Darden Restaurants, Inc. (NYSE:DRI) Q4 2023 Earnings Call Transcript

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Chris O’Cull: Hi, great. Good morning, guys. Raj, I had a question about the guidance. I’m just thinking if you exclude the $0.10 to $0.12 earnings accretion expected from Ruth’s in the guidance, it looks — it would seem to imply EPS growth below your longer-term outlook, particularly at the low end. Are you seeing any indications today that the underlying business could be softening I guess, or are you expecting it to soften over the course of this year? I’m just curious if you can give some color as to why the underlying business seems to be growing at a slower rate.

Raj Vennam: Yeah, Chris. I think, look, we’re taking into consideration all the information we have, right. We think — we build a plan based on all the information we have today. And if you look at what the consensus economic forecast is for the next year, it’s flattish GDP and that — in a — if you look at last year where GDP was growing, the industry will still had negative traffic, right? So while we outperformed quite a bit and we expect to continue to outperform, we’re taking that into consideration as we build a plan. But if you look at the midpoint of our guide, you do get to a decent base business growth and that’s kind of how we build a plan and then the guidance range is to incorporate some variability around that and that’s how we really think about it.

Chris O’Cull: So you’re not seeing any softening today, you are just kind of keeping a more conservative outlook based on what the predictions are for the economy over the next 12 months?

Raj Vennam: Yeah. Well, I would say that it’s not softening today. I mean if you look at the last few weeks, I think we’re — our GAAP to industry sale is fairly similar. But as we talked about, Q1, we do expect some softness in Fine Dining, that’s just a function of wrap. But outside of that, no, we’re not seeing any trends that would — any recent trends that would indicate that there is a major change in the underlying environment for us.

Chris O’Cull: Great. Thanks.

Operator: Thank you. Our next questions come from the line of Eric Gonzalez with KeyBanc Capital Markets. Please proceed with your questions.

Eric Gonzalez: Hey. Sure. Thanks. And Raj, just regarding the comp guidance, the 2.5% to 3.5%. Can you maybe talk about what level of pricing you’re embedding within that outlook and how that compares to the — to where you exited fiscal ’23 which I think was around 6%? And then also, do you have an underlying assumption for the industry’s growth rate for the year? Thanks.

Raj Vennam: Yeah, Eric. So the way we think about it is, our comp guidance of 2.5% to 3.5%, we expect to have pricing in the 3.5% to 4%, which would imply a traffic of flat to negative 1.5% for the year for us. That range would imply that. You can extrapolate from that what the implied industry can be. We’re not expecting our GAAP to be significantly different going into the year, but we focus a lot more on things we can control. And we look at all the factors we have year-over-year and taking into consideration the macroenvironment and then just build a plan that way. As far as comp — exiting the pricing, yeah, we exited the quarter with closer to 6% as we said and but we expect that to tick down throughout the year. So start with that, call it, 6%, but by the end of the year, by Q4, we get closer to the 2%.

Now, lot of the pricing actions we took last year already impact next year’s by about 3%. So the carryover from prior year is probably close to 3% and so that’s really where we are.

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