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

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Brian Harbour: Okay. Thank you. Raj, also just with your prior comments about kind of G&A for the year and kind of the quarterly progression. Is that still kind of valid? It sounds like maybe that piece — some piece of stock-based comp was one-time in the first quarter, but could you just comment on kind of the G&A outlook?

Raj Vennam: Yeah. Sure. Yeah. As we’ve mentioned a couple of things, right. G&A was higher than we expected for the first quarter. Part of that was driven by our outperformance on the bottom line. I mentioned earlier that while sales were more in line, we did outperform on the bottom line that helped that cost a little bit more incentive comp. And then stock-based comp, that is truly a onetime. I mean that’s more of a timing, but it’s pulling forward some from future years, right? But as we look at the full year, G&A is likely to be a little bit higher than what we talked about last quarter. So I think last quarter, we talked about closer to $430 million. I would say, at this point, it’s probably closer to $440 million on the year.

Brian Harbour: Okay. Thank you.

Operator: Thank you. Our next questions come from the line of David Tarantino with Baird. Please proceed with your questions.

David Tarantino: Hi. Good morning. I was wondering, Rick, if you could talk about how you’re thinking about unit growth for the next several years. And I know at one point, you were trying to push unit growth towards the high end of your annual targets. And I’m wondering, if that’s still your desire and perhaps, Raj, if you could give us an update on what you’re seeing on returns and build costs, that would be helpful. Thanks.

Rick Cardenas: Hey, David. Thanks. In regards to development and unit growth, we do want to get to the top end of our long-term framework of 3% unit — sales growth from new restaurants. As we’ve said in the past, there’s still some permitting delays. We’re seeing a little less on the utility connections and those kind of things, but we’re still — it’s still taking a little longer to get permits. We also are being a little selective, especially where inflation and costs have made the economics of the deal is a little less attractive. And we generally like to have good margin of error with our projects. And so we’ve turned down a few projects that just because costs are a little higher than we wanted them to be. And we’ve done that in the past, and we’ve been able to get back to those same projects at the costs that are more reasonable for us.

So we’re willing to wait a little bit to get the cost back more in line. That said, we believe inflation has peaked and we are starting to receive more bids that are in line with our project budgets and some even actually below our project budgets. So that gives us some good feelings for the future. We still believe we have the opportunity to grow close to the high end of our framework and we are actively building that pipeline.

Raj Vennam: And David, on the returns, we are — our returns are still pretty strong. We are — any project we approve has to be net present value accretive to us. And as Rick mentioned, we generally like to have a little bit of headroom within our margin of error as we approve projects. Maybe that buffer is not as high as it used to be. But when we look at actual performance on average, we exceed our internal hurdles by quite a bit.

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