, where you are in the market? Or is that something that you're seeing across the board for the industry? And was that the primary driver for the labor productivity improvement that you've seen this quarter? And if that's the case, for how long do you expect the low turnover to last?

Yes, Danilo, I would say our turnover, our retention has continued to outpace the industry. Ours is getting better, faster than the industry is. And I would attribute that to a great employment proposition that we provide. We give our team members opportunities to grow, and that gives them a chance to come into the industry and get life-changing manager jobs and above. And so almost all of our brands are at record turnover levels and the ones that aren't are pretty darn close. And the industry data is getting a little bit better.

So when we think about labor, low turnover helps labor costs because you've got more productive employees doing the job, you've got less need to hire and train. We do still train, but we train them, cross-train them, but we spend less money on new hire training. So that should help us. As long as we keep our turnovers moving in the right direction, then our labor productivity should get slightly better. We may invest some of that. As we mentioned, we always find ways to invest in the guests. And if we get some things that are much better than we would expect, we would probably give some of that back to the consumer in the form of either better service or better pricing or better deals.

And then from Raj's comments earlier, one could infer that maybe 2027 could be more elevated pricing versus 2026, a little bit above inflation perhaps. And historically with pricing above inflation, the guest count could be more reduced. And so I'm wondering what kind of initiative at a high level, do you think you could be deploying in 2027 to perhaps counterbalance this and still have a guest-driven growth for your brands?

Danilo, let me start and then maybe Rick can add to that. So I don't want to signal anything specific to '27 with respect to pricing versus inflation. What we're talking about is we've given ourselves a lot of room over the next -- essentially since COVID by underpricing the full-service CPI by almost 1,200 basis points, even grocery by 400 basis points. And so we feel like if we need to take price, we can take it and we can be smart about it without impacting the guests, part of the reason being cumulatively, we're in a much better place.

Our relative value position is very strong. So we don't necessarily think in the year -- if there is a year where we take a little bit more or actually in line with price, that all of a sudden, that becomes a headwind to guest count. That's not how we view it.

And Danilo, I would add to that, even if we price out inflation and we anticipate commodities being a little bit better over time, then it wouldn't be a huge price for next year if we do that. But I would also add that, again, we keep investing in our team, in our product, in what we serve to the guest. I would say that those investments build on themselves over time, and guests notice the value that they get. Most of our brands are at record high guest satisfaction, record high affordability, record high values for those brands.

So I would say that we got just continued operational execution. And as we've said, we'll continue to look at our media spend and become more effective with that media spend but still increase slightly, like we've said about 10 basis points or so. We'll probably do the same thing next year, could be even more so depending on how impactful that marketing spend is. So we should have some things that help counterbalance anything we do at price. But as Raj said, we don't think what we would do at price would be a tremendous drawdown to the guest count.

Our next question today is coming from Gregory Francfort from Guggenheim Partners.

Rick, this may be a little bit out of left field, but just I'm curious your thoughts on some of these AI tools that are coming on, how much you're using them at corporate, what that's unlocking for you from an analytics perspective. Just any thoughts on kind of what may be changing inside your business with what's going on?

Yes, Greg, not quite out of left field. But I'm going to start anything about AI to say that at the core, we are and we always will be a hospitality-driven company, which means you need people. So we're a people-focused business so we're going to need them. But our team is doing an incredible job every day. What we're using AI, machine learning for is to give our team member, our managers a much better forecast of their business so they can schedule better, plus we're using tools to that to make them write better schedules. They can order food better. Because the best thing you can do as a manager is to have a great forecast so you can staff your restaurant right and have the right amount of food.

That said, we're doing things here in the support center to improve on tasks that are repetitive, using AI to start projects faster to get things done faster. But we have yet to take any jobs out because of AI. We've got 200,000 employees in this company and only about 1,000 of them work here. The other 200,000 work in the restaurant. And I would say we're probably not going to lose any team members in the restaurant because of AI. We're going to make their jobs better. We're going to make the guest experience better. But I would say that ultimately, the approach for AI for us is about amplifying the expertise for our people, not replacing them, as I said. It helps us deliver on exceptional service, and that's what we'll keep doing.

And the last I'll say is we've got a great team in IT here, over 200 people strong. And they're using it to write code faster, to get a lot of savings in what they do so that we can have more tools for our teams at a faster pace. And even some things that we've been looking to do for years that we were struggling to get done, AI is getting it done a lot faster. So that's where you're going to see the benefit of AI. But you probably won't see it specifically because it's not going to be necessarily so guest forward.

Our next question is coming from Jeff Farmer from Gordon Haskett.

You guys mentioned that Uber was, I think, roughly 4.7% of mix at Olive Garden. But I am curious in terms of the concept's total off-premise mix, including to-go and catering.

Yes, Jeff, I think we were at 29%, and that's about 3 points higher than last year. I think last year was 26%. Recall, Q3 is typically high off-premise because of catering, we talked about earlier, and just generally a high off-premise quarter.

Okay. And then just same question from LongHorn off-premise mix?

I think LongHorn was 15% for the quarter, which was 1 point higher than last year, yes.

Next question is coming from Dennis Geiger from UBS.

Curious if any updated thoughts on tax rebate, stimulus benefits or kind of any latest expectation you have based on anything you've observed so far to date?

Yes, Dennis, it's still a little early. Most of the refunds are going to happen in basically March and April, but we did see some of the refunds coming in, in February. We know that per recipient, the tax refunds are higher. But I will say everything we know is contemplated our guidance. The last thing I'll say is we do know that when checks drop, we see the impact. And we had some of that impact in February, but it was pretty small amounts in February.

Great. Rick, and then just quick on the operational stuff and that speed of service initiative, which I know is longer term in nature. I feel like I've observed it in the Olive Garden. Just curious if any update to share there and where the guest and the employee feedback is, if anything to share?

Well, I'm glad you've experienced it at the Olive Garden. They really started to make a good push on it in this year's Q3. And they're doing some things in different restaurants to test initiatives to get the roadblocks out of the way for speed. And I would say that at Olive Garden, there's 50,000 servers. And so how do you convince 50,000 people that they have to change the way they do things and then help give them the tools to do that. And they don't have to be technology tools.

It's how do you get the soups out and breadsticks out faster, so the first course out faster? How do you ensure that you give the guest the speed and the pace that they want? Olive Garden is making some moves, and I think those moves are going to get even bigger in the upcoming quarters. And our other brands are following suit. Olive Garden is moving a little bit earlier, but the other brands are going to get there. And our goal is to get this experience in the time that the guests believe is ideal. And right now, the ideal time is a little bit faster than what all of casual dining is doing and it's a little bit faster than where we are.

So we're going to get to the ideal time. It's just going to take a while. And the guest impact of that will be seen 2 different ways. In the short term, it's going to be better throughput on the high-volume tough days. In the long term, it's going to be guests coming for us for occasions they weren't coming before. And that second one is long term and it's going to take a while. It's going to take time for the guests to realize that, hey, I've got 45 minutes to go to lunch in total, and I need to get in and other in 30. Can I do it? If they don't believe they can do it today, I want them to believe they can do it in a few years. And when they can, they're going to come back a lot more often. And I just used lunch as an example. It's not just about lunch.

Our next question is coming from Andrew Strelzik from BMO Capital Markets.

Apologies if I missed this, but you lowered the commodity inflation guidance from 4% to 5% down to 4%. What was the driver of that within the basket? And was that more 3Q related or 4Q related? And then I guess related to that, keeping the overall inflation of 3.5%, was there anything as an offset to the lower commodity inflation? Or is that just kind of rounding?

Yes, Andrew, it's really rounding because we see approximately 3.5%. But when you look at commodity specifically, there was some favorability. Most of the favorability that we have versus the prior estimate is in beef. I think we expected Q4 to be more in the double-digit range and it ended up being high single digits. And we had some offset on the favorable dairy that's helping partially offset. So I would say, those are the 2 drivers in terms of the change. Again, we're talking about tens of basis points of change because we were saying, I think, earlier 4% to 4.5% and now approximately 4% for the year. .

Got it. Okay. And then with the step-up in new units for next year, I know it's only a handful incrementally, but should we assume that most of those Olive Garden and LongHorn? Or is that a little more broad-based? Anything to call out there?

Yes, it's a little bit more. As we look at 75 to 80, I'd say 50 to 55 is going to come from those 2 brands, but then probably mid-single digits for the rest of the brands. So as you look at, I say, Yard House, Cheddar's and Chuy's will probably all have mid-single-digit unit growth, number of units. And then the rest will come from Fine Dining.

Yes, Andrew, and I would add that over the long term, you should see over time, not right away, you should see more of our growth as a percent growth coming from the smaller brands, so you think about Chuy's, Yard House, think about Cheddar's, they've got to be at the higher end of our framework or more because Olive Garden is going to be within that framework somewhere, probably at the lower end. So in order for us to get to that framework and to get a more balanced portfolio, those other brands are going to grow faster over the long term is what we said. So in the first few years in that, olive Garden is going to drive some of the growth.

Our next question today is coming from John Ivankoe from JPMorgan.

The question is on operations. And obviously, perfect is it possible in the real world. So I wanted to see the percentage of restaurants that you thought were operationally excellent today. And I think the converse of that is percentage of restaurants that you may have an opportunity to significantly improve your operational improvement, especially as the labor market might be more willing for you to do so.

John, I can't give you an exact number here. But let's just use the 80/20 rule. I would say 80% of the restaurants are operating great and maybe 20% have some room to improve. It's probably less than that. I will say that our dissatisfaction, which we measure guest satisfaction, but our dissatisfaction at our brands are pretty much at all-time lows. And I'm talking about low single-digit dissat in our big brands. And that is pretty amazing when you consider where dissatisfaction rates can be in casual dining and any dining or any...

Yes. definitely. And yes, listen, some people aren't going to be happy with Perfect. So low single digits is very good. Let me ask you a separate question in the interest of time. Greg asked about AI. And I think, specifically on a corporate level, you mentioned having AI-driven forecasts for general managers.

But within quick service a number of these different companies are talking about basically assistance for the general manager to help them do their jobs better even beyond forecasting, your labor allocation, food prep, what have you. Does that make sense for casual dining broadly? Does that make sense for Darden? And is that something you might be working on and see as an opportunity?

Absolutely, John. And I did mention that it's forecasting, but it is about food prep and labor management and other things. So I probably didn't put it all in there, but it's all part of that. And I think whatever we can do to make the general manager and the restaurant managers' job easier to get them out of the office and with our guests and with our team members is what AI can help do. What I did say is we won't have it to our guests are actually seeing it in their face. But we're using a lot of that stuff already.

Our next question is coming from Brian Vaccaro from Raymond James.

Just a quick one for me. It's really a question on the casual dining segment. And it's pretty striking how your outperformance gap has widened significantly in recent quarters. So maybe if you could just talk about this widening gap between the winners and losers in the segment. Are you starting to see a tick up in closures or think we might be on the precipice of seeing that? Or just any other thoughts you have on this widening gap.

[Technical Difficulty]

We do experience some technical difficulties. Just give me a moment, please. while I get the speakers back on the line, please. Ladies and gentlemen, please do not disconnect. We are reconnecting the speakers at this point. One moment, please, while we reconnect to speakers. Once again, we are experiencing technical difficulties, please continue to hold. Do not disconnect. We do appreciate your patience in this matter.

And Brian, you're still in queue, my friend, just stand by, okay.

Can you hear us now?

Yes, we can. please go ahead.

Okay. All right. All right. Sorry. I don't know if, John, you got my whole answer.

We didn't hear anything, Rick. This is Brian Vaccaro. Do you want me to ask the question again? Or did you get it all? .

No, I got it John, the question about AI for John. Did you get that answer? That's what I want to make sure.

Yes, we got cut off on that, I think. So you can finish up that maybe, and then I'll ask my question. .

I do apologize. Brian, your question was next, and then that's when we got cut off. Do you want to proceed from there?

You heard it all then, John. Okay. Go ahead, Brian. .

Okay. Okay. Great. So yes, just a question on the casual dining segment, and it's pretty shrinking how your outperformance gap has widened significantly in recent quarters. So maybe you could just talk about this widening gap between the winners and losers in the segment. And are you starting to see a tick up in closures or think we might be on the precipice of seeing something like that? Just any broader thoughts on this widening gap.

Brian, I would say I'm really pleased that, that gap keeps widening. There are winners and losers in every industry and especially in categories like ours, which aren't super high-growth category. There's always going to be winners and losers, and we plan to be winners. Are we seeing a lot more closings? I wouldn't say we're seeing more closing. We're seeing some bankruptcies, but that generally happens over time. We've been on the precipice of big closings for years. And maybe one day it will happen. I just don't know. I don't know what other companies are thinking about in their plans in the future.

But restaurants that have -- individual restaurants that continue to lose margin and continue to lose traffic, eventually, they can't pay the rent. So some of those will close and the good brands will kind of pick up the slack and add restaurants. But we're just going to keep performing the way we have no matter what the situation is out there. And if restaurants close, we'll be the beneficiaries.

All right. That's helpful. And then last quick one. Just Raj, sorry if I missed it, but where do you see your G&A shaking out for the year in your updated guidance?

Yes, Brian, I think we're still looking at approximately $500 million for the full year. Q4, that implies heavier G&A in Q4 for a couple of reasons. One, we have an extra week. Call it, that's roughly $10 million. And because of the growth we have, the most of the growth -- as you look at year-over-year growth on sales and earnings, we have pretty strong growth implied especially on the earnings in Q4. And so that leads to higher incentive comp. And so between those two, I think Q4 is probably -- you're thinking roughly about $30 million higher than Q3.

Thank you. We reached the end of our question-and-answer session. I'd like to turn the floor back over to Courtney for any further or closing comments.

This concludes our call. I want to remind you that we plan to release fourth quarter results on Thursday, June 25, before the market opens with the conference call to follow. Thanks for participating.

Thank you. That does conclude today's teleconference and webcast. You may disconnect your line at this time, and have a wonderful day. We thank you for your participation today.

Greetings, and welcome to the Darden Restaurants Q2 Fiscal Year 2026 Earnings Conference Call and Webcast. [Operator Instructions] As a reminder, this conference is being recorded.

It is now my pleasure to turn the call over to Courtney Aquilla, Vice President, Finance and Investor Relations. Courtney, please go ahead.

Thank you, Kevin. Good morning, everyone, and thank you for participating on today's call. Joining me are Rick Cardenas, Darden's President and CEO; and Raj Vennam, CFO.

As a reminder, comments made during this call will include forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. These statements are subject to risks and uncertainties that could cause actual results to differ materially from our expectations and projections. Those risks are described in the company's press release, which was distributed this morning, and in the filings with the Securities and Exchange Commission. We are simultaneously broadcasting a presentation during this call, which is available on the Financials tab in the Investors section of our website at darden.com.

Today's discussion and presentation include certain non-GAAP measurements, and reconciliations of these measurements are included in the presentation. Looking ahead, we plan to release fiscal 2026 third quarter earnings on Thursday, March 19, before the market opens, followed by a conference call.

During today's call, all references to industry results refer to the Black Box Intelligence Casual Dining benchmark, excluding Darden. During our fiscal second quarter, average same-restaurant sales for the industry grew 1.3% and average same-restaurant guest count decreased 0.4%. Additionally, median same-restaurant sales for the industry grew 1.9% and median same-restaurant guest counts decreased 0.5%.

This morning, Rick will share some brief remarks on the quarter, Raj will provide detail on our second quarter financial performance and share our updated fiscal 2026 financial outlook. Then Rick will close with some final comments.

Now I'll turn the call over to Rick.

Thank you, Courtney. Good morning, everyone. We had a strong quarter that exceeded our sales expectations as each of our segments delivered positive same-restaurant sales. Commodity headwinds were stronger than we anticipated as beef prices remained at historically high levels throughout the quarter. Our restaurant teams did a great job of being brilliant with the basics during the quarter, driving record or near record guest satisfaction scores across all of our brands.

At the Darden level, we continue to leverage our 4 competitive advantages to enable our brands to compete effectively and continue providing strong value to our guests. The power of our scale enables us to continue to price below inflation over the long term and not pass all the costs on to our guests while the breadth of our portfolio enables our brands to stick to their strategy, even if they are overly impacted by a single commodity.

We opened 17 new restaurants during the quarter and are on pace to exceed our planned openings for the full fiscal year. These new restaurants opened faster than planned, collectively contributing 40 additional operating weeks versus our plan for the quarter. This is a testament to the outstanding job Todd Burrowes and the entire development team, led by Marc Braun, have done to strengthen our pipeline.

Olive Garden delivered positive same-restaurant sales of 4.7% for the quarter, driven by the success of the Never Ending Pasta Bowl promotion and first-party delivery, combined with strong operational execution that led to all-time high guest satisfaction scores. For the fourth consecutive year, the starting price for Never Ending Pasta Bowl was $13.99. Preference was strong and refill rates reached a record high, demonstrating that guests continue to find abundance and meaningful value at Olive Garden in this environment.

First-party delivery, through our partnership with Uber Direct, continue to drive strong results. This channel attracts younger, more affluent guests to crave Olive Garden at home, value convenience and order more frequently. These guests have a higher check average than dine-in guests. Uber Direct sales represented 4% of total sales for the quarter, and approximately half of that was incremental.

As we have discussed on recent calls, across the portfolio, we are placing a greater emphasis on sales growth and reinvesting to drive long-term success. At Olive Garden, the success of first-party delivery is helping fund investments such as the addition of the lighter portion section on our menu, which features 7 existing dishes with a smaller portion and a lower price. This section is designed to give guests more choices and is offered in addition to the Olive Garden's regular portion sizes.

Olive Garden has seen a double-digit increase in affordability perceptions from guests who order from the lighter portions menu and an increase in frequency among these guests, which should help build traffic over time. 40% of restaurants offered this menu during the quarter, and they added another 20% of locations early in the third quarter. Olive Garden plans to complete the rollout system-wide in January.

As we begin the third quarter, the Olive Garden team is poised to build on their momentum. They are currently offering 2 fan favorites for a limited time, ravioli di portobello and braised beef tortellini. Thousands of Olive Garden fans requested the return of these iconic dishes, which included multiple online petitions to bring them back.

Turning to LongHorn Steakhouse. The team's ongoing commitment to their strategy rooted in quality, simplicity and culture continue to guide their success as they delivered strong top line momentum, driven by same-restaurant sales growth of 5.9%. Their relentless focus on executing every dish on their menu to their high standards was reflected in an all-time high [indiscernible] score for the quarter. Their ability to consistently operate at this high level is enabled by having one of the most experienced teams in the industry. In fact, LongHorn further strengthened their impressive retention by setting their record low for team member turnover during the quarter.

The investments LongHorn has made in food quality, combined with their grilling expertise, have built strong guest loyalty. And to further build on their leadership in food quality, LongHorn brought back a guest favorite for the holidays, their 14 ounce, 7-Pepper Crusted New York Strip with brown butter sauce, which was met with enthusiastic reviews by guests and social media influencers.

Same-restaurant sales for our Other Business segment grew 3.1% during the quarter, driven by strong performance at Yard House. During the quarter, Yard House's Oktoberfest event returned for the fifth year. This event continued to deepen guest engagement and drive results through limited-time menu offerings that strengthen Yard House's competitive advantages of a socially energized bar and distinctive culinary with broad appeal. The event also featured a $5 refillable beer stein that was a hit with guests, with all steins selling out within the first few weeks.

Also during the quarter, Yard House began rolling out first-party delivery through our partnership with Uber Direct. While the impact on total sales won't be as significant as what we've seen at Olive Garden, the team is pleased with the initial results and plans to continue rolling it out to additional restaurants in the third quarter.

Same-restaurant sales for the Fine Dining segment grew 0.8% for the quarter, driven by strong performance at Ruth's Chris Steak House and improving trends at The Capital Grille. As guests continue to seek price certainty, Ruth's Chris brought back its limited time offer, featuring a 3-course menu for $55. It was a key driver of sales and traffic growth and featured a new 8-ounce prime fit cut strip and 2 guest favorites, Stuffed Chicken and Salmon & Shrimp. Each entree came with a super salad, an individual side and a dessert.

The Capital Grille's Wagyu & Wine event returned during the quarter, featuring a choice of a Dave Phinney wine and Wagyu Burger for $35. This event delivered strong guest preference and sales momentum at The Capital Grille continued to grow throughout the quarter.

I am pleased with our performance as we move back into the back half of our year. Our brand teams have the appropriate plans in place and the power of Darden positions us well to win in a competitive environment.

Now I'll turn it over to Raj.

Thank you, Rick, and good morning, everyone. As Rick mentioned, the second quarter was another strong sales quarter for Darden with top line momentum exceeding our expectations. While elevated commodity costs, driven by beef, were a significant headwind for the quarter, we priced 130 basis points below inflation as we remain committed to providing strong value to our guests. This large investment in underpricing inflation resulted in restaurant-level margins being below last year. The near record beef costs have sustained longer than we anticipated and are likely to remain elevated into the third quarter, with some relief as we get into the fourth quarter.

In the second quarter, we generated $3.1 billion of total sales, 7% higher than last year, driven by same-restaurant sales growth of 4.3%, the addition of 30 net new restaurants and the acquisition of Chuy's in October of last year. Both our same-restaurant sales and same-restaurant guest counts were in the top decile of the industry again this quarter. Same-restaurant sales exceeded the industry benchmark by 300 basis points and the positive gap widened throughout the quarter.

Adjusted diluted net earnings per share from continuing operations of $2.08 were 2.5% higher than last year. We generated $466 million of adjusted EBITDA and returned $396 million to our shareholders this quarter by paying $174 million in dividends and repurchasing $222 million in shares.

Now looking at our adjusted margin analysis compared to last year. Food and beverage expenses were 90 basis points higher, primarily due to elevated beef costs driving total commodities inflation of approximately 5.5% for the quarter.

Restaurant labor was 10 basis points higher with total labor inflation of 3.3%. Restaurant labor in our comparable restaurants was favorable to last year, driven by productivity improvements that more than offset pricing below labor inflation. Restaurant expenses were 10 basis points higher as sales leverage was more than offset by Uber Direct fees and brand mix with the addition of Chuy's.

Marketing expenses were 10 basis points lower due to sales leverage. We had incremental marketing activity in the quarter that was funded by cost savings. This all resulted in restaurant-level EBITDA of 18.7%.

Adjusted G&A expenses were 60 basis points favorable, driven by leverage from sales growth and lower incentive compensation accrual as well as favorable mark-to-market expense on our deferred compensation. Due to the way we hedge mark-to-market expense, this favorability is fully offset in the tax line. Our adjusted effective tax rate for the quarter was 13.2%, and we generated $243 million in adjusted earnings from continuing operations, which was 7.8% of sales.

Looking at our segments, all segments grew sales for the quarter, driven by positive same-restaurant sales. The high beef cost pressured segment profit margins at all of our segments, except for Olive Garden. Total sales for Olive Garden increased by 5.4%, driven by strong same-restaurant sales and traffic growth as well as the addition of 11 net new restaurants. The sales momentum continued from prior quarters with same-restaurant sales in the top decile of the industry and outperformed the industry benchmark by 340 basis points.

Olive Garden delivered a strong segment profit margin of 21.8% for the quarter, which was 30 basis points above last year, even with an approximate 20 basis points of margin investment related to the lighter portions menu and the continued impact of delivery fees.

At LongHorn, total sales increased by 9.3%, driven by same-restaurant sales growth of 5.9% and the addition of 21 new restaurants. The sustained sales and traffic outperformance resulted in same-restaurant sales and traffic in the top decile again this quarter. The LongHorn team is doing a great job of staying focused on their strategy and maintaining momentum despite elevated beef costs. Our measured approach in reacting to inflation resulted in pricing 320 basis points below inflation at LongHorn that resulted in segment profit margin of 16.2%.

Total sales at Fine Dining segment increased 3.3%, driven by positive same-restaurant sales and the addition of 3 net new restaurants. High beef costs also had a large impact on the brands in the segment, resulting in segment profit margin of 14.8%, 280 basis points lower than last year.

The Other Business segment sales increased 11.3%, with positive same-restaurant sales of 3.1% and the acquisition of Chuy's benefiting part of the quarter. The positive sales growth and the continued productivity improvements in multiple brands within this segment were not enough to fully offset the elevated commodity pressures from beef and the impact of delivery fee. This resulted in segment profit margin of 13.4%, 60 basis points lower than last year.

Turning to our financial outlook for fiscal 2026. We have updated our guidance to reflect the year-to-date performance, the evolving commodities environment and the expectations for the back half of the year. We now expect total sales growth for the year of 8.5% to 9.3%; same-restaurant sales growth of 3.5% to 4.3%; 65 to 70 new restaurant openings; total capital spending of $750 million to $775 million; total inflation of approximately 3.5%, with commodities inflation of 4% to 5%; and approximately 116.5 million diluted average shares outstanding. All other aspects of our guidance remain unchanged, including adjusted diluted net earnings per share between $10.50 and $10.70, of which approximately $0.20 is related to the addition of 53rd week.

We expect earnings per share growth in the third and fourth quarters to sequentially improve as the gap between pricing and total inflation narrows in the back half of the year. Specifically, for the third quarter, we expect earnings per share growth in the mid-single digits compared to the third quarter of last year.

In summary, we're pleased with our strong top line performance and continued industry outperformance this quarter. While our pricing strategy and amid elevated commodity costs has impacted margins in the near term, we believe it's the right approach to support our long-term success. As we move through the rest of the fiscal year, we remain confident in our ability to grow sales, manage costs and deliver value to our guests and shareholders.

Now I'll turn it back to Rick.

As I reflect on our performance, I'm reminded of the power of the platform we built over time and our ability to navigate whatever comes our way. When you look at our company, there are 3 key attributes that we believe make Darden a great company and a great stock.

First, our winning strategy grounded in our 4 competitive advantages and our commitment to managing the business for the long term has led to a long track record of success. Over our 30-year history as a public company, Darden has achieved annualized total shareholder return of 10% or greater for any 10 fiscal year period when considering Darden stock appreciation plus dividend yield.

Second, we have a clear road map to grow our portfolio of iconic brands, which includes 2 dominant brands, 3 high-potential growth brands and several balanced brands that are leaders in their respective categories. And third, our strong commitment to disciplined capital stewardship enables us to return capital to shareholders while making appropriate investments in the business for long-term success.

I'm incredibly proud of the results we continue to deliver for our shareholders, and we remain committed to executing our strategy to drive shareholder value now and for generations.

Finally, I want to take a moment to acknowledge the recent passing of Darden's first CEO, Joe Lee. Joe was the visionary leader whose leadership helped shape not only Darden, but the entire casual dining industry. I was fortunate to work with Joe. And one of the things that always stood out to me was the care and compassion he had for his people. He always said, if you take care of your people, they will take care of your guests. Those words remain fundamental to Darden's culture today and they are especially meaningful during the holidays.

Now is the busiest time of the year in our restaurants, and I'm so proud of our 200,000 team members who do such a remarkable job of nourishing and delighting everyone they serve. On behalf of our entire leadership team and the Darden Board of Directors, thank you to all of our team members for everything you do. I wish you and your families a happy holiday season.

Now we'll take your questions.

[Operator Instructions] Our first question today is coming from Brian Bittner from Oppenheimer.

Happy holidays, and congratulations on solid top line results. First question is on the lighter portions menu and the strategy as you rolled that out to 100% of the Olive Garden restaurants here in January. How impactful do you think this will be to sales just based on what you've seen so far? Is it something that we're actually going to be able to identify here from the outside? Or is it more of an impact to internal metrics, like value perception, et cetera?

Brian, it is an impact to internal metrics, value perception, affordability and the right portion size. But we will see some impacts to sales in a couple of ways. In the long term, as we said, we've got higher frequency in the guests that are ordering this versus the guests that aren't. And the guests that aren't are increasing frequency as well. So this is a good top spin.

In the short term, there will be a little bit of check mix. So as Raj mentioned, in the second quarter, we had about 20 basis points of mix from -- 20 to 30 basis points of mix from the lighter portion. As we roll it out to more restaurants, there will be a little bit of bigger mix impact, but that's being offset by other things we have with the strong performance of delivery. It might not be necessarily in mix offset but in total sales.

So we believe this is the right thing to do for our guests in the short term and the long term. And that's why we've actually accelerated the rollout.

And my follow-up is on labor and the margins on labor. Over the last couple of quarters, you've seen some labor margin deleverage despite growing comps over 4% the last couple of quarters. What do you attribute this to? Because historically, you've been able to better leverage labor margins on these type of comps. Is there any specific investments going into labor or mix issues within the brands worth pointing out? And how are you thinking about the ability to maybe better leverage labor margins moving forward?

Brian, this is Raj. So from a labor margin perspective, I think I said in my prepared remarks, if you actually look at our comparable restaurants, which is where we obviously had the same-restaurant sales growth, you have actually labor leveraging. We actually saw labor improve year-over-year. Even with us underpricing inflation, because labor inflation, as I said, was about 3.3%, our pricing was 2.6%, so we were able to offset that underpricing inflation and drive labor leverage through productivity improvements.

The reason you don't see it at the total Darden level is because of the growth over the last year and the acquisition of Chuy's. And so that's really what you got to look at the brand mix combined with some of the nuances. So it's more, I would say, idiosyncratic versus a systematic issue. We actually feel like as we go through the back half, you should start to see labor start to be more of a good guy.

Next question is coming from David Palmer from Evercore ISI.

Congrats on this, particularly this Olive Garden same-store sales result in the quarter, which should help with concerns about that brand lapping the tough comparisons coming up in the fourth quarter. But I'm wondering what does your guidance generally anticipate with regard to Olive Garden comps going into that quarter? Are you factoring any benefit from fiscal stimulus? And just generally, what do you think you'll be doing in general to help maximize your chances of keeping positive comps going over those tough comparisons? And I have a quick follow-up.

Yes, David, thanks for those comments. So from a same-restaurant sales perspective, if you look at our guidance, we talked about, for the full year, 3.5% to 4.3%, which essentially means roughly 2.5% to 4% in the back half, which would imply basically flat traffic at the midpoint of that range. I don't want to get specifically into the brands, but here is how we think about the total.

When we look at the -- take into consideration the first half of the year, some macro uncertainty, but potential consumer spending benefit from the fiscal stimulus in early 2026, and we have several initiatives at the brand levels to drive sales. We feel like the outlook we provided is reasonable. And so I think that's really all I have to say on that front.

The other thing I'm curious about is how you're thinking about pricing versus the path of inflation on beef and steak. Clearly, I think you said something about your pricing was trailing inflation by 3 points or more. I think I didn't quite catch that at LongHorn. So I'm just wondering about whether you think that -- does your guidance anticipate additional pricing at LongHorn through the rest of the year? Any thoughts on that?

David, so yes, on the pricing front, let me start at a bigger picture and then get back to LongHorn specifically. So we did price for the quarter, at the Darden level, was about 130 basis points below inflation. And we do expect that to cut in half by the time we get to third quarter and actually catch up to inflation as we get to fourth quarter, primarily because, one, we're taking some pricing, but also we expect inflation to come down, especially as we go into the fourth quarter.

And specifically at LongHorn, yes, I don't expect LongHorn to have underpricing by 320 basis points as you move forward. We'll take some modest price increases. But that's the benefit of the portfolio, right? We've talked about -- Rick mentioned this in his prepared remarks, that when there is some near-term pressure on one of the commodities, the portfolio provides the air cover to be able to kind of deal with this for the near term.

And so all that said, look, our bias is to minimize pricing. And we'll do what we think is right to protect the guest, even if that means some margin erosion in the near term. Primarily, we're talking about second and third quarter, because we expect margin growth as we get into the fourth quarter.

Our next question today is coming from Brian Harbour from Morgan Stanley.

Raj, can you maybe just talk more about the beef piece and what kind of gives you the confidence that starts to come down by 4Q?

Brian, I guess maybe let me start with what happened in the second quarter and how we're transitioning and how we see this. Because beef prices peaked in our fiscal second quarter, and they were well above the normal seasonal trends due to supply constraints that stem from packer cutbacks and halted Mexican cattle imports due to the screwworm outbreak.

We have seen retail demand destruction accelerate over the past few months. And we think November was actually down about 14% demand, volume down in steak. Prices have started to improve in recent weeks, and we've been able to take some coverage for the back half. I think this morning we showed about 45% coverage for the back half. And actually, as we're speaking, our team is getting a little bit more coverage. And so that's -- and the prices that were -- the coverage we're getting at is at the levels that are in line with our updated thinking, and all of that is contemplated in our guidance.

If you look at what happened in the near term, prices are expected to ease a little bit as beef production actually increased to near prior year levels the last couple of few weeks, driven by packer profitability and lower cattle prices. Now there are -- there is enough inventory on feedlot to support the recent production increase.

Okay. That's helpful. With first-party delivery, is 4% of sales, is that kind of where you're expected to be at this point? Or I guess what else do you think could continue to push that higher, if you, in fact, want that? Are you still seeing sort of sequential increases in delivery mix?

Yes, Brian, we're really pleased with 4%. As you recall, we didn't do any marketing -- you didn't know that, but we didn't do any marketing in Q2, and we're at 4%. I think the way that would increase is if we do some more marketing and get more people into it. But it's tracking pretty closely to our overall to-go business. And we feel good where that is with the incrementality we're getting. But if we want to drive that up, we have some options on the marketing side.

Your next question today is coming from Jacob Aiken-Phillips from Melius Research.

So I wanted to ask on Olive Garden delivery. You said about half of the 4% was incremental. But as delivery grows, do you expect the incremental share to hold? Or does cannibalization increase with penetration? And then what are you doing operationally to try to preserve the incrementality?

Jacob, I would hypothesize that as delivery grows, the incrementality will stay where it is or get better, because it's these folks that are ordering delivery, are higher frequency, and lower -- a little bit younger and more affluent. So as it grows, if it continues to grow, we would expect a little bit more incrementality, until it [ wraps ] on itself, and then it's a little less there.

And then just more broadly, you've talked about guests moving between channels depending on value or occasion. Have you seen any meaningful shift and where full-service or casual dining fits into the broader food spend mix?

Yes. As you see our sales performance in the casual dining industry itself, I think the industry has been growing faster than other segments, and we've been growing faster than the industry. So I would say that we're continuing to share from casual, and we're taking share from a little bit on the limited service.

Next question today is coming from Jake Bartlett from Truist Securities.

My first was about marketing. And marketing as a percentage of sales was down a little bit in the second quarter, I think roughly flat in the first. What are your expectations for the year? Is it still the 10 to 20 basis points? And I guess that would imply an acceleration. Maybe if you can confirm that, and then I have a follow-up.

Jake, so recall, we said in the last quarter, I think we talked about -- we got about, call it, roughly $20 million of savings in marketing with some of the work -- great work our teams did to go back and take a look at how we spend the dollars. So anyway, when we take that into consideration, that helped increase marketing activity even though the dollars were basically flat to last year. Now as we look at the full year, we're probably closer to somewhere around 10 basis points increase year-over-year. But if something changes, we'll update you next quarter.

Okay. And my follow-up was just on the macro environment. I'm not sure if I heard you kind of talk about what you're seeing from a consumer perspective, lower income, whether some of the weakness is bleeding up into the middle income. What is the baseline macro environment that you're basing the back half sales guidance on?

Yes. I would say that we see the same reports you see, we've said that before. But the consumer is still resilient. They're being cautious. As we've said a few times, the weaker consumer sentiment doesn't necessarily translate into reduced spending. During the quarter -- so this is what's happening in our brands. During the quarter, our casual brands saw an increase of visits year-over-year from guests within middle to higher income groups. So it hasn't kind of moved up for us to the middle income groups with the largest growth coming from our higher income households.

We did see strong traffic growth from guests 55 and over as well, so on the demographic side, but there was a little pullback in those earning less than $50,000 in the casual brands. But we'll -- I'll end it with the way we always talk about it. We know Casual Dining is the #1 category where consumers intend to treat themselves and indulge. And when they're kind of thinking about where they spend their hard earned money, they want to go to a place that they get a great value and a good experience for a great price. So we'll continue to focus on delivering an excellent experience and deliver value for every guest that chooses to dine with us.

Next question today is coming from Andrew Charles from TD Cowen.

Raj, just curious, with the updated same-store sales guidance, does that embed any incremental pricing? You talked about the higher inflation forecast and how you're not going to fully price to offset inflation. Just curious if there's an increased pricing factor contemplated with the updated guidance.

Yes, Andrew, there is a little bit of increase in price. As I said, we actually expect our pricing to be closer to mid-3s in the back half, for the full year to be close to 3%. So if you think about where we started the year, I think we were 2.2% in the first quarter, 2.6% in the second quarter. So there's a little bit of an increase there that we incorporated into our guidance.

Very good. And Rick, in the past, you've laid out your hesitations around listing Olive Garden on third-party delivery. I'm curious if any of those pieces around things you've laid in the past, like data sharing, tip sharing, the ability to throttle it on and off, you believe are better addressable is ultimately contemplating the decision to add Olive Garden to third-party delivery?

Yes, Andrew, I would say the 2 big third-party delivery providers know what our concerns are on third party. And as long as we get a solution for those concerns, then we would look at it. It wouldn't make sense for us not to look at it, but we really do have some concerns and they know what they are.

Next question is coming from Jeffrey Bernstein from Barclays.

My first question is just on the comp commentary. Just I think, Raj, you mentioned that the favorable gap to the industry improved through fiscal 2Q. I was wondering whether you would assume or you are assuming that that continues. Maybe you have some quarter-to-date third quarter numbers. But your assumption for the back half of the year in terms of maybe a further widening of that gap? And then I had a follow-up.

Jeff, look, we did see an increase in our performance and we've said historically, when industry slows down a little bit, we have widened the gap. But as we look at the back half, we don't really start with what the industry numbers are. We actually look at a lot of what's macro and then all the things I mentioned about the brand initiatives because industry is a representation of some of it, but not all of it. And so we just -- we do it differently. And so I don't want to comment on what we expect the gap to be going forward.

Understood. And then the follow-up is just on the Uber addition. It sounds like Yard House is next up, third in line, therefore, behind Olive Garden and Cheddar's. I think you mentioned it's not likely to be as meaningful of a contributor as it is more of a bar type concept. But just wondering where LongHorn sits or where -- I know you don't dictate it, so where perhaps management of LongHorn specifically think about it. It would seem like that's the next big brand that could have more of a meaningful contribution, but offsetting that, I know often discuss that maybe their food doesn't travel as well. So just wondering your updated thoughts in terms of whether LongHorn could add 1P delivery.

Jeff, I'll start with the Yard House part. We don't anticipate it to be as big an impact because Yard House is a smaller brand, not just because they're a bar, but they also do a little bit lower to-go business. So if you think about when we implemented it at Olive Garden and then at Cheddar's, the percent delivery lined up pretty well with the percent to-go. So Cheddar's right now, I think, is doing about 15% off-premise. LongHorn does about 15% off-premise. So it's not a small off-premise business.

And we do know that when guests order at LongHorn off-premise, the mix is different. So they order more chicken and seafood and a little less steak than they do in the dining room. So it's something that LongHorn is learning from the other brands to see if it makes sense for us to go on to Uber Direct. And if it does, then we'll start testing it. But we don't have anything to say about that right now.

Your next question today is coming from Sara Senatore from Bank of America.

I was interested just on the topic of value. It sounds like that's resonating even actually in Fine Dining. You talked about these sort of combos and these -- and the $55 at Ruth's. I guess, are you bringing in different customers to the -- across the brands? I mean I know you mentioned maybe some softness in below $50.

But if I just think about -- while the pricing may be up low single digits, there's presumably some negative mix and the sort of entry-level price points are lower across -- it sounds like across maybe all your brands. So are you seeing different customers come in for that? Or is it just more increasing frequency among the customers you do have as you offer these kinds of very accessible price points?

Yes, Sara, most of our promotions really help our core customers. We are seeing a little bit of an increase in new customers or customers who haven't seen in a while when we do these. But we actually see an increase in our core, too. So it's not targeted to get new -- for new people, it's targeted for anybody. And we do see a little bit of a mix at Ruth's Chris when we do the $55 prefixed menu. But that's because guests are looking for certainty and price certainty. And so that's what we're giving them. And it drives quite a bit of volume at Ruth's Chris, and it's a good thing for us. It's not -- it's a profitable deal for us.

Great. Understood. And then just on a follow-up, Raj, you mentioned, I think, the demand has declined about 14% in November for beef. I guess, do you -- are there certain kind of rules of thumb about what that would mean for beef prices? Just as I think about it, it seems like this is the first time we've really seen like retail demand pull back. So just trying to understand how that translates into kind of the market prices for beef.

Sara, I would say, the last few months have been different from what we would have seen historically. Historically, there was retail demand destruction. You saw the prices come down sooner. I don't want to get into a lot of the dynamics, but there is something with how the -- between the packers and how things are working. It seems like there is some constraining of supply. But it's hard for us to really know what's happening. Maybe they have other challenges.

But -- so it's really going to be a function of how much production is out there, right? And so, yes, I don't think we have a good crystal ball on that. But I did share, we are seeing some green shoots, and that's -- that are actually starting to see the coverage that come more in line with our expectations.

Our next question is coming from Jim Salera from Stephens.

Raj, I wanted to start and maybe ask if you could us the comp components for Olive Garden breaking out particularly mix and traffic? And then as an add-on to that, are you able to give us any details around the type of consumer that you're seeing in the near term with Olive Garden given that it's a well-established brand, but they have a lot more avenues that consumers can access the brand? Now I wonder if that has any noticeable changes in the type of guests, whether it's income level, age, group sizes. Anything like that you could provide would be great.

Yes. So from an Olive Garden breakdown, the comp -- the same-restaurant sales were 4.7%. The traffic, as we measured, was 1.7%, but when you add the catering of 1.1%, that's basically a traffic growth of 2.8%. And the pricing was 2.6%, so there was some negative mix, but also there was some help from Uber Direct fees, but that's the mix of the traffic and the sales.

From a guest perspective, I think Rick already addressed it in the script or in his prepared remarks about we're seeing more increased growth across all income levels above $50,000. And we're seeing a little bit more growth from the -- as we move up the age spectrum, there's a little bit of a pullback, the below $50,000 and lower -- our younger folks, but that's really it.

Okay. And then if I could shift gears a little on LongHorn, continued outperformance there, I think, value steak in general. Is there any way for us to maybe match that up with the outperformance in Fine Dining as well? Because I think a lot of people expected the value to continue to do well, but were surprised by the outperformance in Fine Dining. I don't know if there's a read to make there, if there's some maybe aspirational guests that are accessing Fine Dining, or if we just reached a point where we've lapped enough and the sales base is lower than we can get back to positive on Fine Dining?

Yes, Jim, I'll start talk with LongHorn. I think LongHorn, their outperformance is driven by years of what they've done focusing on their strategy: continue to price a little below inflation, invest in their food and cook their stakes better. And that's been very helpful for them.

Now I think they may be benefiting right now with such a high price of beef that consumers are actually going to LongHorn instead of eating at home. And when we talk about the $50,000 consumer, under $50,000, I think LongHorn grew under $50,000. So it's interesting, they have a higher check than Olive Garden, but they grew their guest count at an under $50,000 range. That could be because such a disparity between how much you have to pay in the grocery store versus what you pay in the restaurant, which could be driving some of the traffic growth. But it has impacted their margins.

So on the Fine Dining side -- I'll finish with one other thing at LongHorn. I still think they might be taking a little bit of share from Fine Dining. That said, Fine Dining had a good quarter this quarter. Its trends are improving. And it may be that we're getting closer to kind of clearing everything out that happened during COVID. We're seeing some good value, some good performance at Ruth's Chris. Capital Grille had a good quarter.

But we don't -- it's not over yet. We've got to see that continue for a while to feel really great about it. We feel good about it. We want to feel great about it. So as we think about what's happening in the industry, we continue to say that as long as we do the things that we're supposed to do, provide a great value, cook the food properly, give a great experience to our guests, they're going to be coming back.

Next question is coming from Lauren Silberman from Deutsche Bank.

Great. Can you just help unpack what you saw in terms of cadence of actual comp as you move through the quarter? I know there's a lot of volatility and noise in the industry. And then anything that you can provide on what you're seeing quarter-to-date as well as differences that you may be seeing across regions?

Lauren, I don't want to get into the quarterly cadence of comps, but I'll just say from an earnings perspective, I think we kind of provided the high level how we're thinking about it. And it's really more driven by pricing. As I said, pricing gap to inflation is expected to cut in half as we get into third quarter as we take a little bit more price and inflation actually is probably closer to the Q2 level.

But then as we get to the fourth quarter, we expect pricing to go up a little bit more and inflation to come down a little bit more. And so that's kind of why in -- we talked about what we expect earnings growth to be more in the third quarter to be in the mid-single digits. But I don't want to get too much into the quarterly sales comp.

Okay. And then just on stimulus, there's some excitement about stimulus into '26. If you go back to prior fiscal stimulus, which brands tend to benefit the most in your portfolio? And do you see it through traffic or average check?

Yes, Lauren, I would say all of our brands benefit from stimulus, depending on how it comes in. But I will say that if you think about the folks that benefit from no tax on tips and no tax on overtime, they may be a median income and lower. So that could help our brands like Olive Garden or Cheddar's or Chuy's that have a little bit higher mix there. But all of our brands benefit when there's stimulus that gives more money to consumers.

Next question is coming from Peter Saleh from BTIG.

I just wanted to follow up on the conversation around the marketing efforts around Uber Direct. I think you guys mentioned you didn't do any marketing this quarter. Can you just talk about that decision? And what's the game plan in the back half of the year? Are you planning on increasing marketing around that effort? Any thoughts on that would be helpful.

Peter, the reason we didn't do any marketing on Uber Direct in the second quarter was we had just kind of done some in Q1, and we had other things that we wanted to spend our marketing dollars on, particularly Never Ending Pasta Bowl. Never Ending Pasta Bowl is our best promotion at Olive Garden. And I think others had some concern that we were wrapping on Never Ending Pasta Bowl on how that would go. And as Raj mentioned, our gap to the industry grew every month in the quarter, even though Never Ending Pasta Bowl was kind of coming towards the end of the promotion period.

So we think that we would -- we're better off spending marketing dollars on Never Ending Pasta Bowl than we are on delivery at that time. I can't comment on if we're going to do it in the third or fourth quarter, but it's something that people will see pretty quickly if we do.

Great. And then just following up, my last question, on tariffs. Is there any sort of update on the impact there, tariffs, on either commodities or on development costs? I think in the past, you had mentioned there was maybe a slight impact on development cost from tariffs. Just any update on that front would be helpful too.

Yes, Peter, not a lot. I mean at this point, part of our commodity inflation includes all of the tariff impact. It's in the tens of basis points as a percent of sales, which is in line with what we had indicated earlier. From a construction cost, I'd say we're still -- from the data we're seeing, it's in that mid-single-digit impact. No change there.

Next question is coming from Jon Tower from Citi.

Maybe going back to the small plates that you're rolling out now and getting it done by January. I'm just curious, have you tested any media behind it? What's your intention behind doing that? Obviously, you're seeing a bit of negative mix now that you've rolled it out to some of the stores. So how are you thinking about communicating it to guests? And obviously, there could be some pressure on the business if you were to market it to them. So how are you thinking about the trade-off there?

Yes, Jon, currently, we're not expecting or we're not thinking about marketing it to our guests because it's doing pretty well on the menu the way it is, and it's driving a little bit more frequency and the guests should order it. And maybe the word of mouth from other guests will do that. But our plans right now don't include marketing it, but those could change.

Okay. And is this something that will be available to delivery, so 1P, guests as well?

Yes. The way we think about 1P is if it's on our menu, it's probably available for delivery.

Okay. Cool. And then just on the unit growth update, it's nice to see you guys taking up the numbers by another 5 potentially for the year. Can you just give us some color on where you're seeing those numbers or what brands it's coming from? And then is this just a pull forward from what you were thinking for fiscal '27?

Yes, Jon, we're talking about 5 restaurants, it's a couple of brands that are driving that. So without telling you exactly which one, because that can change throughout the year where we end up at the fiscal year, so we'd say 65 to 70. It isn't necessarily a pull forward from next year that doesn't get backfilled by other brands. So we don't anticipate that this year's growth a little bit ahead of plan will damper next year's, because our teams are out there working hard, going and finding sites and getting deals done faster than they had before.

And as you recall, in the June call, I said that we are farther along in development than any point in any June we've had in years. So we feel really good about it. And that team is still doing great work to get us more sites.

Next question is come from Jeff Farmer from Gordon Haskett.

With all the pushes and pulls, how are you guys thinking about the fiscal '26 restaurant level margin versus fiscal '25?

Jeff, I would just refer you back to the long-term framework, and we've talked about that we've put out at the beginning of the year, and we said we're focused on earnings after-tax margin of flat to positive 20 basis points. And I think our guidance still implies we're going to be in that range, give or take 10 basis points, but that's kind of how we look at it.

We don't want to get too bogged down on any one level of -- one line item. We manage the business holistically to get a good return to the investors. And I would encourage you all to look at it through that lens.

Okay. And then with your top line exceeding expectations for the second consecutive quarter, I appreciate that there's some incremental costs or greater than expected costs that you guys are incurring. But are there areas where you're increasing reinvestment relative to prior expectation with that better top line performance?

Yes, Jeff, we are making investments with these incremental sales and, primarily, it's in the lighter portion section on the Olive Garden menu, we are rolling out faster than we anticipated. We had originally expected to roll it out over the fiscal year and maybe even into next fiscal year, but it's doing so well. And the -- and delivery is doing so well, we just decided to keep going. And then we're also making big investments and still pricing below inflation.

Next question is coming from Dennis Geiger from UBS.

I just wanted to ask the latest on the operational efforts or the speed of service efforts. I know it's a longer-term initiative that you've touched on previously. But just any updates on the implementation of that or how you're thinking about the plan?

Yes, Dennis, every brand is implementing it a little differently depending on what they need to do. I would say that some brands are getting their speed up faster than other brands. But all brands are making some improvement. And again, this is going to take a lot of effort and a lot of time to convince a group of folks that they have to do something a little differently than they thought, and to help the teams understand that the guests want things faster.

And we don't really get a whole lot of complaints about being too fast, we get about being too slow. So those are the things that we have to keep doing. This is changing people's habits, and that takes a while, but we're seeing some improvement.

Great. Just to follow up on that. I know the genesis of the plan is to improve the customer experience, et cetera, more so than table turns, I believe. But an obvious benefit over time if this goes well, presumably, is your table turns move notably and maybe there's a traffic benefit that you see from this. Is that fair?

Absolutely. I think especially during peak times, if we can get speed better, then table turn should speed up and it would increase traffic during those times. But I think it will increase traffic long term anyway because people are getting the experience they want at the pace they want, and they'll come back more often.

Next question is coming from Andy Barish from Jefferies.

Could you give us just kind of a Cheddar's brand update? And not a lot of call out there, I imagine there's some pressure just given the success of some big bar and grill concepts right now. But just kind of where that stands and what you might look at as a key for more unit growth there.

Yes, Andy. Cheddar's is part of the Other segment. The Other segment also grew same-restaurant sales. And Cheddar's didn't disappoint, so they grew their same-restaurant sales as well. Even if other bar and grills are kind of out there talking a little bit more -- a lot more about value, Cheddar's is still doing what they do: providing great everyday experience with wow pricing.

The other thing that we've been able to do over the years is to significantly improve their operational turnover. So if you think about turnover when we bought Cheddar's, it was well, well above the industry average. And now it's below industry average. It's much closer to Darden averages for turnover. And that means a better experience.

And so we do believe that Cheddar's is one of those brands that I mentioned earlier that have high potential for growth. And what I would say is I want to remind everybody that we think that growing way too fast is an issue in the industry. So our growth rates for any of our brands won't exceed 10%. But for Cheddar's, this year is the year that they're kind of finalizing and building their pipeline, and so it might take a year or so before you start seeing a little bit more growth at Cheddar's.

Appreciate it. And then Raj, can you just go through -- I missed some of the Olive Garden, the components of same-store sales?

Sure, Andy. So the traffic was -- as we measure, was up 1.7%. Catering was another 1.1%, so I'd say really the traffic growth was 2.8%. And then the check was 2.6%. Yes. And then -- not check, sorry, pricing. Pricing was 2.6%. So if you look at it through that lens of 2.8%, then the implied check would be 1.9%.

Next question today is coming from Chris O'Cull from Stifel.

Rick, is there a plan to take the smaller portion approach with any of the other brands?

We do have another brand testing smaller portions of current menu items, but they're doing it in a different way and not as many items. So there are some brands that lead to being able to do different kind of portions based on the protein, and so other brands already have it. So you think about LongHorn has different sizes for some steaks, they're testing a little bit more, they have different sizes for their chicken tenders, so does Cheddar's, I believe. So we do have other brands doing it, but not at the same way. We don't have a separate section on the menu for it.

Okay. And then just based on the company's research on GLP-1 usage, do you see a need to make any additional changes beyond the smaller portions to kind of accommodate these consumers?

We're continuing to monitor the usage and the impact on eating and drinking. It's impacting drinking more than it's impacting eating, especially in our kind of brands. The data that we see is they're basically pulling back on some restaurant visits, but more so limited service.

That said, the lighter portion section is helpful for that. But we aren't doing the lighter portion just for GLP-1. We're doing it to give all of our guests more options. It just so happens to benefit the consumers that might want smaller portions that are on GLP-1 medications. And we have a lot of options like that in all of our menus.

Next question is coming from Andrew Strelzik from BMO Capital Markets.

I wanted to ask about your comments that the Olive Garden delivery was tracking with the broader off-premise business. Does that surprise you at all? I mean it's supposed to be a different guest that's as incremental as it is earlier in the life cycle. Just kind of curious for your perspective on that.

No, Andrew, it doesn't surprise us. They're more similar to off-premise guests than on-premise guests. So if you think about Olive Garden and the percent of sales they do with to-go, and you look at the ratio of what they do off-premise versus delivery, then I would expect that same ratio to happen with other brands, because they are more similar. Our off-premise guests that are not delivery are also a little bit higher frequency than on-premise guests. These are just the delivery guests are even higher frequency. So it wasn't surprising that the same kind of mix happened at other brands.

Okay. All right. And then just curious on the change in CapEx guide. Is that all the new units? And with the updated new unit guide, you're close to the low end of your updated range? What's the realistic time line to start pushing kind of higher -- towards the higher end of that range?

Well, so let's start with the CapEx part of it. So CapEx is really a function of some of the openings happening sooner than we planned at the beginning of the year. And again, kudos to the team for doing a great job on that. But it's also a function of what we're -- as we fill up the pipeline for next year, because the spending this year happens for some of the restaurants opening, especially in the front half of next year. So we feel good about the pipeline.

We just updated our framework to reflect 3% to 4% unit growth contribution from new units. And we think we're going to be in that range based on what we provided here.

Next question is coming from Danilo Gargiulo from Bernstein.

Stepping back and looking at the long term, you have been outperforming the industry for quite some time. And I was wondering if you were to decompose this outperformance versus the industry, which consumer cohorts are you winning the most? And I don't mean just by income level, but also maybe occasions, age. And as you're maturing your brands, how do you see this outperformance to continue?

Yes, Danilo, I would say that granularity of data on where we're outperforming more is a little bit harder to get because we don't know where other parts of the industry are getting their guests. We do know that we've had, over the last couple of years, a little bit better performance in our higher-income consumer than not. But I would say during COVID, we had a great performance in our lower-income consumer.

So it's really hard to say where we're getting the outperformance versus the industry. I can just tell you we've got a great portfolio of brands that meet all the different consumer needs. And so if a higher-income consumer is feeling great, we've got great brands for them. If lower-income consumer is feeling great, we've got great brands for them. So that's the beauty of our portfolio and that's what makes us pretty different than most.

And then I want to follow up on your comment on GLP-1. Specifically, I think your brands have enough flexibility within your menu to offer different options for consumers and solve different needs. I was wondering if you can comment also on how the spending behavior is changing, not just on the alcohol mix, but also on the eating behavior, whether you see like a greater mix of protein, fewer desserts and sides. And what's your best estimate on how this is going to be evolving over time? And how it will be impacting the overall spending behavior in the industry?

I would say the only real big change in mix that we're seeing is in alcohol sales, and we've been seeing that for a little while. And you can see that more in the Fine Dining brands and the Other brands. We're not seeing a dramatic -- we are seeing a little bit of mix in appetizers and desserts, probably from some folks that are on GLP-1 drugs. Because I think when people get on GLP-1s, they also want to try to change their lifestyle and they want to eat a little less fried food. And if you think about most restaurants, appetizers are fried. So that could be part of it.

But we've got a broad menu, and we are going to continue to monitor what's going on with folks on GLP-1 drugs. We believe we have great brands that have a lot of protein, which is something that GLP-1 users want. And I would say we've got a great brand that was designed 20 years ago that is in the sweet spot of GLP-1s, that's Seasons 52. So we've got a lot of things that we can offer folks on those medications and anybody else. So I don't want to focus just on GLP-1 users. We've got a broad portfolio that can serve any guest needs.

Next question is coming from Gregory Francfort from Guggenheim.

Raj, can you just maybe give us an update on where turnover sits either for Olive Garden or your total system for labor? And do you think we're in a different environment now than we were over the last few years? And what that might look like going forward?

Greg, I would just say the turnover is actually pretty low. We continue to be better year-over-year. I think we're still trending probably double-digit increase versus prior year from a turnover -- essentially lower turnover. And so I think for most of our brands, we're probably -- this is like a record low, yes. And so from that perspective, we feel really good about that environment.

And I think the other factor I'll mention is our hourly wage rate -- inflation on the hourly wage was about 3%. This is kind of lower than what we saw even before COVID. We used to be in the mid-3s. So to be around 3% tells you that the labor environment is actually pretty solid for us.

Our next question is coming from Brian Vaccaro from Raymond James.

I just had a question on Olive Garden. And Rick, you spoke to the strength of Never Ending Pasta. I was just curious, was the sales mix up on NEP year-on-year? And are you seeing any changes in the mix, kind of the entry-level price point versus the higher tiers? And could you comment also just on the lighter portions? I think the sales mix was running mid-single digits last time we heard. Have you seen that increase the longer it's been in the market?

Yes, Brian, I would start with the Never Ending Pasta Bowl. We did see a little bit more mix to Never Ending Pasta Bowl, so a little bit more preference in it. We did see a much stronger refill rate. I think we had a record refill rate potentially. And we did see a little bit fewer buy-ups to the higher protein -- the more protein. But it could be because we've got more guests coming in and because the refills were so high, they were getting great value.

In regards to the lighter portion menu, still about -- still somewhere 1.5%, but we're around. So it could be up 10 basis points, down 10 basis points here or there. As we talk about frequency growing, it's going to take a while for that frequency to really make a meaningful impact in that mix. And we feel good about that mix.

All right. That's helpful. And then Raj, just a quick one on G&A, if I could. It came in lower than we were expecting here in the current quarter. I know there's quarter-to-quarter volatility. But could you just give a quick update on what -- where you see G&A shaking out within your fiscal '26 guidance?

Yes, Brian, I'd say we're still probably around -- when we look at the full year, probably going to be still close to $500 million. Q4 is probably $15 million to $20 million higher than Q3. Part of it is because of the 53rd week and some seasonal stuff. But really no change to the total guidance for G&A.

Next question is coming from Jim Sanderson from Northcoast Research.

Just wanted to follow up on the lighter portions at Olive Garden. Anything to call out that's notable about the demographics of the consumer that is purchasing this light portion, whether by gender, household income, daypart, anything like that?

Jim, we're still doing some more work on that. You think about -- we haven't had it in all the restaurants, and we're talking about 1.5% of sales. So if you think about the number of tokens we have for that, it's going to take us a little bit of time to get that work.

All right. And just another quick follow-up. Anything to comment on with respect to holiday bookings? Are they exceeding your expectations for the current time frame, maybe in line? Just anything you would provide as a test on how the consumer is behaving.

Yes, Jim, two things. One, in regards to Thanksgiving, which was already happened, we had record Thanksgivings in our Fine Dining brands, our reservation brand, and our holiday bookings are strong.

Next question today is coming from John Ivankoe from JPMorgan.

So the question is on immigration broadly, and I was hoping we could touch on a couple of maybe related topics to that. Firstly, I heard the comments, obviously, that labor inflation is now running lower than even it was pre-COVID. So that must mean that your supply of labor overall is very good. But I wonder if there's anything happening kind of below the surface that maybe in certain restaurants, certain pockets that labor markets have kind of turned over, but you've just been able to replace the people that perhaps would have left or maybe gotten competed away? So that's kind of the first question.

And then secondly, make a comment, if you can, in terms of pockets of demand. I think I remember you're using the word that there may have been some ripples of kind of demand being affected in various markets. So I wanted to see if there was a change there.

And then the third point, there's a comment made on beef packers that maybe were constraining some supply. I wonder -- and this just actually came into mind when you said that, if there may be kind of an immigrant worker situation on the packer side, if that could potentially be a leading indicator for other types of industry. So just overall your view on those broadly important topics.

Jim, thanks. I'll try to get those answers and maybe Raj can jump in too. On the immigration front, on our team members, we really haven't seen anything material on any restaurants turning all of their team members for those reasons. As we mentioned, we've got record retention. So there might be a restaurant or two that had a few folks, but it's not something that we're too worried about.

In regards to the packer situation, we can't comment on what's going on and why there might be some supply constraints. I don't think it's necessarily driven by labor, although one supplier did close one of their plants. I don't know if that was a labor issue or not. They didn't comment on why.

And then Raj can talk about the sales impact for us.

Yes. From a regional difference, John, I'd say for the quarter, when we look at second quarter, Midwest was our strongest growth. And then I think we had -- we saw actually softness in sales in New England area, and then Pacific Northwest. Other than that, most others were pretty close to the median. Even Florida and Texas, which were lagging, were actually -- were still below the company average, but they were a little bit closer to the company average than they were a quarter ago.

Next question is coming from Christine Cho from Goldman Sachs.

Follow-up to the earlier question, the Casual Dining outperformance. With many other segments kind of playing catch-up on value, could you kind of talk about your plans to better communicate value to consumers? Any new or expanded marketing approaches you are planning for the back half? And additionally, I think, Rick, you mentioned that you have no imminent plans to market the lower portion size menus. But what will make you change your mind?

Yes, Christine, competitively, I don't want to get into too much detail about our plans, especially for each brand. We're disciplined and we remain committed to our marketing filters. And as you all remember, the marketing filters, does the message build brand equity? Is it simple to execute and not at a deep discount?

And so we're going to continue to pull the right levers like we did with Never Ending Pasta Bowl, Oktoberfest at Yard House, the 3-course menu at Ruth's Chris, Wagyu & Wine at Capital Grille. Those are all things that elevate everything we talk about without a deep discount. When you look at our promotional calendar last year for the back half, I wouldn't anticipate it's going to be significantly different than that.

Now on the lighter portion menu and marketing, yes, right now, we have no plans to do it. If that changes, we'll have to find the right way to communicate it. But it will have to be something that we feel like we've got a great way to communicate it to explain what it is for consumers that don't really know that section of the menu. But I think that there's a better way to do that, which is just let the consumer tell their friends. And so right now, we don't have plans to do it. But if that changes, it's because Olive Garden came up with a great way to talk about it.

We reached the end of our question-and-answer session. I'd like to turn the floor back over for any further or closing comments.

That concludes our call. I want to remind you that we plan to release third quarter results on Thursday, March 19, before the market opens with a conference call to follow. Thank you for participating on today's call, and happy holidays, everyone.

Thank you. That does conclude today's teleconference and webcast. You may disconnect your lines at this time, and have a wonderful day. We thank you for your participation today.

Greetings, and welcome to the Darden Fiscal Year 2026 First Quarter Earnings Conference Call. [Operator Instructions] This conference is being recorded. [Operator Instructions]

I'll now turn the call over to Ms. Courtney Aquilla. Thank you. You may begin.

Thank you, Kevin. Good morning, everyone, and thank you for participating on today's call. Joining me are Rick Cardenas, Darden's President and CEO; and Raj Vennam, CFO.

As a reminder, comments made during this call will include forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. These statements are subject to risks and uncertainties that could cause actual results to differ materially from our expectations and projections. Those risks are described in the company's press release, which was distributed this morning, and in its filings with the Securities and Exchange Commission. We are simultaneously broadcasting a presentation during this call, which is posted in the Investor Relations section of our website at darden.com.

Today's discussion and presentation include certain non-GAAP measurements, and reconciliations of these measurements are included in the presentation.

Looking ahead, we plan to release fiscal 2026 second quarter earnings on Thursday, December 18, before the market opens, followed by a conference call.

During today's call, I'll reference to the industry [ Chuy's ] results refer to Black Box Intelligence Casual Dining Benchmark excluding Darden. During our fiscal first quarter, average same-restaurant sales for the industry grew 5% and average same-restaurant guest count grew 2.6%. Additionally, due to the continued divergence between average and median results, we are sharing that median same-restaurant sales for the industry grew 3.3% and median same-restaurant guest counts grew 1.3%.

This morning, Rick will share some brief remarks on the quarter, and Raj will provide details on our first quarter and share our updated fiscal 2026 financial outlook. Now I will turn the call over to Rick.

Thank you, Courtney, and good morning, everyone. We had a great quarter with same-restaurant sales and earnings growth that exceeded our expectations. For the first quarter, 3 of our 4 segments generated positive same-restaurant sales and traffic growth. The strength of our results is a testament to the power of our strategy.

Across our portfolio, our restaurant teams remain focused on being brilliant with the basics through culinary innovation and execution, attentive service and an engaging atmosphere, all enabled by our people. And at the Darden level, we continue to strengthen and leverage our 4 competitive advantages of significant scale, extensive data and insights, rigorous strategic planning and the quality of our employees to further position our brands for long-term success.

Olive Garden same-restaurant sales grew 5.9%, driven by compelling food news and the continued growth of first-party delivery. Early in the quarter, Olive Garden's marketing highlighted their Create Your Own Pasta platform from the core menu. Their television creative featured a new spicy 3-meat sauce and Bucatini pasta starting at $12.99. This new sauce taps into guest evolving tastes for bolder, more flavorful offerings. It was well received and helped drive a significant increase in preference for the Create Your Own Pasta platform.

Olive Garden built on the momentum of bold and spicy flavors by debuting Calabrian Steak & Shrimp Bucatini for a limited time during the quarter. The dish exceeded expectations and quickly became a new guest favorite, ranking among the top 10 entrees for preference.

First-party delivery through our partnership with Uber Direct is helping capture younger, more affluent guests who value convenience and crave Olive Garden. This represents a significant incremental opportunity for the brand as these guests have a higher check average and typically do not use Olive Garden for an in-restaurant dining occasion.

Olive Garden's advertising featuring 1 million free deliveries concluded in the first quarter with all the free deliveries being redeemed. Average weekly deliveries doubled throughout the campaign. Following the campaign, delivery order volume has remained approximately 40% above the pre-campaign average. The team will continue to promote delivery across a number of channels.

On our last call, we talked about putting a greater emphasis on sales growth and reinvesting to drive long-term growth. One of the ways we're doing this at Olive Garden is by strengthening affordability on the menu to give guests more variety at approachable price points.

During the quarter, Olive Garden began testing a lighter portion section of the menu, featuring 7 of their existing entrees with reduced portions and a reduced price. These items available at dinner and all day during the weekend still offer abundant portions and come with Olive Garden's Never Ending first course of unlimited breadsticks and unlimited soup or salad.

40% of Olive Garden restaurants currently offer this menu and the initial response from guests has been encouraging, with affordability scores increasing 15 percentage points and high satisfaction with portion size.

I have confidence in Olive Garden's initiatives for the year as well as their 5-year road map to sustain long-term growth and success.

LongHorn Steakhouse grew same-restaurant sales by 5.5%, driven by continued adherence to their strategy rooted in quality, simplicity and culture. The team continues to raise the bar in food quality by consistently executing every dish on their menu to their high standards. This is reflected by LongHorn's #1 ranking among casual dining brands -- major casual dining brands within Technomic's industry tracking tool for food quality, service, atmosphere and value. I'm really proud of the operational consistency at LongHorn and the work the team is doing to maintain their momentum.

Same-restaurant sales for our Other Business segment grew 3.3% during the quarter, driven by strong performance at Yard House, Cheddar Scratch Kitchen and Seasons 52. During the quarter, Yard House strengthened their competitive advantage of distinctive culinary offerings with broad appeal by enhancing their taco platform with higher-quality ingredients and more options for guests. As they have seen with similar investments in their burger and pizza platforms, this resulted in higher preference and guest satisfaction.

To help strengthen their competitive advantage of a socially energized bar, Yard House held its third annual Best On Tap Competition during the quarter. What began as a test of knowledge and hospitality skills has grown into a cornerstone of the Yard House culture where every bar tender competes. Congratulations to this year's winner, Michelle Yanez from the Yard House at City Center in Houston, Texas.

The Cheddar's team leverages efficiency and Darden's purchasing power to provide great food served at a wow price. During the quarter, they introduced a Hawaiian sirloin, a center cut top sirloin finished with pineapple and a sweet Hawaiian glaze, starting at $16.49. This limited time offer also included a honey butter croissant and 2 sides for that price.

In Technomic's most recent survey, Cheddar's ranked first among casual dining brands for both price and affordability.

During the quarter, Cheddar's also saw strong off-premise sales growth driven by first-party delivery. Off-premise sales grew 15% during the quarter, and the Cheddar's team will continue to promote delivery through owned and digital channels as well as in restaurants.

Same-restaurant sales for the Fine Dining segment was slightly negative for the quarter, but I'm encouraged by the actions each of our Fine Dining brands are taking to address the softness. For example, in the current environment, more guests are seeking price certainty, and Ruth's Chris Steakhouse introduced a 5-week limited time offer featuring a 3-course menu that drove positive comps for the quarter. For $55, guests could select 1 of 3 entrees as well as a super salad, an individual side and dessert. The offer was well received with strong guest preference and sales lift.

Now I want to share a quick update on the sale of 8 Olive Garden locations in Canada that I referenced during our last call. On July 14, we closed on the sale of those locations to Recipe Unlimited, the largest full-service operator in Canada. At closing, we also entered into an area development agreement with Recipe Unlimited to open 30 more Olive Gardens over the next 10 years, 5 of which have already been approved.

Our franchising team is focused on growing our global presence. Today we have 163 franchise locations, which includes 63 in the Continental United States and 100 outside the Continental U.S.

Last month, we held our annual leadership conference, which provides a powerful way for us to engage with every general manager and managing partner across our brands, celebrate past performance and align on key operational priorities. This was also an opportunity for these restaurant leaders to learn about their brand's 5-year business plan and understand what they need to do to win today and into 2030.

The opportunity to interact with this talented group of operators is one of the highlights of the year. I came away energized by the level of engagement and passion on display, which further reinforced the results of our most recent engagement survey, a new all-time high for Darden.

Overall, I am pleased with the strong start to our new fiscal year. Our strategy is working, enabling us to grow sales and take market share while meaningful -- making meaningful investments in our business and returning capital to our shareholders.

Beyond that, we have a larger purpose at Darden: to nourish and delight everyone we serve. One of the ways we do this is by fighting hunger. Once again this year, Darden is helping Feeding America add refrigerated trucks for 9 member food banks. With the addition of these new trucks, the Darden Foundation, with support from our partner, Penske Truck Leasing, has funded more than 50 vehicles to meet the increasing demand for food assistance in communities where we operate. Our philanthropic giving would not be possible without the efforts of our 200,000 team members and their passion to nourish and delight our guests and communities. Thank you for all you do.

Now I'll turn it over to Raj.

Thank you, Rick, and good morning, everyone. The first quarter was another strong quarter for Darden. Sales and earnings growth exceeded our expectations as our sales momentum from the fourth quarter continued into the first quarter. This strong top line sales growth and our significant scale provide us with the opportunity to keep a long-term perspective and continue investing in our business.

In addition to the menu investments Rick mentioned, the largest investment we made over the past several years is pricing below total inflation. During the first quarter, our pricing was 30 basis points below inflation.

We generated $3 billion of total sales, 10% higher than last year, driven by same-restaurant sales growth of 4.7%, the acquisition of 103 Chuy's restaurants and the addition of 22 net new restaurants. Both our same-restaurant sales and same-restaurant guest counts for the quarter were in the top quartile of the industry.

Adjusted diluted net earnings per share from continuing operations of $1.97 were 12.6% higher than last year. We generated $439 million of adjusted EBITDA and returned $358 million to our shareholders this quarter by paying $175 million in dividends and repurchasing $183 million in shares.

Now looking at our adjusted margin analysis compared to last year. Food and beverage expenses were 20 basis points lower, driven by pricing leverage as commodities inflation was approximately 1.5% for the quarter. Industrial labor was 20 basis points unfavorable as a result of high performance-based compensation expense, including a higher 401(k) match for our restaurant teams. Total labor inflation of 3.1% was fully offset by pricing of 2.2% and productivity improvements.

Restaurant expenses were 10 basis points higher as sales leverage was more than offset by Uber Direct fees and the brand mix with the addition of Chuy's.

Marketing expenses were flat as cost savings in marketing helped fund additional marketing activity in the quarter. This resulted in restaurant-level EBITDA of 18.9%, 10 basis points lower than last year.

Adjusted G&A expenses were 30 basis points favorable. Synergies from the acquisition and leverage from sales growth were partially offset by unfavorable mark-to-market expense on our deferred compensation. Due to the way we hedge mark-to-market expense, this unfavorability is fully offset in the tax line. Interest expense increased 10 basis points due to the financing expenses related to the Chuy's acquisition.

Our adjusted effective tax rate for the quarter was 10.5%, helped by the mark-to-market hedge I mentioned earlier. Our effective tax rate would have been approximately 12.5% without this impact.

In total, we generated $231 million in adjusted earnings from continuing operations, which was 7.6% of sales.

Looking at our segments for the quarter. Total sales for Olive Garden increased by 7.6%, driven by strong same-restaurant sales and traffic growth. The sales from the addition of 18 new restaurants more than offset the sales loss from the refranchising of 8 Canadian restaurants. Their sales momentum continued from the prior quarter with same-restaurant sales in the top decile of the industry and outperforming the industry benchmark by 90 basis points. Olive Garden delivered a strong segment profit margin of 20.6% for the quarter, which was only 10 basis points below last year, even with the investments in affordability and the impact of delivery fees.

At LongHorn, total sales increased 8.8%, driven by same-restaurant sales growth of 5.5% and the addition of 18 new restaurants. The sustained sales and traffic outperformance resulted in same-restaurant sales in the top quartile of the industry for the 13th consecutive quarter, with this quarter ranking in the top decile. The LongHorn team is doing a great job of staying focused on their strategy and maintaining momentum within the business despite continued cost pressures. Higher-than-expected beef cost towards the end of the quarter and pricing below total inflation of approximately 100 basis points resulted in segment profit margin of 17.4%, 60 basis points below last year.

Total sales at the Fine Dining segment increased 2.7%, driven by the addition of 5 net new restaurants. While same-restaurant sales for the segment were slightly negative, the strong performance of the limited time offer at Ruth's Chris helped to offset the continued challenges within the Fine Dining category. Overall, segment profit margin was lower than last year.

The Other Business segment sales increased 22.5% with the acquisition of Chuy's and positive same-restaurant sales of 3.3%. The positive sales momentum and continued productivity improvements in multiple brands within the segment resulted in segment profit margin of 16.1%, 90 basis points higher than last year.

Now turning to our financial outlook for fiscal 2026. This morning, we updated a few items in our guidance, taking into consideration actual performance year-to-date and the evolving commodities outlook for the remainder of the fiscal year.

We are raising our expected total sales growth and tightening the range of same-restaurant sales to reflect the outperformance in the first quarter, acceleration in our new unit pipeline and any incremental pricing we may take to partially offset the additional commodities costs. We now expect total sales growth of -- for the year of 7.5% to 8.5%, same-restaurant sales growth of 2.5% to 3.5%, approximately 65 new restaurant openings and total inflation of 3% to 3.5% with commodities inflation of 3% to 4%.

All other aspects of our guidance remain unchanged, including adjusted diluted net earnings per share between $10.50 and $10.70. While we are reiterating our full year earnings per share guidance, we expect the lowest year-over-year EPS growth to be in the second quarter, driven by the significant step-up in beef costs and our measured approach to pricing for these costs. We expect our pricing for the second quarter to be approximately 100 basis points below total inflation.

We have a proven track record of successfully navigating through higher costs, and we'll continue to take a disciplined approach to ensure the long-term health of our business. We believe our strategy remains the right one for our company.

Now we'll take your questions.

[Operator Instructions] Our first question today is coming from Brian Harbour from Morgan Stanley.

Maybe just on that last point first, Raj, could you talk about sort of contracting through the balance of the year and sort of what gives you visibility that you've kind of encompassed the range of food cost outcomes?

Yes, Brian, I think if you look at what we published this morning, we -- our coverage is less than typical, especially in beef. Right now, we only have about 25% coverage in beef for the next 6 months. And that's one of the biggest opportunities in terms of where we're seeing the biggest headwinds. And I think as you all know, there's been a significant spike in beef costs recently, especially tenders and [ rebuys ], so -- and we don't believe these price levels are sustainable, and that's why we don't have as much coverage, and that's part of the reason. And given the significant price increase, there are -- we are starting to see some demand disruption in retail.

So I guess, really the big picture, beef is the biggest variable here. And then the other component here where you're seeing a higher inflation is on seafood, primarily due to the tariffs on shrimp. And our team is working through to figure out how to mitigate some of that. And that's really the reason why we're taking the inflation up from 2.5% at the beginning of the year to now 3% to 4%. But this situation is still very fluid here.

Okay. Understood. Rick, maybe just on the comments about sort of the new portion sizes at Olive Garden. What -- are you seeing sort of a different guest that is asking for that? Do you think this is actually sort of a traffic driver for Olive Garden? Or I guess, on the other hand, do you think this is check-dilutive in some sense? Like how are people actually sort of approaching that? What are you seeing from those items?

Yes, Brian, it's still pretty early. We do believe in the long run, this is a traffic driver. It will dilute our check a little bit if people trade from a higher portion size item to a lower portion size item. But we believe that's the portion that those guests want. And it's very early indications are that we're seeing a little bit more frequency. But it's not necessarily new guests because we haven't marketed it, and we put it in restaurant without even any fanfare and it's just people are gravitating towards that. It's not significant preference gravitating towards it, but there is some preference moving there. .

Our next question is coming from Jon Tower from Citi.

Great. Maybe kind of in the same vein, that -- the affordability pivot and -- this quarter as well as the Uber Eats amplification or build in the quarter. Can you maybe speak to how that hit on the cost line during the period? And I noticed that, obviously, the restaurant margin, you didn't lever that as much on a pretty solid comp in the period. So maybe, Raj, if you could speak to those costs during the period and what you're expecting going forward as well.

Yes, Jon, let me first start by saying these are things we planned on and we had in our plan. And I think we said -- that's why we said we're actually exceeding our plan. And it's actually -- the fact that the segment profit margin is only down 10%, they're still north of 20%, is a testament to the strength of the business model at Olive Garden. Now with that said, let me explain a little bit more detail.

First of all, we still priced below total inflation. Olive Garden's pricing was only 1.9%. So that's a pretty low price in this environment given that, again, the total inflation. Second, specific to those 2 items, they were roughly on the margin, if you just purely look at the margin percentage impact, they are probably about 20 basis points each. So if you put that back, I mean, we would have been positive 30, right? But that's, again, even with pricing below inflation. So I think that's sort of a key metric that we need to take into consideration because we believe, long term, these are the right decisions we're making. And I think any business would envy a 20-plus segment profit margin.

Got it. I appreciate that. And then maybe just drilling a little bit more into the delivery business at Olive Garden. Can you talk about -- Rick, you had mentioned that you're pleased with how, obviously, you're seeing younger guests make their way in, more affluent. Can you give us any more information on the frequency of those guests? Are they coming more so than what you're seeing within the store in terms of frequency and how they're using it even, obviously, it hasn't been a year yet, but seasonally, how they're maybe using that channel relative to in-store?

Yes, Jon. We've said -- as we said in the past, we are getting higher frequency for delivery guests than we are in dining guests. It's still early. We haven't had the delivery for a year yet, as you mentioned.

As to seasonality, the one thing that Uber told us is normally, over the summer, delivery orders start to kind of fall off. And we really hadn't seen that. So we'll know a little bit more about the seasonality of delivery after we've passed a year or maybe even 2 years, because it continues to grow for us. That said, we're very excited about how delivery is going. And as Raj mentioned earlier, we are using some of that extra guest count and extra margin to invest for all guests, and we feel really good about that for the long term.

Next question is coming from David Palmer from Evercore ISI.

Aside from the beef cost question, I think there's probably 2 areas that are major areas of curiosity, and I certainly share them. And one is the strong performance of the casual dining segment, which is becoming increasingly unusual after fast casual has slowed through the year, through the middle of this year. And another, I think, is Olive Garden against more difficult comparisons later in your fiscal year. How will it do and what are you lining up against that?

So those are really my 2 questions. What are your thoughts about why casual dining is doing as well? And do you think that will continue? And then separately, Olive Garden, you're rolling out a pretty large test on small portions, but what are your thoughts? And what are you kind of lining up to keep the momentum going as you get into lapping some of the good stuff you've been doing in the last 3 or 4 months?

Yes, David. I believe the strong casual dining segment is driven by, generally, less pricing than other segments of dining, for the segment itself, for casual dining itself. And for the larger players in casual dining, even lower pricing than casual dining total. So there's -- the guests are starting to see the value that casual dining brings.

Now we've been seeing that for a few years now, as you know, it's just others are kind of following in line with that, and we're seeing that the guests see the value. Also, when they're trying to figure out where they spend their money, they're going to places where they can connect and engage with their friends and family. There may be less snacking going on and less kind of munching, but when people are going out to eat, they're going out to where they can feel they can get a great meal at a great value and have time with their friends.

In regards to Olive Garden for the back half of the year, we have plans to continue the momentum. We do know that the comparisons get a little bit more challenging. But the Olive Garden team is working on things that we could do in the back half of the year. We've got a great plan. We do believe that, over time, the affordability items on the menu, the lighter portion -- I don't want to call them affordability. They're the right portion size for the right price for a group of consumers, that will eventually drive more traffic. It might not drive it in the back half of the year because we're not talking about it yet. That said, we may start talking about it in the back half of the year.

So there's a lot of things that we're going to do. We've got a great team. And we'll react to whatever the sales trends look like at Olive Garden, and we'll go from there.

Your next question is coming from Jim Salera from Stephens.

I was hoping you could give us a breakdown on LongHorn, just the comp split between traffic and ticket. And then as a follow-up on that, have you seen any increase in engagement with consumer -- you mentioned, obviously, pricing 100 basis points below inflation. Should we kind of expect that similar gap to progress through the year? Or any thoughts around how we should expect pricing to trend?

Yes. So let's start with the LongHorn traffic versus -- LongHorn traffic was up about 3.2% for the quarter. The same-restaurant sales were 5.5%. So the check was 2.3%. Their pricing was 2.5%. They had a little bit of a negative mix, primarily [indiscernible], of 20 basis points.

In terms of pricing versus inflation, at LongHorn, as we said, we -- there was a bigger spike in beef prices. That was a little bit of a surprise at the end of the quarter. But we also had planned on having some gap to pricing. So it further widened, I guess, by the time we ended the quarter, a little bit.

As we look through the year, we expect second quarter, at the Darden level, without getting specific segment level here. at the Darden level, we expect pricing to be about 100 basis points below inflation, and we expect that gap to narrow as we go through the year. And so you would expect the pressures on the margin to be -- kind of follow that, right? So we probably have the biggest gap in Q2, maybe cut that in half by the time you get to Q3 and then try to narrow that further as we get to Q4.

But consistent with our philosophy, our pricing for the full year will probably be -- we'll end up being below inflation. Is it going to be 30% or 50%? I don't know. We're working through that. I think our -- we've been always very thoughtful about what cost do we actually price for. And we don't want to price for temporary costs. We want to price for, over time, find other ways to solve for these incremental costs. And that's what our team is focused on.

Great. And then you guys mentioned the value-focused menu expansion at Olive Garden. Is that something that we could see maybe in a more limited fashion at LongHorn as well, maybe focus on like appetizers or smaller plate items? Or is that something that right now it's just Olive Garden focused?

Yes. We're doing this at Olive Garden to see how that works out. And if other brands think that it makes sense for them and they get the learnings from Olive Garden, maybe they will implement. But right now, the focus is the Olive Garden and it's the Olive Garden team that's driving it. And as I said, we'll see how that goes. Now there might be some things that LongHorn does in the future or other brands do in the future, but they'll make those decisions as those times come.

Your next question is coming from Eric Gonzalez from KeyBanc Capital Markets.

Just a few quarters ago, you talked about some strength among the lower income consumers. Obviously, most of your peers, particularly on the fast food side, are talking about weakness among that cohort of income. So if you maybe you could talk about what you're seeing from an income perspective, and are you gaining share among lower-income consumers? Do you think that part of the equation is actually holding yourselves up relative to your peers? And are you seeing some maybe trade into the category from some of the higher-income folks, particularly on the casual dining side?

Yes, Eric, specific to casual dining, all our casual dining brands saw an increase in visits year-over-year from guests across all income groups, but specifically those in higher income groups. So you would expect that that would have been -- that could have been some trade down, but it could be trade up from a lower income group to a great value in casual dining.

We are seeing a few shifts in behavior and that guests are going towards price certainty, so they know what they're going to pay before they come in, or greater perceived value even if the item is a high price. So if you think about the Calabrian steak and shrimp that we had at Olive Garden, great preference, great perceived value. It was the highest priced menu item on the menu. But we are seeing, as I said, for casual dining brands, growth among all income groups.

Great. And then on the -- just to close the loop on the commodity discussion. Based on where the commodities are now and what you've locked in, I know you're a little bit lighter on the beef side, what do you think that implies for store-level margins? And what's embedded in the guidance? In the past, you talked about modest margin expansion you still think you can get there based on what you did in the first quarter and where you are locked in.

Eric, I would refer you back to our long-term framework, which basically talks about our earnings after tax from 0 to 20 basis points growth. So if you look at our guidance, even at the low end, we're basically either flat or growing margin at the Eats level. We don't want to focus too much on any one line item, and for us, ultimately, if we're able to achieve our long-term framework and get the targets we want to get to by investing more in the guest, we want to do that. If that means that the segment profit margins are down year-over-year, that's not something we're concerned about. I think our focus ultimately is on -- at the Eats level, at the earnings after tax level, are we staying flat or growing margins? And that's -- we feel like we're still on a path to get there.

Your next question today is coming from David Tarantino from Baird.

Rick, I had a question about your views on the overall health of the consumer spending environment. Certainly, you had a great quarter. But I guess over the last few months, we've seen a lot of crosscurrents related to the job updates and whatnot. So I'm just maybe wanting to get your thoughts on where we are from the state of consumer spending and whether you think anything's changed recently relative to maybe where you thought it was at the start of the year.

Yes, David, I can't say that anything has changed dramatically from where we saw it at the start of the year. We are ahead of where we thought we'd be right now. There's a lot of talk about the job revisions, but those jobs didn't exist. So that's what people were working. And so we're dealing with what was actually happening, not what was thought to be happening. And so I believe that the August retail sales were up pretty significantly, and we had a pretty darn good August too. So I don't see any dramatic change to what we thought the consumer was.

Great. That's helpful. And Raj, one quick clarification. You mentioned the inflation versus pricing gap is expected to narrow as you get into maybe the second half of the year. Is that because of the price components going higher or the inflation components coming down? I guess, could you explain kind of how that might work?

Yes. Sure, David. It's primarily the -- we are taking a little bit more price as we go through the year. We mentioned that at the beginning of the year, right? We started pretty low in the first quarter. We expect to get for the full year to be in the mid to high 2s. And we started with 2.2, as you can see, as the year progresses, that moves up a little bit. And then there's also some near-term pressures that we expect, because like I said in the commentary around beef, we don't think all these high prices are sustainable. I mean these are pretty punitive to the consumer, and we're trying to protect them by not pricing for it.

Our next question is coming from Sara Senatore from Bank of America.

I wanted to ask about the idea of sort of investing and growing top line, more of a top line-driven growth algorithm. You mentioned pricing below inflation and, obviously, affordability is something that your brands are known for in terms of value for the money. But I guess I could also characterize marketing as a way to do that or even perhaps subsidizing delivery fees.

So I was just curious, as you think about the kind of different investments, is marketing something -- I know you said you got some leverage, so marketing dollars were higher though, perhaps a little bit light of what we might have expected. And you talked about delivery fees as perhaps margin pressure. So I wasn't sure if that's because you're not fully covering them with what you charge your customers. But perhaps you could -- and I know it's free delivery this quarter, so perhaps an exception. But maybe you could talk a little bit about as you think about investing behind top line, these other possible ways to do that. And then I do have another quick follow-up.

Yes, Sara, we do believe that marketing can help drive traffic. And while our marketing as a percent of sales didn't seem to grow, I think Raj mentioned in the prepared remarks, we had some cost saves in marketing that offset our actual marketing growth. So we actually had more TRPs out there, our other brands that are not on linear TV or testing connected television and other digital aspects, cheddar's has their first ever 30-second commercial on a connected television. So we are increasing our marketing activity because we believe that that will drive some traffic. But we're not doing it at deep discounting in the ways that we had done it in the past.

And you did -- I think you answered your question on the delivery fees. There are other ways that we can do things to drive delivery. But this quarter, the 1 million free deliveries did impact a little bit of the margin.

Great. And then just the follow-up was, I think, Rick, you alluded to less snacking or munching. I was curious, is that like a GLP-1 reference in terms of like how people are changing their eating patterns? Or was it more people are prepared to give up some of these sort of convenience or impulse occasions and spend behind really good experiences like they get at Olive Garden or LongHorn or your other brands?

Yes, I think it's a little bit of both. There are some people on GLP-1s that when you do the research on them, they eat smaller portions or they eat out a little less, but when they eat out, they actually eat out more in casual dining. And so there is a little bit of that.

But I think it's maybe even a consumer that says, "I'm just trying to be healthier or eat a little less." And so maybe there is a little less snacking.

And at the lower end consumer, they probably don't have as much resource to go out as much as they did, and it's probably impacting another category more than it is impacting us.

Next question today is coming from Jeffrey Bernstein from Barclays.

Great. Rick, for fiscal '26, you raised your comp guide modestly. But clearly, that's in spite of maybe what many people expected, a slightly tougher macro and concerns on consumer slowdown and we know about the tougher compares. I think you mentioned the first quarter was modestly above your plan. But any color you could share on your confidence in raising that guide?

And as we think about the current fiscal 2Q, the compares are definitely much tougher. In the last quarter, you were willing to frame kind of what you expected for the current quarter versus your full year guide. Wondering whether you think the fiscal second quarter will come in above or below kind of that new range. And then I had one follow-up.

Yes, Jeff, I'll start by saying we wouldn't have increased our guidance if we didn't feel confident about it. So as we look at our same-restaurant sales and our total sales -- part of the reason we raised our total sales is we're really confident in our unit count in development. We increased the number of -- well, we got rid of the low end of our range for development and we say now we're approximately 65, partly because we are -- most of the restaurants are either built or being built or open already, and some of them are coming in earlier than we thought. So we feel really good about our development pipeline.

And I'll let Raj talk about the cadence of our comp, but -- for the second quarter and beyond.

Yes, Jeff, I'd say, look, we expected as we went into the year for the back half to be not as strong in comps as the first half. But I think as the year is progressing, we're learning more and we feel really good about how even the second quarter started off, and that's all taken into consideration as we provided this guidance. But I think ultimately, the cadence will still be the fact that we still expect the back half to be lower than the first half.

Understood. And then just a follow-up on your Uber partnership. I know it's still early, but it seems like you're having success with Olive Garden and Cheddar's with the 1P. I'm just wondering, first, whether you'd consider a next brand to embrace that 1P Uber delivery and whether there's any updated thoughts on potential for using Uber for the order aggregation part of things, not just delivery.

Yes, Jeff. We are pleased with our first-party delivery, both at Olive Garden and at Cheddar's. It continues to grow for us. We do have another brand that's wanting to embrace it, and we would expect that brand to be on the platform sometime in Q3. I won't tell you what brand that is, but they're very excited to jump into the first-party delivery.

In regards to marketplace or third party, whether it's Uber or anyone else, we still have some challenges with the model. We're focused on first party right now. And we've talked about the things that we don't like about third party. If a provider can come with every solution that we have for third party or the reasons that we don't like it, then we would definitely consider it. But right now, we're very comfortable and very pleased at how first-party delivery is going.

Our next question is coming from Jacob Aiken-Phillips from Melius Research.

Yes, I first wanted to double back on unit growth acceleration over like the medium to long term. I know you took away the lower end. Just how should we think about that ramping up, especially with -- I know there's some new prototypes, there's some acceleration in Canada and a couple of moving parts?

Yes. The development is our owned restaurants, so 65 of our restaurants. Canada is all franchised, so that doesn't count in our unit growth. We get a lot of good royalties from that, but that doesn't -- isn't a unit for us.

In regards to how we're going to ramp up our 5-year plan, has us solidly in our long-term framework of 3% to 4% of our sales growth coming from new units. And so you would expect our unit growth percentage to ramp up a little bit year-over-year.

Great. And then just on -- I know that there was like some prototypes like smaller, but then also some of the competitors are saying they're seeing some higher construction costs from like imported stuff. Any comments there?

Yes. We've got a couple of brands -- actually, all of our brands, especially Olive Garden and LongHorn, over years, worked on the right prototype size. Yard House and Cheddar's have just come out with new prototypes that are smaller, much more efficient and the costs are lower than it would be for building our existing prototype-size restaurants. And we've opened a few of them and they're doing really well and they're able to generate the sales that our existing prototypes are generating in general.

In regards to costs, our costs are much closer and actually sometimes under our budgeted amounts, which is very different than it was before. Tariff impacts, we don't believe, are too dramatic to construction costs. And so we feel really confident about our pipeline and being able to build them at a very good return for us.

Your next question is coming from Jake Bartlett from Truist Securities.

My first one is on delivery. I'm hoping you can frame the mix that delivery was in the first quarter, but also what the exit rate was after the promotion. Also, whether you expect to promote similar promotions in the -- as we go forward in '26. And then I have a follow-up.

Yes, Jake, I'll speak specifically to Olive Garden. I think that's what you're asking for. So for Olive Garden delivery in the first quarter was about 5%. We exited at about 4%. As we mentioned, when we stopped 1 million free deliveries, we exited a little bit lower, but still 40% above where we were before the promotion. I think that was...

That was the question. And whether you expect to do a similar promotion to the 1 million...

Sorry. I don't know if we may do another 1 million free deliveries. I don't know, but we do have marketing funds that Uber gives us based on our volume. And so we're going to utilize those somehow. Whether it's 1 million free deliveries or doing something different, we will utilize those funds.

Got it. In terms of the Never Ending Pasta Bowl promotion, I think time is similar to last year. I'm wondering, you made a comment about consumers really grabbing -- taking towards price certainty, some momentum in August. I'm wondering whether you can comment on how you expect Never Ending Pasta Bowl to perform this year versus last and maybe how it is performing, whether it's particularly resonating with consumers right now.

Yes. I will say that Never Ending Pasta Bowl is off to a good start for us. It's really at the center of Olive Garden's core equity of Never Ending Craveable abundant time food. And preference is up versus last year, and the team is doing an amazing job ensuring that guests get refilled. So the refill rate is way up.

So I think guests are understanding that promotion more and more as we brought it back and they really understand the value that it brings. And I will say that the performance to date is in our guidance.

Next question is coming from Peter Saleh from BTIG.

Great. Maybe just one question, on the beef situation. Can you elaborate a little bit more on maybe what's driving it higher in the near term or more recently? And why do you think this is not sustainable? And then just more specifically, if these prices are sustained or maybe even go higher, would you take a little bit more price at LongHorn in the back end of the year? Just trying to understand the strategy there if beef prices actually go a little higher from here.

Yes, Peter, let's just start with the dynamics, right? Right now, supply is constrained from a few things. One, there have been some pack or cutbacks and also Mexican cattle imports have been halted because of the screwworm outbreak. So those are kind of the drivers of the supply constraint.

In addition to that, tariffs on Brazil are causing a significant reduction in beef imports into the U.S. So that's also creating a constraint. So those are on the supply side.

Part of the reason we don't believe that kind of a price increase, especially double-digit price increase you saw, we're seeing are not sustainable, is because the consumer can't afford these. And over time, there will be some -- there should be some demand destruction. And also, the amount of cattle on feed has actually been fairly consistent month to month. And at some point, this cattle has to be -- has to go put to work, I guess.

So those are the reasons how we think about where the prices might go. Who knows exactly? We don't know. We're just -- but we're a lot more open for those reasons.

Now as we think about what would we do, yes, if these -- if prices stay very high, that means that the demand is also very high, which means we should be able to take some price. We're not -- that's not our preferred path, but if the dynamics lead to a place where we feel good about demand, then yes, we'll take some price.

Your next question is coming from John Ivankoe from JPMorgan.

I want to go a couple of different directions. First, Raj, in your prepared remarks, you did talk about seeing some demand destruction at retail. I wondered if you're actually seeing that, if it's recent. Some of the data that I've seen, I thought it was recent, was actually showing quite high demand at the retail level. So I just hopefully got your facts being better than mine, just to kind of correct me what we're seeing in retail and if we are seeing any material signs and a slowdown in retail because that could certainly help us on the restaurant side from a supply perspective.

Yes, John. So you're right in the fact that if you go back a few months, it's been pretty robust. But if you look at the last month of data, you're starting to see that decline. Actually, the data we have shows that the volume actually declined in the low single digits year-over-year at retail. That wasn't the case for prior, call it, 4, 5 months or so. So there was -- yes, there was some resiliency in that, but it's starting to -- at least we saw 1 month of data where it slipped into low single-digit decline year-over-year.

Okay. And that's maybe just classic growing season being over and people are just shifting to other things. That's helpful. So...

No. It's year-over-year. Sorry, I just want to clarify, we look at year-over-year. So seasonality is captured in the year-over-year.

Yes. But it's -- we're speaking the same language, I just said that awkwardly. So it was interesting, hearing things like reduced portion prices of some -- reduced prices in some portions of some core menu items, things like Hawaiian steak. I'm not going to name the brand that it reminds me of 20 years ago, but -- and as well as in the Darden concept, but I've seen this done actually quite unsuccessfully over time. In other words, when consumers kind of expect to see a certain amount of food on the plate, especially at dinner, it's not something that you're necessarily happy with even if they are paying lower prices.

So Rick, I'm sure you know exactly what I'm talking about. But was there anything to learn about previous history lessons in casual dining specifically? I think this is probably tried around 2007, 2008 where smaller portions at smaller prices were tried, but weren't successful. And things like Hawaiian steak way back when, which you tried that, a few people like, but really a lot of people different. Where are we on that stage gate process today in 2025 maybe versus some of the lack of success the overall industry had 20 years ago?

John, I'll start with the Hawaiian steak. It's not a smaller portion size. It's a Cheddar's. It's a great portion for Hawaiian steak. And by the way, LongHorn ran Hawaiian steak and did really well with it a few years back. So maybe there's different tastes now than they were back then.

And in regards to portion size, I think if you go back 20, 30 years ago, overall portions were maybe a little bit smaller in the dinner menu already. And so if somebody brought even smaller portion, it went a little bit too far. And then -- but the way we're thinking about it is there is a consumer group out there that believes in abundance, but abundance is different for everybody. And by bringing some smaller portion sizes to the dinner menu at Olive Garden, there's still abundant portion sizes, but it also adds price breadth to the menu. So consumers can choose. We're not changing our entire menu to make it a smaller portion. We are putting items on there that are smaller with a compelling price point. And at Olive Garden, you still get the unlimited soup or salad and you get all the breadsticks you want. So it's still a great -- it's still abundant.

And maybe our consumers finally evolved that you don't need to have uneaten food on the plate to feel that you've gotten good value. You can just see just the right amount of portion and be happy with it. So that would certainly be a change versus the old America, but that'd obviously be a good direction to go. Okay.

Next question is coming from Lauren Silberman from Deutsche Bank.

I just want to go to top line. A lot of questions, obviously, what's going on in the restaurant industry broadly. You talked about strong August. Can you just help unpack sort of what you saw in terms of cadence of comps during the quarter? Any more color on September from that? And then any differences in performance that you're seeing across the regions?

Yes, Lauren, I think from a cadence of comps, actually, the gap to the industry was the biggest for us in August. In fact, when we look at our own internal comps, we were actually -- July was our weakest. And so for us, June was pretty strong. July was still strong, all positive, but just if you look at the weak month to month, July was weaker than June and August. And actually, like I said, August had the biggest gap to the industry.

As far as regionality, there isn't a huge amount of regionality. It's actually what we're seeing is fairly similar to what you kind of see in Black Box with certain markets still not performing as well, such as Texas, and Florida is starting to pick back up so it feels like Florida is getting better. And then depending on the brand, California had some decent strength. So that's all I can share regionally. There's not a lot of other stuff to get into there.

Okay. And then just a follow-up on the commodity side. What are you expecting in terms of cadence to get to the 3% to 4% for the year? I understand like there's a commodity price dynamic, but do you expect like 2Q to peak in terms of actual commodity inflation?

At this point, yes, we think Q2 will -- probably the peak. But Q3, Q4, probably not that much lower. I mean by the time we get to Q4, we expect it to be a little bit better than where would be. But Q1 would be the lowest that we just had, right? It was 1.5%. I think pretty much every quarter going forward is we're expecting to be north of 3%, and that's how you get to the 3% to 4% guide. But Q2 is probably the peak.

Next question is coming from Danilo Gargiulo from Bernstein.

Maybe a year ago or so, you started talking about the relevance and importance of improving the speed of service. And maybe, arguably, with the increased focus on affordability or right portion for the right price, there could be even more of an overlap between consumers who might be choosing casual dining over fast food. And so I'm wondering if you have any early signs or any KPIs that are showing some momentum that you're picking up in the improvement in speed of service so far.

Yes, Danilo, across our brands, we're seeing some brands with some improvement and other brands that haven't really made a whole lot. And so we had a refocus on that this year at our general manager conference, and we would expect to see greater improvement in speed of service in the upcoming years.

Recall, when I mentioned that, I said this is going to take a while. And it is taking a while. But the managers are really getting on board with it over the last year, and the reinforcement of our conference gives me great confidence that we're going to get better.

In regards to, do we have any data to say that we're taking share from other categories, the only thing I can say is all of our consumer groups and all of our income groups were positive year-over-year in casual dining, which is probably the best chance to take share from other categories. And those other categories have had a little bit more traffic decline. So maybe we're taking share or maybe they're just losing some share.

And then it sounds from Raj's response that there's not a lot of regional differences, maybe with the exception of Texas and maybe pockets in California. So if you're stepping back and analyzing the delta between the top-performing stores within the same brand and the bottom-performing stores within the same brand, what is the one characteristic that is driving the increased performance? And how can you make that more standardized across the rest of the group?

I will say this is a tried and true thing in restaurants, the thing that drives the most performance within a brand is the quality and consistency of the managers in that restaurant, and the team. And so as turnover gets better, if you've got a great general manager and a great team of managers that are running things to our standards, you have better performance. And so that's going to be restaurants for the rest of our lives. You can have restaurants that are in a market that's doing great, but the restaurant is not doing great. It all comes down to leadership.

Our next question today is coming from Dennis Geiger from UBS.

Just wanted to ask if anything to note -- else to note on sort of behaviors that Olive Garden, LongHorn or broadly across the portfolio as it relates to performance across daypart or even kind of within the menu side, desserts, alcohol, anything to call out there?

Yes. Look, I think we are seeing -- I mentioned a little bit about alcohol. There is less -- we're seeing some lower preference on alcohol across most of our brands. There is -- some brands at LongHorn, for example, has grown lunch more than their dinner, but all dayparts are growing there.

And then in Fine Dining, I think we're seeing a little bit more drop-off in the business travel that's leading to some weekday weakness. But those are some of the dynamics from a consumer perspective that I can share.

Your next question is coming from Chris O'Cull from Stifel.

Rick, the conversation around eliminating the tip wage seems to be ramping up. Do you believe there's a risk that it could be eliminated? And how are you thinking about any potential impact it could have on the business?

I would start by saying this industry has really diverse business models. And we believe that the policy environment should reflect the level of diversity in the model. As a full-service operator, our business model continues to be the best choice for our guests and our team members. And I will tell you that whatever happens, we're going to be okay with it, okay in the way we react. So I don't foresee a big change in that. But if it does, we will work through those things and come out okay.

Your next question is coming from Brian Vaccaro from Raymond James.

Just 2 quick ones, if I could. First on the housekeeping side. Raj, could you break out the Olive Garden comps between traffic and check? And as we think about check at Olive Garden, I think it's been exceeding pricing for the last several quarters. Is it still reasonable to expect check to exceed price as you think about the next few quarters?

Yes, Brian. Let me start with the breakdown. Olive Garden same-restaurant sales was 5.9%. Their traffic, as we measure was 2.8%, but then they also had catering of 80 basis points. So I would categorize that as 3.6% traffic growth. And then when you think about the check, pricing was one line, and Uber fees, basically the delivery service fee net of the discount, was about 40 basis points.

So yes, as we go into the future, do we expect check to be a little bit higher than pricing? Yes. But it will be because of the delivery fee and service fee, is really the driver yes.

Okay. And then just as a follow-up, obviously, talking about investing in the guest experience, as you've been doing for a while, but thinking about fiscal '26 specifically as well. When you look at labor in the first quarter, it looks like labor per operating week as we look at it was up 4.5%, maybe closer to 5%. You talked about the higher incentive comp, and obviously you have higher traffic, which takes more labor to service. But I'm curious to what degree that also reflects some reinvestments that you're making in the guest experience. And maybe you could provide a few examples of the specifics on those reinvestments.

So Brian, let me just start by saying, from a labor perspective, our total inflation was 3.1%, right? So if you look at -- you mentioned 4.5% increase on dollars, but if you take the 3.1%, that is part of it. Then it was up about 1 point or so, but our traffic was up closer to 3% once you take into consideration the catering at the Darden level. So that means we're actually getting some leverage on that traffic.

And so that's really what's happening. And that's why I mentioned in the script that we were -- we had productivity improved actually year-over-year.

We continue to look at ways to invest in labor. I don't think we need to get into specifics, but some of the things that Rick mentioned about speed, those are places where we're looking at. How do we help ensure that? But that doesn't translate necessarily into a labor deleverage because you actually get more throughput when we make those investments.

Next question today is coming from Andrew Charles from TD Cowen.

Our next question is coming from Jim Sanderson from Northcoast Research.

I just had a few follow-up questions. Going back to the delivery segment, have you discussed what percentage of sales mix was incremental? I think that's been a little bit of a moving target, especially given the promotions. Maybe you could update us on what you expect incrementally out of delivery for both Olive Garden and Cheddar's.

Yes, Jim, I'll speak specifically outside of the promotion. It's about 50% incremental. During the promotion, when you get free delivery, some of the people that would have gotten normal to go probably shifted into delivery. But outside of that, it's about 50%, both the Cheddar's and Olive Garden.

Okay. So relatively stable with what it has been, let's say?

Yes.

And then just a follow-up question on Olive Garden, when we were talking about the breakdown same-store sales, I didn't really detect any negative mix. And I was wondering, does that mean that the smaller portions and the promotions aren't having any meaningful impact on check? Is that the right way to look at that?

Well, they have -- that specifically has a negative impact, but it was offset by other mix. So we are seeing -- we had -- I think we mentioned on the call, we had the Calabrian steak and shrimp that had a higher price, but we actually had -- saw a pretty strong preference there, that helped. So it was mostly entree mix itself tended towards higher value, sometimes maybe higher price items. .

Your next question is coming from Andrew Charles from TD Cowen.

Yes. This is Zach Ogden on for Andrew. Could you just elaborate on where the strength is coming from for Other Businesses? Are there certain brands that are outperforming others and what would be leading to that?

Do you mean in the Other Business or other business? I just want to make sure I understand the question.

Yes. So the Other Businesses segment, so the 3.3% in 1Q. What was the strength coming from there?

Well, we mentioned that 3 of those brands were all positive, some more positive than others. I think Cheddar's was the most positive and then Yard House after that and potentially Seasons are right around there. But I think Cheddar's had the highest comp in that segment.

Okay. Got it. And then could you just comment on what you're seeing from the younger cohort more broadly maybe just beyond delivery? Are you seeing certain or, I guess, relative strength or weakness among Gen Z?

They're fairly similar to the rest of our consumer group.

Thank you. We have reached the end of our question-and-answer session. I'd like to turn the floor back over for any further or closing comments.

This concludes our call. I want to remind you that we plan to release second quarter results on Thursday, December 18, before the market opens, with a conference call to follow. Thank you for participating.

Thank you. That does conclude today's teleconference and webcast. You may disconnect your line at this time, and have a wonderful day. We thank you for your participation today.

Greetings, and welcome to the Darden Restaurants Fiscal Year 2025 Q4 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. It's now my pleasure to turn the call over to Courtney Aquilla, Senior Director of Finance and Investor Relations. Courtney, please go ahead.

Thank you, Kevin. Good morning, everyone, and thank you for participating on today's call. Joining me are Rick Cardenas, Darden's President and CEO; and Raj Vennam, CFO. As a reminder, comments made during this call will include forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. These statements are subject to risks and uncertainties that could cause the actual results to differ materially from our expectations and projections. Those risks are described in the company's press release, which was distributed this morning, and in its filings with the Securities and Exchange Commission. We are simultaneously broadcasting a presentation during this call, which is posted in the Investor Relations section of our website at darden.com.

Today's discussion and presentation include certain non-GAAP measurements, and reconciliations of these measurements are included in the presentation. Looking ahead, we plan to release fiscal 2026 first quarter earnings on Thursday, September 18, before the market opens, followed by a conference call.

During today's call, I'll reference to the industry results refer to the Black Box Intelligence, casual dining benchmark excluding Darden. During the fiscal fourth quarter, average same-restaurant sales for the industry grew 3.0% and average same-restaurant guest counts grew 0.9%. This morning, Rick will share some brief remarks on the quarter. Raj will provide details on our fourth quarter and full year financial results as well as share our fiscal 2026 financial outlook. Then Rick will close with some final comments.

Now I will turn the call over to Rick.

Thank you, Courtney, and good morning, everyone. We had a strong quarter with same-restaurant sales and earnings growth that exceeded our expectations. I'm proud of the great work by our restaurant teams throughout the quarter, particularly on Mother's Day as several brands achieved sales records for that day. The return of Olive Garden's buy one take one offer for the first time in 5 years, combined with the continued strength of off-premise, drove their impressive sales during the quarter. Olive Garden's marketing strategy to meaningfully communicate strong value, create urgency and introduce food news continue to resonate as guests are motivated by news and compelling price points.

Buy one take one with a starting price point of $14.99 allowed guests to choose one entree for their dining experience and then take a second one home. The take-home selections leveraged Olive Garden's existing $6 take-home platform, minimizing operational complexity. During buy one take one, Olive Garden same-restaurant sales gap versus the industry increased to 450 basis points.

With delivery available nationwide, the entire quarter, Olive Garden continued to see order volume grow week-to-week while retaining higher-than-average sales per transaction versus curbside pickup orders. This, combined with continued growth in catering and curbside to go, drove overall takeout sales to grow nearly 20% over last year.

At the end of the quarter, Olive Garden launched a campaign to promote delivery across multiple channels, including television advertising, with a compelling and memorable offer, 1 million free deliveries, partially funded by Uber. We continue to see strong incrementality with average weekly deliveries per restaurant nearly doubling during the last 2 weeks of the quarter. The Olive Garden team continued to execute at a high level, which led to an all-time high guest satisfaction score for the quarter. I am extremely proud of how Dan Kiernan and his team managed the business throughout the year and the strong momentum they have generated heading into the new fiscal year.

At LongHorn Steakhouse, the ongoing commitment to quality, simplicity and culture continues to drive their momentum. Their entire team remains obsessed with serving the highest quality stakes in casual dining. This includes having industry-leading specifications and ensuring they perfectly season and grill every stake they serve. To support this, during the quarter, Olive Garden validated each one of their Grill Master's expertise with the 8th Annual Steak Master series, their internal drilling competition and training program.

Congratulations to Tim Crane from the LongHorn Steakhouse Independents Missouri who claim the Championship Trophy. This focus on ongoing training continues to pay off as LongHorn ended the year with an all-time high stakes will correctly score as well as a new all-time high guest satisfaction score for the quarter. Laura Williamson and her team have done a great job of building on the business momentum at LongHorn.

For the fiscal year, the same-restaurant sales increased 5.1%, and they reached a major milestone by surpassing $3 billion in total sales. These results reflect the strength of their focused strategy. Last quarter, we announced Cheddar's Scratch Kitchen have begun piloting Uber Direct. It was a successful pilot. And as of last week, delivery is now available in all but 8 Chuy's restaurants. Paid media and e-mail support began earlier this week, partially funded by Uber.

The Cheddar's marketing team also continues to build on its use of connected television debuting the first 30-second spot in Cheddar's history during the quarter. The spot was developed at no cost at Darden, thanks to the scale of our CTV media spend across our portfolio. In addition to Olive Garden LongHorn, Cheddar's also received an all-time high guest satisfaction score for the quarter, as did Ruth's Chris Steak House and Eddie V's.

We know that engaged well-trained team members helped drive operational success and 2 of our brands were recognized for their people practices during the quarter. Longhorn and the Capital Grille received the Employer of Choice Awards from Black Box Intelligence, for casual dining and fine dining, respectively. The award recognizes exemplary performance in managing turnover rates, fostering an inclusive workplace culture and implementing best-in-class people practices.

Overall, I am pleased with our results. Our adherence to our winning strategy anchored in our 4 competitive advantages and being growing with the basics, led to a successful year. Our strategy remains the right one for the company, and we will continue to execute it to drive growth and long-term shareholder value.

Now I will turn it over to Raj.

Thank you, Rick, and good morning, everyone. As Rick said, fiscal 2025 was another strong year, driven by disciplined execution of our strategy. In the fourth quarter, same-restaurant sales continued the sequential improvement from prior quarters with our casual brands gaining significant market share. This resulted in sales and earnings exceeding our expectations for the quarter. Furthermore, we finished the year with same-restaurant sales at the top of our initial guidance range and earnings in the upper half of the range despite the slower-than-expected start to the year.

Now looking at the fourth quarter. We generated $3.3 billion of total sales, 10.6% higher than prior year. This was driven by same-restaurant sales growth of 4.6% with positive traffic growth, the acquisition of 103 Chuy's restaurants and the addition of 25 net new restaurants, which includes the permanent closure of 22 underperforming restaurants. Same-restaurant sales exceeded the industry benchmark for the quarter and were in the top decile of the industry.

Adjusted diluted net earnings per share from continuing operations increased 12.5% to $2.98. We generated $582 million of adjusted EBITDA and returned $215 million to shareholders through $164 million in dividends and $51 million of share repurchases.

Turning to the fourth quarter P&L compared to last year. Food and beverage expenses were 60 basis points lower as commodities inflation was better than expected at approximately 1.5%. Restaurant labor was 10 basis points lower as productivity gains more than offset higher performance-based compensation and pricing below total labor inflation of approximately 3.5%. Restaurant expenses were 20 basis points higher driven by brand mix with the addition of Chuy's and the impact of first-party delivery at Olive Garden, partially offset by sales leverage.

Marketing expenses were flat at 1.3% of sales consistent with our expectations. This all resulted in rational level EBITDA for the quarter, improving 50 basis points to 21.6%. Preopening costs were 10 basis points higher as we accelerated our new restaurant pipeline opening 19 restaurants during the quarter.

Adjusted G&A expenses were 30 basis points higher due to higher incentive compensation accrual compared to the fourth quarter last year and unfavorable mark-to-market expenses on our deferred compensation. Because of the way we hedge mark-to-market expense, this is largely offset in the tax line. Interest expense increased 20 basis points due to the financing expenses related to the Chuy's acquisition. And our adjusted effective tax rate for the quarter was 12.2%, with tax expenses down 20 basis points because of the mark-to-market hedge impact I referenced earlier.

In total, our adjusted earnings from continuing operations were $352 million, which was 10.7% of sales. In the fourth quarter, all of our segments grew total sales with 3 of the 4 segments growing same-restaurant sales and segment profit margin. Olive Garden increased total sales for the quarter by 8.1% with strong same-restaurant sales growth of 6.9% and the addition of 15 net new restaurants. Olive Garden same-restaurant sales outperformed the industry benchmark by 390 basis points for the quarter.

Uber direct delivery fees positively benefited check mix by about 40 basis points in the quarter. These fees were passed on to Uber with the revenue fully offset in restaurant expenses. Olive Garden continues to have industry-leading segment profit margin, delivering 23.8% for the quarter, which is 100 basis points higher than last year.

At LongHorn, total sales increased 9.3%, driven by same-restaurant sales growth of 6.7% and the addition of 16 net new restaurants. LongHorn continues to increase market share with strong and sustained sales growth exceeding the industry same-restaurant sales benchmark by 370 basis points this quarter and 850 basis points on a 2-year basis.

Segment profit margin for the quarter was 20.1%, 80 basis points above last year. Total sales for Fine Dining segment increased 2.3%, driven by the addition of 6 net new restaurants, which includes the permanent closure of 2 underperforming restaurants. Same-restaurant sales were negative for the quarter, resulting in segment profit margin lower than last year. While the Fine Dining category as a whole continues to be challenged, we are seeing sequential improvement in guest traffic from households earning $150,000 and above.

Total sales for the Other Business segment increased 22.4% with the acquisition of Chuy's and positive same-restaurant sales at Yard House and Cheddar's. This positive growth was partially offset by the permanent closure of 20 restaurants during the quarter, including 15 Bahama Breeze restaurants. Positive sales momentum and continued productivity improvements at Yard House and Cheddar's contributed to a 17.5% segment profit margin for the Other Business segment, 10 basis points higher than last year. The integration of Chuy's is progressing as planned with synergies on track and a neutral impact to EPS for fiscal 2025, which is in line with our expectations.

As we look at our annual results for fiscal 2025, we had same-restaurant sales growth of 2%, outperforming the industry by 170 basis points. Total sales increased 6%, surpassing $12 billion for the first time in our history. Adjusted diluted net earnings per share from continuing operations increased 7.5% to $9.55. We delivered $2 billion in adjusted EBITDA from continuing operations driven by strong sales growth, and we returned $1.1 billion to shareholders with $659 million in dividends and $418 million in share repurchases.

Looking at our fiscal 2025 full year P&L. Restaurant-level EBITDA grew 40 basis points, driven by disciplined cost management and pricing leverage. This favorability was partially offset by the increased depreciation and amortization expense, resulting in operating income margin that was 10 basis points higher than last year.

Financing expenses related to Chuy's acquisition increased adjusted interest expense 20 basis points from last year. This all resulted in adjusted earnings from continuing operations of 9.4%, which was 10 basis points below last year.

As I mentioned earlier, we permanently closed 15 underperforming Bahama Breeze restaurants as well as a few restaurants at other brands. These closures will result in a headwind to our fiscal 2026 total sales growth but are expected to be slightly positive to earnings. Fiscal 2026 is a 53-week year and we anticipate a positive impact from the extra week on diluted net earnings per share from continuing operations of approximately $0.20.

Now turning to our financial outlook for fiscal 2026. We expect total sales growth of 7% to 8%, including approximately 2% from the additional week; same-restaurant sales growth of 2% to 3.5%, and opening 60 to 65 new restaurants; capital spending between $700 million and $750 million; total inflation of 2.5% to 3% with commodities inflation of approximately 2.5% and total labor inflation of approximately 3.5%; EBITDA of $2.16 billion to $2.19 billion; and an annual effective tax rate of approximately 13% and approximately $117 million diluted average shares outstanding for the year, all resulting in diluted net earnings per share between $10.50 and $10.70. This morning, we also announced that our Board approved a 7% increase to our regular quarterly dividend to $1.50 per share, implying an annual dividend of $6.

Now turning to our long-term financial framework, which outlines the strategic priorities and performance expectations that guide our sustained value creation. We remain committed to delivering 10% to 15% total shareholder return as defined by EPS growth plus dividend yield. However, we're updating the framework to reflect a greater emphasis on sales growth with appropriate investments while maintaining our growing margins.

As a result, we're increasing new restaurant growth to 3% to 4%, and same restaurant sales growth to 1.5% to 3.5%. Additionally, we're updating how we define margin expansion, shifting from EBIT margin to earnings after tax margin to more accurately reflect how we view and manage our business. There are 3 primary drivers of this change.

First, due to the way we hedge mark-to-market expense on our deferred compensation, the impact in G&A is largely offset in the tax line. Second, current lease accounting guidelines result in an ongoing negative impact to interest and depreciation with an offsetting benefit in restaurant expense. And third, to account for any interest expense associated with any future acquisitions.

Our updated framework targets [indiscernible] margin growth to be flat to 20 basis points. This all results in [indiscernible] growth contributing 6% to 10% of total shareholder return. Our dividend remains a priority, and the target payout ratio range of 50% to 60% remains unchanged. Share repurchase is being updated from a dollar range to a percentage range of contribution to shareholder return. Return of cash is now targeted to contribute 4% to 5% of total shareholder return.

Looking at our performance since 2019 relative to the updated framework, new restaurant growth inclusive of acquisition was within the updated range having grown 3.1%. Same-restaurant sales of 2.9% is in the top half of the target range and [indiscernible] margin expansion was above the midpoint of the updated range, increasing 13 basis points on an annualized basis, resulting in an annualized [indiscernible] growth of 7.6% near the middle of the range.

The dividend payout ratio of 58% is near the top end of the range and share repurchase contribution to shareholder return was 1%, culminating in total cash return of 4.1% despite the issuance of 9 million shares of common stock in fiscal 2020. Total shareholder return as defined by EPS growth plus dividend yield was 11.6% and within our targeted range. Additionally, our -- over our 30-year history as a publicly traded company, Darden has achieved an annualized total shareholder return of 10% or greater for any 10 fiscal year period when taking into account Darden's stock appreciation plus dividend yield.

Finally, our strong operating model generates significant and durable cash flows. Since fiscal 2019, we've grown EBITDA by about $800 million and are on track to reach nearly $1 billion in EBITDA growth by the end of fiscal 2026. Our balance sheet at the end of fiscal 2025 is well positioned with adjusted debt-to-EBITDA of 2.1x. This is at the low end of our targeted range of 2 to 2.5x despite the additional debt related to the acquisition of Chuy's and Ruth's Chris over the past 2 years.

Now I'll turn it back to Rick.

Thanks, Raj. Strategic planning is one of our competitive advantages. And at the Darden level, it ensures that we have the right portfolio of brands, we align strategies and coordinate operations to maximize our portfolio's value and we capture the available synergies across all our brands. For our brands, our strategic planning process allows us to determine the strategic role in the portfolio, identify their distinct advantages and cultivate differentiated positioning, develop a deep understanding of their guests and the competitive landscape, and ensure they adhere to their strategy so they can compete effectively and grow share.

During the quarter, we completed our 5-year planning process. Each of our brands has a clear understanding of their role in their portfolio, and they have built a 5-year strategic plan based on that role, focusing on what they need to do to win today and into 2030. They have already begun to put their plans in action and will execute them to drive shareholder value. Additionally, there were some other key outcomes from that process that I would like to share.

As Raj mentioned, we made the decision to close 15 Bahama Breeze locations in May, leaving the 28 highest-performing Bahama Breeze restaurants in our portfolio. After further review, we have made the difficult decision that these remaining locations and the Bahama Breeze brand are not a strategic priority for us. We also believe that this brand and these restaurants have the potential to benefit from a new owner.

Consequently, we will be considering strategic alternatives for Bahama Breeze, including a potential sale of the brand, or converting restaurants to other Darden brands. Excluding any onetime potential impacts, which are unknown as of today, we do not expect these strategic alternatives including a potential sale to have a material impact on our financial results.

We also signed a definitive agreement to sell the 8 Olive Garden locations in Canada to Recipe Unlimited, the largest full-service operator in Canada, and we are on track to close that deal soon. These 8 restaurants will become franchised and upon close, Darden and Recipe Unlimited will enter into an area development agreement to open 30 more Olive Gardens over the next 10 years. Their expertise in the Canadian market will help the Olive Garden better operate locally and accelerate the brand's ability to grow throughout the country.

Our international franchising team led by Brad Smith, is focused on growing our global presence. Today, we have 154 franchise locations, which includes 63 in the Continental United States and 91 outside the Continental United States. One of the benefits of the Ruth's Chris acquisition was the scale it added to our franchise business. The increase in revenue from adding 74 Ruth's Chris franchise locations has allowed the team to grow faster. We were able to add the resources and systems to help our franchisees better operate our brands that would have taken us longer if we had not added the Ruth's Chris restaurants. And the team has been busy signing new area development agreements with international partners.

In addition to the agreement with Recipe Unlimited, we also have new agreements with partners in India and Spain, each of which calls for the development of 40 Olive Garden locations as well as an agreement with our existing Ruth's Chris franchise partner in Asia for the development of 6 Capital Grill locations. Brad and his team are doing a great job and I'm excited about the growth prospects of our international franchising business.

Also, as you may have seen from our 8-K filing this morning, after 33 years with Darden, Dan Kiernan will be retiring as President of Olive Garden on August 31. Dan has worked in the industry since he was 16 and began his career at Olive Garden as a manager in training. For the last 7 years, he has led Olive Garden to new heights and has been a tremendous steward of the brand. As I said earlier, Dan and his team have generated strong business momentum. And following the successful completion of their 5-year business plan, Olive Garden is well positioned for this leadership transition.

One of the benefits of our scale is having a deep bench of talent to fill leadership roles. I am pleased that we have another proven operator to lead Olive Garden. John Wilkerson who has led Cheddar's for the past 7 years, will be the next President of Olive Garden, and he will work closely with Dan over the next 10 weeks to ensure a smooth transition. John is a 30-year Darden veteran, who has done an excellent job of rebuilding the fundamentals at Cheddar's and setting the brand up for growth. John will continue reporting to me.

John's replacement at Cheddar's is Mark Cooper, currently President of Seasons 52 and Bahama Breeze. Lorie Kessler, who has led operations at Seasons for 52 years -- excuse 52 -- for 11 years -- sorry, didn't want to age you, has been named President of Seasons 52. Mark and Lorie will report to John Martin, Group President. In addition to Cheddar's and Season 52, John Martin will retain responsibility for Yard House, the Capital Grille and Eddie V's. He will also lead Bahama Breeze as we consider strategic alternatives for the brand.

Additionally, I am pleased to share that Thomas Hall has been named President of Chuy's. For the past 7 years, Tom has served as Executive Vice President of Operations for LongHorn. Tom will report to Todd Burrows, Group President, who is responsible for Chuy's and Ruth's Chris as well as Darden development and international franchising teams. With these changes, I am confident we have the right leaders in place across all our brands to compete effectively and grow share.

Finally, last month, Darden celebrated its 30th year as a publicly traded company. I was delighted to ring the opening bell at the New York Stock Exchange with several team members with 30 or more years of service, including Level Rutledge, our longest tenured team member at 52 years. That moment was a great reminder of an enduring quote from Bill Darden. He said the greatest edge we have on our competition is the quality of our employees reflected each day in the job they do. Our people drive our success, and I want to congratulate our teams on a strong quarter and a successful year.

On behalf of our leadership team and the Board of Directors, thank you for your continued dedication and commitment to nourishing and delighting our guests and each other. Now we'll take your questions.

[Operator Instructions] Our first question is coming from Eric Gonzalez from KeyBanc Capital Markets.

Congrats on the really strong same-store sales results. Well, obviously, you're executing at a very high level. It's really hard to deny the fact that the industry seems to be in a strong position, particularly some of the larger chains in full service. So perhaps you can give us your perspective on why casual dining is having a bit of a moment right now. And relatedly, I'm curious what your thoughts on how some of the smaller chains [indiscernible] that you're sharing in this environment? Whether you think the independents are struggling with the same affordability perception issues that you might have in fast food?

Yes, Eric, thanks for the question. Thanks for the comments on our quarter. As we look across what's been going on over the last 5 or 6 years, as you recall, we've been very prudent in keeping our pricing below inflation because we knew that over time, pricing matters, if you take it too much. And what we believe is happening right now in the casual dining space is consumers are figuring out that casual dining is a great value. And so they're coming to casual dining more. And we're starting -- we're seeing that across our brands and some of the industry.

And so without commenting on what's happened in other places, we think that's a big part of it. consumers want to go out and spend their hard-earned money. And we think we're taking some wallet share from fast food and fast casual.

Maybe if I could, as a follow-up, ask about the unit growth outlook, the 60 to 65 units this year. Your long-term range in your algorithm is 3% to 4%. So I think the 60 to 65 implies 2.7% to 3%. So I guess I'm curious when we might see a ramp in unit growth and which brands might be the largest contributor?

Yes, Eric, I'd say from -- when you look at 60 to 65, you're right, it could imply 2.7% to 3%. But as you look at actually how we're ramping up growth from where we're starting. We're actually building the pipeline. Our development team has done a great job. We expect to be in the 3-plus range over the next 5 years. And we are actually -- we have a pretty strong pipeline. As you know, these things take time to build up. But I think we have new practices and processes in place.

And from a brand mix, as we've said, initially, as you look at next year, I'd say between Olive Garden and LongHorn, we're going to probably have 40 to 45 openings and then Yard House might be in the mid-single digits, and then you have all the other brands contributing probably another 15 or so. But as we look into the future, we expect the other brands to become a bigger part of the mix.

But we do think there's a huge opportunity for still Longhorn to be in the 25 to 30 openings a year. And then Olive Garden to be in the 20-ish range for the foreseeable future. But then we're also, as I said, the other brands will start to contribute even more as we move into the next few years.

The next question is coming from Chris O'Cull from Stifel.

Raj, my question was on the updated long-term framework. Does the new margin expansion target reflect a different view on the long-term restaurant margin opportunity or even the rate of reinvestment you expect to make in the business?

Yes, Chris, it does a little bit, right? What we're trying to figure out is, one, let me just start with the -- just by changing the definition, we're getting a more holistic view because there's a lot of contraction between the G&A, D&A and then tax and interest. So that's why we wanted to get to a bottom line number. So that's one.

But two, does it imply restaurant level EBITDA maybe not growing at the rate we've targeted in the past? Yes, because we're saying that we are going to make investments with a greater emphasis on sales grade -- sales growth. And if sales growth drives even more margin, that's good, but we're going to try to find ways to reinvest to get for the long term.

The next question is coming from David Palmer from Evercore ISI.

Regarding Uber Direct at Olive Garden, curious about what you can share about mix and same-store sales contribution in the in fiscal 4Q and what you're contemplating for mix and same-store sales contribution from it in fiscal '26? And also is there anything different about the incremental margin from that from the base business?

David, so I think we said on -- for Q4, the mix impact from just the fees was about 40 basis points. Uber [indiscernible] was about 3.5% of total sales at Olive Garden. So -- and I think we talked about in the past what the total contribution would be to incremental sales, and we said it's 40% to 50%. So if you kind of go with that and taking the impact of the fees, it's roughly about 2% incremental sales impact to the quarter.

We are not ready to talk about the future in terms of what the impact would be for next year. But when we did the advertise, the exit rate was about 5% of total sales. That included the free delivery offer. And from a margin perspective, we do not expect this to have a meaningful impact of negative -- on margin -- any negative impact or positive impact on margin. Because if you look at how we structured the deal, a lot of the fees are just passed on to Uber but there isn't any margin difference on the base. And the minimal -- the geography impact is pretty minimal. We're talking about maybe 10 basis points at best.

But then there's also a positive. People are buying more through that, that helps offset. And you saw that in the fourth quarter. Olive Garden has a pretty strong positive mix. And I think as we signaled a few times, if Uber -- Uber Direct contributes even more than we expect going into this year, we're going to reinvest some of that into the business to drive long-term growth.

And with regard to Uber Direct and other brands, I would assume that this is going as you would have expected for Olive Garden. Are there other [indiscernible] that you think are particular to Longhorn and the other brands that you'll want to figure out before you do Uber Direct at those brands that you think might be an additional hurdle? Or are you kind of seeing probably what you need to see from this as a lever that could apply to your other brands?

Yes, David. As we launched it in Cheddar's, and got pretty similar answers to Olive Garden, we were able to ramp it up faster and get it into most of the restaurants faster. The other brands, we'll continue to look at. We have some thoughts on what brand might go next. But we want to make sure that every brand that adds delivery has a great experience for their to-go. And so we mentioned that there were 8 Cheddar's restaurants that didn't -- that aren't live, that's because they didn't earn the right to have delivery. That doesn't mean that our other brands don't have a great experience.

But there are other brands might have a little less on the curbside space and those kind of things, so they might not even be able to have curbside pickup. And as you recall, we don't want the Uber drivers to come into our restaurant. We want that to be just like another curbside experience. So we're looking through our portfolio to see what we can do on some of the brands that might not have as much curbside to see if we want to add.

But the last thing I'll say on this is we are not pushing Uber Direct onto any brand. Every brand has their president and their leaders, and they choose if they want to do it. We can veto if they get it, and there are some brands that we would probably veto, but I don't think those brands are thinking about doing it.

So without getting into which we're in is next, we do have another brand that we think we're going to work on but it will probably not start until sometime right at the beginning of the next calendar year.

The next question today is coming from Andrew Charles from TD Cowen.

Rick, it's a good segue to my next question. I'm curious, are you prioritizing expanding rolling out Uber Direct across the remaining brands that make sense, recognizing it's not going be all of them? Or is the attitude to see how Olive Garden would perform on the Uber marketplace?

Right now, our priority is to continue to see how Olive Garden and Cheddar's perform in Uber Direct marketplace is something that has challenges for us. And we've said what those challenges are. And that's why we developed this Uber Direct offer with Uber, which was the perfect thing for us and a really great thing for Uber. So we'll continue to see how this goes before we determine whether we want to even be in the marketplace at all.

Okay. That's helpful. And then, Raj, just a follow-up question. With the outlook for 2026 inflation of 2.5% to 3%, can you segue how that's going to look between food and labor?

Yes, Andrew. So the food is -- we're expecting food to be about 2.5% and labor to be about 3.5%.

Your next question is coming from Lauren Silberman from Credit Suisse.

Congrats on the quarter. I wanted to follow up on fiscal '26 guidance for the EPS. If your top line comes in stronger than expected, how are you thinking about flowing through to earnings versus reinvesting back in the business? And I guess that kind of applies a bit to the long term?

Yes, Lauren, I think if you look at our framework, we said we're going to try to get at margin to be flat to positive. So we're not going to do it at the cost of giving up margin, but we're going to -- we're okay if we -- if the incremental sales just flow through at the current restaurant level margins and then reinvest the rest. So there's ways to do that, and that's kind of how we're thinking about it.

Okay. And then on the 2% to 3.5% comp growth, obviously, a very strong momentum in the business. Can you just talk about how you're thinking about the cadence of comp as we move through the year?

Well, maybe I'll just start by saying if you look at -- fourth quarter was obviously pretty strong for us, and some of the momentum from that has carried on into June -- first few weeks of June. But as we look at the 12 months out, there's obviously -- there's a lot of macro uncertainty. And so we thought looking out 12 months, we just -- it's prudent to kind of go with this range where we reflect the uncertainty because we are going to start wrapping on some of this growth as we get into the back half of the year. And so that's incorporated into guidance. I don't want to get too much into the cadence, but I think it's fair to assume that we'll start stronger. And from a year-over-year perspective, should be stronger in the first half than the back half.

The next question today is coming from Brian Harbour from Morgan Stanley.

What -- Raj, what -- roughly what pricing do you expect to run in the coming year? And I guess just how about like longer term? I mean is sort of continuing to restrain that sort of key to all the brands as we think about the long-term plan?

Yes, Brian. For fiscal 2026, I would expect us to be in the mid-2s for pricing. I think first quarter is going to be close to 2, and then we'll probably get into the mid- to high teens as we get through the year. Obviously, it depends on how inflation comes in. But our bias -- but it will still likely be below total inflation. And our bias is, as Rick just mentioned earlier, we've been very disciplined with respect to pricing, and that is not going to change anytime soon. That's just -- that's the philosophy. We try to price as little as possible and still get better returns we could get. And it's worked well for us, and we always play the long game, and we'll continue to do that.

Okay. And your comment about sort of reserving the right to reinvest. I mean it sounds like you're being more top line focused, right, in the current [indiscernible]. So I mean, to some extent, what form would that take? Would it be more on the food side? Or how would that actually show itself in the brands?

Yes, Brian. Yes, you got it right. We are going to focus a little bit more on top line growth and on just grabbing margin. And that will -- that can take place in many ways. Every brand has a different way to do that. Olive Garden is testing some things right now which would bring their mix down a little bit to be more -- have some more affordability. And because of the strength of Uber Direct, they're able to do that. Other brands might make some investments in labor to speed up the process.

But it's only as we continue to grow sales, will we make some of these investments. We think these are the right long-term investments to be able to set the company up for the next 5 years. And the investments that we're making, especially on the menu, whether it's in mix or in affordability, will benefit both dine-in and off-premise.

Your next question is coming from Sara Senatore from Bank of America.

I guess -- just wanted to ask about fine dining. You mentioned that the category has been pressured, but I think unlike some of your other larger casual dining, you might be lagging some peers the question is maybe broader about like sort of the approach to the portfolio and your decision to sell some [indiscernible] fine dining. But is there sort of a limit to the span of control that you can have in terms of the number of brands -- is the acquisition of Ruth, would that have played any role in fine dining maybe being a little bit softer just in terms of manage resources?

I'm just trying to understand sort of as you think about the portfolio, it feels like there's a little bit more movement now than I've seen in the past. And I'm trying to sort of think through what might be influencing that?

Yes, Sara. I'll start with the end of your question. The movement in the portfolio being -- I think you're being -- you're talking about leadership, we have -- if we look -- if you look back a couple of years ago, we were in a position where we had leaders that are getting closer to retirement age. And so we wanted to set the company up for success over the long term, and we made some changes a year ago. And one of those leaders has retired, so we were ready for it with the changes we're doing this year. So we're really planful of what we do.

In regards to the span of control of the people that we have, now you look at how we've structured the company on people, the 2 largest brands report to me, Olive Garden and LongHorn and the other brands report to 2 proven leaders. Todd Burrowes and John Martin. And so we think we've got it set up correctly. The number of brands really doesn't -- isn't a reason that Fine Dining has gone through the challenges they've gone through.

Fine Dining has been hit with a consumer that -- during COVID, we had a lot of growth in Fine Dining. I don't know what the other brands had, but we had growth in Fine Dining. And those consumers were not necessarily consumers that we had seen before, and they went back to the normal patterns. And so we don't feel at all that our size and scale has hurt fine dining. In fact, we have even stronger leaders there when we've got -- now we have a President of the 2 Fine Dining brands Capital Grille and Eddie V's, led by John Martin.

And one of our Fine Dining brands that we have is Ruth's Chris, which we've said many times, whenever you add a brand, we're going to go through some challenges during integration and that will impact same-restaurant sales, and they're one of those. So we feel really good about where our Fine Dining brands are.

And then lastly, on the decision on Bahama Breeze, we have -- when we look at our portfolio and we try to determine what brands we add to our portfolio, we have criteria. And that criteria should be what we look at to keep brands in our portfolio. And we made the decision that Bahama Breeze doesn't meet the criteria anymore. And we think that they have a lot of growth potential with another owner. We were not going to be putting a lot of investment into Bahama Breeze. And so to give those team members and those managers growth opportunities, it's better for them to be under a different ownership.

Got it. Okay. And then just a quick follow-up. You had mentioned 150,000 improvement sequentially at Fine Dining. Is there anything else that you can comment on about the demographics? I mean, one thought is that the other benefit that casual dining might be facing is just having less exposure to low-income consumers. So anything you've been very helpful in sort of parsing out kind of under 50 and sort of some of the dynamics? Any updates there?

Yes, Sara. I think so from a consumer demographic perspective, let me just kind of parse out a little bit. I think when you look at casual dining in general, we're seeing growth across most income cohorts. The only group that is still soft is the below 50k household. And in fact, if you actually look at the 150k-plus, that's actually where we're seeing a little bit more growth on casual dining. And then when you look at Fine Dining, you're actually seeing pullback at -- with households below 150k across. And then only place where we're seeing some growth or stabilization is about 150k households.

The other dynamic with the fine dining, specifically is that the urban versus suburban that we had discussed. That suburban traffic is actually still at running at 95% of pre-COVID levels, so holding up pretty well. But urban is still in the low 80s. It's like 82% or something in Q4. So it's not -- clearly a lot less than where it was before COVID.

Now I will say one other thing on Finning and then wrap it up is just really, when you look at their retention to pre-COVID, it has stabilized. We're seeing that more stable month-to-month and quarter-to-quarter were last few months. So that's a good sign that things are starting to stabilize there.

The next question today is coming from Peter Saleh from BTIG.

Congrats on a great quarter. I wanted to ask about the incrementality that you're seeing in the Uber Direct business, the 40% to 50% at Olive Garden. Can you just comment a little bit about who these customers are? Are they higher income? I mean I'm assuming are they new to the brand? Or is it just increased frequency? Just trying to understand how the customer is using Olive Garden through Uber Direct?

Yes, Peter. Right now, the delivery customer has very minimal overlap in dining. We are seeing higher guest frequency for delivery versus dine-in guests. And a higher percentage of them are new or lapsed guests versus pickup or dine in. So we've got a lot of consumers that haven't been to Olive Garden over a year that are using the delivery service. And nearly 40% of our pickup consumers have tried delivery.

And then last thing on the consumer demographics, they are younger and slightly higher income, which you would expect.

Great. That's very helpful. And then just lastly, on price going forward, I know you're taking less price than inflation. When you talk about reinvestment, is it are you considering maybe even taking less price going forward? Or is it just reinvesting back in quality? Just trying to understand kind of the reinvestment comments again, just if you guys can elaborate a little bit?

Yes, Peter, I think those reinvestments can take many forms. And one of them could be pricing even lower than inflation. But I think we've got some other places that we can invest. And that, as I said, is somewhere in affordability. Do we have enough items under a certain price point. And in labor, are we providing the service experience that our guests expect for the prices they're paying. Now we're not talking about huge, huge, huge dollars, but it could be tens of basis points in investment or maybe even 20s, depending on how much we exceed our sales targets.

But one of them could be pricing, but I would say that we've been making that investment for a long time. We'll keep doing that. And we're going to continue to do that but add some other things.

The next question is coming from Jake Bartlett from Truist Securities.

Mine was about the same-store sales guidance in '26. And how it relates the long-term framework. Roughly the same, very similar -- but you are seeing this big contributor from delivery now. You have the easy compares -- looks like you talked about good momentum into the quarter -- into the first quarter here. So what are some of the offsets? It sounds like you're baking in some conservatism due to the macro environment. What are you seeing from [indiscernible] making you maybe a little more cautious there? Any more color on the moving pieces? We can see the -- what's driving some of the strength. But what are you worried about in terms of the headwinds?

Jake, so there's a lot in there. So let me tried to unpack. The big headline would be, we're going to continue to make the investments. And like, look, if you go back to during COVID, we were pushed very hard to take a lot more pricing than everybody else was, and we didn't, and that is paying dividends. And so we've invested in price. Now we're going to invest in other places. Rick talked about different areas where we're going to continue to invest. And we -- like again, we are not trying to achieve a near-term over earnings to hurt us for the long term. We're just playing the long game, and we -- I think we've earned the credibility over time to show that our strategy works.

If you look at over time, the fact that we've been able to deliver double-digit TSR consistently is a testament to the way we operate this business and we will not deviate from that. And that's really what's reflected in this guidance.

Great. My follow-up is on G&A. You were a little higher than guided in '25 -- fiscal '25. Can you give us a hand on what we should expect for '26 for G&A?

Yes, Jake, I think just let me start with the first part of why it was a little bit higher in the first -- in this year than what we thought. It was really mark-to-market. So because there was such a big run-up in the market, it was an incremental impact of about $15 million to $20 million, and it was offset in taxes. And that's just -- that's why we're kind of talking about there is some interaction between G&A and tax and you got to look at them together.

Now as we look at next year, we expect G&A going in to be around $500 million for the year. That includes the 53rd week. So if you take out roughly $10 million for the 53rd week, you're looking at a $490 million G&A on a 52-week basis. And like I just said, there are several factors that can influence what we'll end up being because especially mark-to-market and then the incentive comp.

The next question is coming from Jim Salera from Stephens.

Can you give the breakout of traffic and ticket of Olive Garden for the quarter? Just trying to size up how much of an impact the buy one take one contributed on transactions? And do you have a sense for if that deal was more of a frequency driver among loyal Olive Garden guests or were kind of entice new households to come to the brand?

Let me start with the first part, and then we'll get to the second part in a second. So from a same restaurant sales breakdown for Olive Garden, their pricing was 2.7%. And catering grew by about 70 basis points. And then they had -- I mentioned already Uber delivery mix was about 40 basis points, and then there was a positive mix of about 1%. And so their underlying traffic was about 2%, a little over 2%.

But truly, the traffic would be more close to 3% if you take into consideration the catering mix. From a buy one take one, it's just -- any time we do something like that, we do bring in a few new guest but that also drives frequency. And I think Rick mentioned in the script, we leveraged an existing offer. It actually did not hurt our check at all, if you -- in our margin. So you saw that. I mean, Olive Garden printed year-over-year segment profit growth of 100 basis points. And that's where we talk about how we're not deep discounting to just get traffic. We're doing it in way that's prudent.

Okay. Great. And then thinking about '26, just any comments you can offer on promotional cadence? And you mentioned I believe industry guest count was up just under 100 basis points in the quarter. And so it seems like consumer may be gradually improving. Just thoughts on how much we pull on the promotional lever in '26 to kind of support that gradual recovery?

Yes, Jake, for competitive reasons, I'm not getting into too much detail on the promotional activity. But I can tell you that if you look at a brand like Olive Garden, with this year demonstrated is that Olive Garden can react to whatever environment they compete in. And so if the environment gets a little bit more less challenging, maybe we come off of a little promotion activity and make investments in other places. If it gets more challenging, we keep the promotional activity that we have. But we like the cadence that we have now. Recall that we have never [indiscernible] during the time that's a normal well in casual dining. And we have, buy one take one at the other time that there's normal low in casual dining. But they're not deep discounted and they do drive some traffic.

And then you take Olive Garden in the mix, you think about some of the marketing testing we're doing at Cheddar's. John Wilkerson and his team have done a lot of great things to improve and make that brand much more foundationally ready to go. And so we're testing right now connected television, and that's having a good impact and so it will get people to see what Cheddar's has done over this year. So if you call that promotional activity, that's just marketing their brand. It's not necessarily promotional. But we're going to continue to invest in marketing whether it's promotional or not.

Our next question today is coming from Dennis Geiger from UBS.

I wanted to ask [indiscernible] how you're thinking about the strength of the [indiscernible] you kind of gave some color there, Rick, you touched on Uber as well. Just anything at a high level, thinking about the combination of Uber, new [indiscernible] seems like you've had good success [indiscernible] anything else. So just the confidence in that momentum running through '26?

Jake, you broke up a little bit on the beginning. Sorry to say can you just give us that question again? These work phones are great.

Sorry, Rick. Just on Olive Garden [indiscernible], you touched [indiscernible] in thinking about that momentum in the '26, thinking about the viewer, but also the new menu items, the promos, just how you're thinking about the Olive Garden momentum continuing through '26?

Yes, Dennis, I would say Olive Garden has had some strong momentum in the fourth quarter, and that momentum that we have in this quarter is contemplated in our guide. And recall what Raj said earlier, our first half of the year has probably got a little bit more -- a little easier compares. And so our first half of the year should be a little bit better than our second half. That said, we're going to continue to find ways to keep that momentum going. But a brand as big as Olive Garden is going to be pretty similar to Darden and where Darden results are. .

What we're going to do with Uber and -- if Uber Direct continues to build as it is, we've got some things that are in test right now in a couple of divisions at Olive Garden, perhaps we added to more divisions. And those are investments. And so that would impact our same-restaurant sales. So if we get more same-restaurant sales from Uber, we may reduce our same-restaurant sales a little bit based on those tests that we have. It wouldn't necessarily mean that we would go negative, but it would reduce the impact of Uber. But for the right reasons for the long term, as Raj said, we've got a 5-year plan and we're focusing on being great today and in 2030.

And just a quick follow-up. As it relates to that acceleration or that increase in the long-term comp or the business overall. Is that largely delivery driven? Is there anything with any other initiatives? I know you've got a focus on ops and speed, that's a long-term focus. Anything else?

No, I would say that if you look at the long-term comp guidance, we're assuming a little bit more inflation over the next 5 years than we saw in the first 5 years. And so will price a little bit below inflation, and that's a big component of that. We have our long-term framework prior to this assumed in the midpoint there was no traffic growth that we would have traffic growth. Our comps would come from check growth. And our new long-term framework has the same general assumption. So we think we have a little bit more on price because of inflation, but we'll also have some growth because of Uber that will help offset some other things that we're implementing to improve -- continue to improve our business for the long term. .

The next question today is coming from Christine Cho from Goldman Sachs.

Congrats on a strong quarter. You've reiterated the ongoing resilience in [indiscernible] in the last few quarters. But I was wondering if there was any notable observation on consumers in various speeds groups. So for example, have you seen better sales trends or higher net purchase intent from younger guests that is driving acceleration across casual dining as well as your major brands?

Christine, really, it all comes down to the household income. I mean what we're seeing is that the higher income is actually doing a little bit more than the lower income in general. So if you look at across our segments, as you move up to incomes in the 100, 150k households. That's where we're seeing more growth than other places. And now it varies from brand to brand. But when you look at an aggregate, every -- pretty much every household income is growing and casual dining, except for the one below 50k where it's kind of flattish. And that's really -- the age is really -- it's more about the correlation to income than age.

Our next question is coming from Gregory Francfort from Guggenheim Securities.

Rick, I guess my question is for you. I guess, in the state category, if I go back 5, 10 years ago, you might have been competing with the #1 player who was more focused on maybe margins and now you're focused -- you're competing with the #1 player that might be a little more focused on top line. How have you positioned Longhorn to compete? I mean, I'm just trying to figure out how you're doing comps at this level 6 and change. And going forward, do you think you need to reinvest in price? Do you think you need to reinvest in portion sizing? I guess I'm trying to figure how you're going to continue to compete there?

Greg, LongHorn, the reason they're performing the way they have been is because of their adherence to the strategy, quality, simplicity and culture. They've made a lot of investments, especially during COVID, significant investments in all of their items they increased the size of all their stakes. They took a lot less pricing than inflation. And they're going to continue to focus on that and improve the service at LongHorn. So quality isn't just about food. It's about the overall experience. And so yes, they'll keep making those investments, but not at the detriment of margin.

So we think that LongHorn is well positioned to compete with their category. There's not as much overlap between the biggest player in LongHorn, as you would think on consumer, they go there for different reasons. And so we still feel like we've got a great consumer proposition at LongHorn, and we would anticipate that continuing and that's contemplated in our guide and our 5-year long-term -- our long-term frame [indiscernible] our 5-year framework long term.

Our next question today is coming from Andrew Strelzik from BMO Capital Markets.

Two quick ones from me. The first one is on marketing. Within that long-term framework, and a stronger top line focus. How are you thinking about marketing over the next several years and then '26 as well? And then the other question was on speed of service, which has been a focus for you, what drivers do you see there for '26? And can you give us an update on the progress there?

Yes, Andrew. On the marketing front, over the next 5 years, we anticipate marketing growing faster than our sales. Without getting into the total impact of marketing, but as Raj has said in the past, somewhere 10 to 20 basis points. Raj can get more detail on next fiscal year, and I'll turn it over to him in a second. But again, we're going to continue to invest in marketing and you'll see more of that in Cheddar's. You'll see more of that across some of our brands. But it's not -- and it will grow faster than sales.

When you think about speed, we're in the early innings. I know there's a lot of times we got a baseball analogy. We're in the real early innings here. And as I said, when I mentioned speed before, this -- our speed challenges have been a long-time trend in the entire industry. And we will take a good time to reverse that. We've made some progress, it's not as fast as I'd like it to be, but we've made progress. All of our brands are faster. And what we're really trying to do is ensure that the consumer -- we're meeting the pace that the consumer wants and not holding them hostage in a restaurant. So that will take, as I said, take some time.

We've got about 100,000 servers or more in our system, and we got to convince all of them that they've got to change a little bit of what they do. and we're working on that.

I think, Rick, you talked about it. Just so for fiscal 2026, specifically, we're still talking maybe in the 10, 20 basis points. I think if you look over the 5-year same thing, Ricardo already mentioned that. And one thing I'll just point out is we don't assume that it's actually a margin drag. The way we look at it is that the investments we're making, we're going to get a return on it, and that keeps the margins flat. So I wouldn't view this as a margin erosion.

The next question is coming from Brian Vaccaro from Raymond James.

Most of mine have been asked, but just one quick one. Raj, can you walk through the traffic and check dynamics at LongHorn as well?

Sure, Brian. LongHorn was basically -- the pricing was 3.3%. Their traffic was 3.4%. Their check was pretty flat to pricing. So I think the total was 6.7%, sir. .

The next question is coming from John Ivankoe from JPMorgan.

According to the government, overall industry growth and units, and this is a broad industry seems to have slowed from around 2.5% to around 1.5%. And so my question is, where do you think that, that growth rate is changing across the industry? And how might that be influencing your ability to access the type of real estate that Darden typically does best with? In other words, you make a comment about the tightening or loosening of the specific sites that you're looking for over the next couple of years.

Yes, John. We have built a strong pipeline of sites for the next few years. We are in a better position to start this fiscal year than we were to start last fiscal year. We feel really good about the work that the team has done, including new prototypes for Cheddar's and Yard House and finding -- increasing the number of potential sites for Cheddar's, Yard House, Olive Garden and LongHorn.

I think your comment on the number of units is restaurant growth. And so where that's coming -- where the slowdown is coming from, I think, is smaller independents and smaller chains. The big chains like us, continue to grow. We've got great access to capital. We've got great cost of capital, and we've shown that we deserve to be able to grow.

The next question today is coming from Jeffrey Bernstein from Barclays.

Rick, it sounds like you're more comfortable with the uptick in promotions in recent quarters. I know you guys were previously more hesitant to do any more promotional activity. So -- and I think you mentioned focus more on affordability at Olive Garden going forward to perhaps drive more traffic. I'm just wondering if you could talk a little bit more about that increased confidence in waiting into the more value or more affordability side of things and your ability at the same time to still protect margin? And then I have one follow-up.

Yes, Jeff. If you think about the promotions, it's not like we're promotion crazy here. We added buy one take one, which, as Raj mentioned, wasn't a margin drag, and it was 5 weeks at a long time. So it's not like we're going to go into heavy promotional activity. As you -- as we talk about the investments that we're looking at, we're looking at a couple of things. One is as we -- let's double down on affordability at Olive Garden and at other brands. As you think about what we think has been helping somewhat casual dining and definitely us is the price gap between us and other segments. And so let's keep that moving. Let's get that a little bit stronger.

And that would mean adding some items on the menu that may not be the same price points as the ones that are on the menu today. And so that would be a mix impact. Whether we promote that or not, I don't know. We may talk about it, but it's not like we're going to -- we think that we're going to have to have a promotion to do that. We'll talk about it. We'll let our consumers know. And as I said, we've got some of this in test in couple of divisions at Olive Garden, it's doing pretty well for us. And so we feel really good about it. What it's done to our affordability ratings, which were already strong and what it's done for those guests intend to return. So we feel -- we feel good about the investments we're making. We wouldn't be making the investments if we didn't think they pay off in the long run.

Understood. And then just as it relates to your competition on the same front, how do you think the industry is thinking about discounting versus prior, whether or not they're comfortable with the elevated levels or whether you might see some change there?

Yes, Jeff. All I can -- I mean, I don't know what the industry is thinking about other than what I see, and we've got a player that's been doing some good communication on a good value item. And looking at the rest of their menu, they're driving some folks in. I can't say what anybody else is going to do. I can just say that we're ready to react our way to whatever happens. And we showed that at Olive Garden this year and what we did to continue to improve the profitability of Olive Garden and drive traffic and drive same-restaurant sales. .

The next question today is coming from Danilo Gargiulo from Bernstein.

Great. Rick, I was wondering if you can comment on the labor environment in the United States and particularly whether you've seen any increase in turnover in the areas that you're operating, maybe not necessarily in your case, but in general, India in the trade areas that you're most active on, specifically in light of immigration policies seem to be tightening?

Yes. What I would say is I don't -- we don't get turnover data by market for others. We know what ours are, and we're not really seeing a material impact on turnover or people showing up to work from day to day, things fluctuate in our restaurants. But as of now, nothing material on the top line or on labor. I think it's because we've got such a great employment proposition and people want to come to work for us. So if anyone leaves, we're able to fill that job pretty quickly. but we haven't really seen an uptick in turnover. In fact, our brands have been at record turnover levels, record retention levels.

Okay. Great to hear. And then regarding your international aspirations, specifically on the franchising side, what do you think your long-term objective might be from -- in terms of like total number of units that you think over the next 5 to even 10 years, it will be aspiring to get to? And which areas do you think are going to be getting most attention? You mentioned like India, Spain, -- any other areas you think could be particularly interesting to you?

Well, Danilo, we've really started this international push not too long ago, and we're already seeing really great results in signing franchise partners. We want to see them build those restaurants. With India, for example, the 40 restaurants are just in one small part of India. We've got a lot of other areas we can go, but we felt it was prudent to have that partner prove that they can meet those development commitments in that part of India before we give them another part of India.

In regards to Spain, they were really high on Olive Garden. And when signing a 40 restaurant deal, we'll want to see how they go. There's no guarantee that all 40 of those restaurants are going to open just like there's no guarantee that the 40 India restaurants are going to open. But we feel really good about our progress and once we get a restaurant in Spain.

What generally happens -- let me take that back. What generally happens once we get Olive Garden in a country, those franchise partners realize how good we support them, and they want another brand. And so we'll probably get another brand in those countries if we support them and they see the performance. But I'm not going to give you a number of where we're going to be in 5 years.

What I will say is I believe it will be bigger than it is today, and it's already a meaningful business for us on the profit side with really no capital.

Our next question is coming from Jim Sanderson from Northcoast Research.

I wanted to go back to your fiscal '26 guidance, what closure rate is implied for 2026? And just wondering if you're looking more closely at some of the smaller brands like Season 52 or Eddie V's that haven't really grown that much if there's an opportunity to streamline your portfolio going forward?

Jim, I think we basically, as part of the 5-year plan, we went through our portfolio, and we closed more than normal this fiscal year. We're not assuming any significant number of closings next year.

All right. And a quick follow-up question on the Uber Direct. You mentioned the promotion in the last part of May, that generated significant pickup in delivery. Just wondering, did the incrementality, the 40% to 50%, was that consistent? Or did you see more new clients coming to the brand helped by the marketing and promotions for TV -- on TV?

Yes, Jim, it's fair like -- the incrementality is fairly consistent. Recall, when we offer free delivery, we may have seen people that are doing current pickup, getting delivery. So I wouldn't say that the incrementality is going to spike because we may have some trade over from our current pickup tests. But it did increase our sales for delivery when we added the commercial.

Thank you. We reached the end of our question-and-answer session. I'd like to turn the floor back over for any further or closing comments.

This concludes our call. I want to remind you that we plan to release first quarter results on Thursday, September 18, before the market opens with the conference call to follow. Thank you for participating. Have a great day.

Thank you. That does conclude today's teleconference webcast. You may disconnect your lines at this time, and have a wonderful day. We thank you for your participation today.