Darden Restaurants, Inc. (NYSE:DRI) Q1 2024 Earnings Call Transcript

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Jeffrey Farmer: All right. That’s very helpful. And then just a follow-up on pricing. So pricing 6% in 1Q. You guys are guiding to that 3.5% to 4% for the full year ‘24. But what is that — how should we be thinking about pricing moving forward, just sort of the cadence. So it’s 1% — or 6% in 1Q. What theoretically would Darden blended pricing look like in 2Q, 3Q, et cetera?

Raj Vennam: Yeah. I’d say, we’re looking at probably closer to 5% in the second quarter, 3%-ish by the time we get to third quarter and probably closer to 2% or below 2% by the time we get to fourth quarter.

Jeffrey Farmer: All right. Appreciate it. Thank you.

Operator: Thank you. Our next questions come from the line of Jon Tower with Citi. Please proceed with your questions.

Jon Tower: Great. Thanks for taking the question. I guess going a little bit authorization here, but curious to get your thoughts. California is changing or potentially changing the way that it pays its employees in the fast food side, I would argue it’s going to have some implications for the broader industry in California and perhaps beyond that. So I’m curious to get your thoughts, one, on how you handle an environment where aggregate labor inflation starts taking off pretty dramatically in one state, perhaps spilling elsewhere? And then two, be curious to get your thinking around how the industry evolves either in that market or more broadly? And do you see this as an opportunity to accelerate share in that market even though costs might be moving a little bit higher? I would think that some independents in that market, in particular, might have to shut down given the cost to operate will be a little bit beyond reasonable levels?

Rick Cardenas: Yeah, Jon. Let me start by saying the fast act you’re talking about in California. I know it impacts fast food first and that could lead to higher wages across other segments of the dining experience. Our employment proposition is great. We’ve got a great employment proposition. As we talk about and I think we’ve mentioned before, our average wages, including tips are over $22 now across the country. But when you look it in California, it’s higher than that. And so I think as labor costs continue to grow, we’ve had that in other markets where we’ve seen minimum wages grow or we’ve seen a reduction in the tip credit, and we’ve been able to execute and continue to gain share there. So if this does impact restaurants, it’s probably going to impact the ones that have a little less capital and a little less the ability to withstand that.

Just like we’ve seen in other markets where wages have grown really fast. We’ve been able to pick up share because we’re still there. So we’re going to focus on what we can control, which is providing a great guest experience and trying to continue to price below inflation. And if inflation is higher, others are going to have to price more and we’ll be able to gain share by taking a little less price. We’re going to stick to our strategy.

Jon Tower: Got it. So the idea of taking potentially more price in that market later this year is not off the table given that inflationary pressure.

Rick Cardenas: Nothing is ever off the table, if things change dramatically on inflation. What we talked about with the pricing actions that we’ve already taken, most of our pricing is already built in. But that 2% that Raj said in Q4 could be higher if things change. And it’s highly unlikely, it could be lower, but it could be higher if things change.

Jon Tower: Got it. Thanks for taking the questions.

Rick Cardenas: Yeah.

Operator: Thank you. Our next questions come from the line of Sara Senatore with Bank of America. Please proceed with your questions.

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