DARDEN RESTAURANTS INC

Previous wording

To facilitate review of our discussion and analysis, the following table sets forth our financial results for the periods indicated. All information is derived from the unaudited consolidated statements of earnings for the three months ended August 25, 2024 and August 27, 2023.

Current wording

To facilitate review of our discussion and analysis, the following table sets forth our financial results for the periods indicated. All information is derived from the unaudited consolidated statements of earnings for the three and six months ended November 24, 2024 and November 26, 2023.

Previous wording

The following table details the number of company-owned restaurants currently reported in continuing operations that were open at the end of the first quarter of fiscal 2025, compared with the number open at the end of fiscal 2024 and the end of the first quarter of fiscal 2024.

Current wording

The following table details the number of company-owned restaurants currently reported in continuing operations that were open at the end of the second quarter of fiscal 2025, compared with the number open at the end of fiscal 2024 and the end of the second quarter of fiscal 2024.

Previous wording

•Total sales increased 1.0 percent to $2.76 billion for the first quarter of fiscal 2025 compared to $2.73 billion for the first quarter of fiscal 2024 driven by sales from 42 net new restaurants, partially offset by a blended same-restaurant sales decrease of (1.1) percent 1.

Current wording

•Total sales increased 6.0 percent and 3.5 percent to $2.89 billion and $5.65 billion for the second quarter and first six months of fiscal 2025 compared to $2.73 billion and $5.46 billion for the second quarter and first six months of fiscal 2024 driven by sales from 142 net new restaurants, including the acquisition of 103 Chuy’s restaurants on October 11, 2024, and blended same-restaurant sales increase of 2.4 percent 1 and 0.7 percent.1

Previous wording

•Our net earnings from continuing operations were $207.6 million for the first quarter of fiscal 2025 compared to $194.8 million for the first quarter of fiscal 2024.

Current wording

•Our net earnings from continuing operations were $215.7 million and $423.3 million for the second quarter and first six months of fiscal 2025 compared to $212.3 million and $407.1 million for the second quarter and six months of fiscal 2024.

Previous wording

•Reported diluted net earnings per share from continuing operations were $1.74 for the first quarter of fiscal 2025 compared to $1.60 for the first quarter of fiscal 2024.

Current wording

•Reported diluted net earnings per share from continuing operations were $1.82 and $3.57 for the second quarter and first six months of fiscal 2025 compared to $1.76 and $3.35 for the second quarter and six months of fiscal 2024.

Previous wording

1 Same-restaurant sales results excludes Ruth's Chris as they have not yet been owned and operated by Darden for a 16-month period.

Current wording

1 Same-restaurant sales results exclude Chuy’s as they have not yet been owned and operated by Darden for a 16-month

Previous wording

During the second quarter of fiscal 2025, we entered into an exclusive multi-year delivery arrangement with Uber Technologies, Inc. (Uber). The agreement will enable our guests to order on-demand delivery via Darden restaurant channels, with delivery handled by Uber Direct, through Uber’s national delivery network. An initial pilot of first-party delivery from a limited number of Olive Garden locations will begin in the second quarter of fiscal 2025.

Current wording

During the second quarter of fiscal 2025, we entered into an exclusive multi-year delivery arrangement with Uber Technologies, Inc. (Uber). The agreement will enable our guests to order on-demand delivery via Darden restaurant channels, with delivery handled by Uber Direct, through Uber’s national delivery network. The pilot of first-party delivery for approximately 100 Olive Garden locations began during the second quarter of fiscal 2025, with further rollouts expected in the third quarter of fiscal 2025.

Previous wording

We expect sales for fiscal 2025 to be between $11.8 and $11.9 billion, driven by same-restaurant sales growth of 1.0 to 2.0 percent 1 and approximately 45 to 50 new restaurant openings. Additionally, we expect capital expenditures incurred to build new restaurants, remodel and maintain existing restaurants and for technology initiatives to be $550 to $600 million.

Current wording

We expect sales for fiscal 2025 to be approximately $12.1 billion, same-restaurant sales growth of approximately 1.5 percent 1 and approximately 50 to 55 new restaurant openings. Additionally, we expect capital expenditures incurred to build new restaurants, remodel and maintain existing restaurants and for technology initiatives to be approximately $650 million. These amounts now all include the addition of Chuy’s and our expectations for Chuy’s results from the date of acquisition forward.

Previous wording

(1)Same-restaurant sales is a year-over-year comparison of each period’s sales volumes for a 52-week year and is limited to restaurants that have been open, and operated by Darden, for at least 16 months. Accordingly, Ruth’s Chris results will not be included in this calculation until the second quarter of fiscal 2025.

Current wording

(1)Same-restaurant sales is a year-over-year comparison of each period’s sales volumes for a 52-week year and is limited to restaurants that have been open, and operated by Darden, for at least 16 months. Accordingly, Chuy’s results will not be included in this calculation until the fourth quarter of fiscal 2026 and Ruth’s Chris results are included for fiscal 2025 November only.

Previous wording

LongHorn Steakhouse’s sales increase for the first quarter of fiscal 2025 was primarily driven by same-restaurant sales increases combined with revenue from new restaurants. The increase in same-restaurant sales for the first quarter of fiscal 2025 resulted from a 3.0 percent increase in average check combined with a 0.7 percent increase in same-restaurant guest counts.

Current wording

LongHorn Steakhouse’s sales increase for the second quarter and six months of fiscal 2025 was primarily driven by same-restaurant sales increases combined with revenue from new restaurants. The increase in same-restaurant sales for the second quarter of fiscal 2025 resulted from a 4.3 percent increase in same-restaurant guest counts, combined with a 3.1 percent increase in average check. The increase in same restaurant sales for the six months of fiscal 2025 resulted from a 3.0 percent increase in average check combined with a 2.5 percent increase in same-restaurant guest counts.

Previous wording

Other Business’ sales decrease for the first quarter of fiscal 2025 was primarily driven by same-restaurant sales decreases, offset by revenue from new restaurants. The decrease in same-restaurant sales for the first quarter of fiscal 2025 resulted from a 3.9 percent decrease in same-restaurant guest counts, offset by a 2.2 percent increase in average check.

Current wording

Fine Dining’s sales decrease for the second quarter and six months of fiscal 2025 was primarily driven by same-restaurant sales decreases, combined with a decrease in same-restaurant guest counts. The decrease in same-restaurant sales for the second quarter of fiscal 2025 resulted from a 8.3 percent decrease in same-restaurant guest counts, offset by a 2.7 percent increase in average check. The decrease in same restaurant sales for the six months of fiscal 2025 resulted from a 8.7 percent decrease in same-restaurant guest counts, partially offset by a 3.1 percent increase in average check.

Previous wording

•Restaurant labor costs increased as a percent of sales primarily due to a 1.2% impact from inflation, partially offset by a 0.3% impact from sales leverage, a 0.6% impact from salary and benefits, and a 0.2% productivity improvement.

Current wording

•Restaurant labor costs decreased as a percent of sales primarily due to a 0.5% impact from sales leverage, a 0.7% impact from salary and benefits and a 0.2% productivity improvement, partially offset by a 1.2% impact from inflation.

Previous wording

•Marketing expenses increased as a percent of sales primarily due to increased marketing and media.

Current wording

•Marketing expenses increased as a percent of sales primarily due to increased marketing and media spend.

Previous wording

•Depreciation and amortization expenses increased as a percent of sales primarily due to the acquisition of Ruth’s Chris as well as depreciation on brand assets.

Current wording

•Depreciation and amortization expenses increased as a percent of sales primarily due to the acquisition of Chuy’s as well as incremental depreciation on new restaurants and other capital investments.

Previous wording

•Impairment and disposal of assets, net decreased as a percent of sales primarily due to a decrease in unplanned closures or early lease terminations as compared to prior year.

Current wording

•Impairment and disposal of assets, net decreased as a percent of sales primarily due to the write-off of acquired Ruth’s Chris assets in the prior year.

Previous wording

•Food and beverage costs decreased as a percent of sales primarily due to a 0.8% impact from pricing leverage and a 0.2% impact from cost savings, partially offset by a 0.6% impact from mix and other.

Current wording

•Food and beverage costs decreased as a percent of sales primarily due to a 0.9% impact from pricing leverage and a 0.2% impact from cost savings, partially offset by a 0.5% impact from mix and other.

Previous wording

•Restaurant expenses increased as a percent of sales primarily due a 0.3% impact from inflation, partially offset by a 0.1% impact related to other.

Current wording

•Restaurant expenses increased as a percent of sales primarily due to a 0.4% impact from inflation, partially offset by a 0.2% impact from sales leverage and a 0.1% impact related to other.

Previous wording

•General and administrative expenses decreased as a percent of sales primarily due to a 0.9% impact from Ruth’s Chris transaction and integration costs incurred in fiscal 2024 but not in fiscal 2025, a 0.4% impact from incentive pay and a 0.1% impact from sales leverage, partially offset by a 0.2% impact from inflation and a 0.1% impact related to mark to market adjustments.

Current wording

•General and administrative expenses decreased as a percent of sales primarily due to a 0.2% impact from incentive pay, a 0.2% impact from sales leverage, and a 0.1% impact from transaction and integration costs in the first six months of fiscal 2024 related to the Ruth’s Chris acquisition offset by Chuy’s in fiscal 2025, partially offset by a 0.2% impact from mark to market adjustments, and a 0.2% impact from inflation.

Previous wording

Net interest expense increased as a percent of sales for the first quarter of fiscal 2025 primarily due to financing related to the Ruth’s Chris acquisition.

Current wording

Net interest expense increased as a percent of sales for the second quarter and the first six months of fiscal 2025 primarily due to financing related to the Chuy’s acquisition. See Liquidity and Capital Resources for a description of our senior notes issuance to finance the Chuy’s acquisition.

Previous wording

The effective income tax rate for continuing operations for the quarter ended August 25, 2024 was 10.6 percent compared to an effective income tax rate for the quarter ended August 27, 2023 of 12.7 percent. The decrease in the tax rate is primarily driven by the release of federal tax reserves and the favorable impact of mark to market hedges.

Current wording

The effective income tax rate for continuing operations for the quarter ended November 24, 2024 was 12.3 percent compared to an effective income tax rate for the quarter ended November 26, 2023 of 12.1 percent. The increase in the tax rate is primarily driven by nondeductible transaction costs related to Chuy’s. The effective income tax rate for continuing operations for the six ended November 24, 2024 was 11.4 percent compared to an effective income tax rate for the six months ended November 26, 2023 of 12.4 percent. The decrease in the tax rate is primarily driven by the release of federal tax reserves and the favorable impact of mark to market hedges.

Previous wording

On an after-tax basis, losses from discontinued operations for the first quarter of fiscal 2025 were $0.4 million ($0.00 per diluted share) compared with losses from discontinued operations for the first quarter of fiscal 2024 of $0.3 million ($0.01 per diluted share).

Current wording

On an after-tax basis, losses from discontinued operations for the second quarter and first six months of fiscal 2025 were $0.6 million ($0.00 per diluted share) and $1.0 million ($0.01 per diluted share) compared with losses from discontinued operations for the second quarter and first six months of fiscal 2024 of $0.2 million ($0.00 per diluted share) and $0.5 million ($0.00 per diluted share).

Previous wording

We manage our restaurant brands, Olive Garden, LongHorn Steakhouse, Cheddar’s Scratch Kitchen, Yard House, Ruth’s Chris, The Capital Grille, Seasons 52, Bahama Breeze, Eddie V’s and The Capital Burger in North America as operating segments. We aggregate our operating segments into reportable segments based on a combination of the size, economic characteristics and sub-segment of full-service dining within which each brand operates. Our four reportable segments are: (1) Olive Garden, (2) LongHorn Steakhouse, (3) Fine Dining and (4) Other Business (see Note 6 to our unaudited consolidated financial statements in Part I, Item 1 of Form 10-Q).

Current wording

We manage our restaurant brands, Olive Garden, LongHorn Steakhouse, Cheddar’s Scratch Kitchen, Yard House, Ruth’s Chris, The Capital Grille, Chuy’s, Seasons 52, Bahama Breeze, Eddie V’s and The Capital Burger in North America as operating segments. We aggregate our operating segments into reportable segments based on a combination of the size, economic characteristics and sub-segment of full-service dining within which each brand operates. Our four reportable segments are: (1) Olive Garden, (2) LongHorn Steakhouse, (3) Fine Dining and (4) Other Business (see Note 7 to our unaudited consolidated financial statements in Part I, Item 1 of Form 10-Q).

Previous wording

The decrease in Olive Garden’s segment profit margin for the first quarter of fiscal 2025 was driven primarily by negative same-restaurant sales as well as increased restaurant labor costs and restaurant expenses, partially offset by lower food and beverage costs. The increase in Longhorn Steakhouse’s segment profit margin for the first quarter of fiscal 2025 was driven primarily by positive same-restaurant sales as well as decreased food and beverage costs, partially offset by higher restaurant labor and restaurant expenses. The decrease in Fine Dining’s segment profit margin for the first quarter of fiscal 2025 was driven primarily by negative same-restaurant sales, higher restaurant labor costs and restaurant expenses, partially offset by lower food and beverages costs. Other Business’ segment profit margin for the first quarter of fiscal 2025 remained flat compared to fiscal 2024, primarily due to lower food and beverage costs, offset by negative same-restaurant sales.

Current wording

The increase in Olive Garden’s segment profit margin for the second quarter of fiscal 2025 was driven primarily by positive same-restaurant sales, lower food and beverage costs, and restaurant labor costs, partially offset by increased marketing costs. The decrease in Olive Garden’s segment profit margin for the first six months of fiscal 2025 was driven primarily by negative same-restaurant sales, higher restaurant expenses, and marketing costs, partially offset by lower food and beverage costs. The increase in Longhorn Steakhouse’s segment profit margin for the second quarter and first six months of fiscal 2025 was driven primarily by positive same-restaurant sales, lower food and beverage costs, restaurant labor, and restaurant expenses, partially offset by higher marketing expenses. The decrease in Fine Dining’s segment profit margin for the second quarter and first six months of fiscal 2025 was driven primarily by negative same-restaurant sales, higher restaurant labor costs and restaurant expenses, partially offset by lower food and beverage costs. The increases in Other Business’ segment profit margin for the second quarter of fiscal 2025 was driven primarily by the addition of Chuy’s operating results, positive same-restaurant sales, lower food and beverage costs, and restaurant labor costs, partially offset by higher restaurant expenses and marketing costs. The increases in Other Business’ segment profit margin for the first six months of fiscal 2025 was driven primarily by the addition of Chuy’s operating results and lower food and beverage costs partially offset by negative same-restaurant sales, higher restaurant expenses, and marketing costs.

Previous wording

On October 23, 2023, we entered into a $1.25 billion Revolving Credit Agreement (as amended, Revolving Credit Agreement) with Bank of America, N.A. (BOA), as administrative agent, and the lenders and other agents party thereto. The Revolving Credit Agreement replaced our prior $1.0 billion Revolving Credit Agreement (Prior Revolving Credit Agreement), dated as of September 10, 2021, and the Prior Revolving Credit Agreement was terminated concurrently with our entry into the Revolving Credit Agreement. The Revolving Credit Agreement is a senior unsecured credit commitment to the Company and contains customary representations and affirmative and negative covenants (including limitations on liens and subsidiary debt and, prior to the Amendment (as defined below) a maximum consolidated lease adjusted total debt to total capitalization ratio of 0.75 to 1.00) and events of default usual for credit facilities of this type. As of August 25, 2024, we had no outstanding balances and were in compliance with all covenants under the Revolving Credit Agreement. As of August 25, 2024, $293.9 million of commercial paper was outstanding in addition to $0.5 million of letters of credit outstanding, which were both backed by this facility. After consideration of commercial paper and letters of credit backed by the Revolving Credit Agreement, as of August 25, 2024, we had $955.6 million of credit available under the Revolving Credit Agreement.

Current wording

On October 23, 2023, we entered into a $1.25 billion Revolving Credit Agreement (as amended, Revolving Credit Agreement) with Bank of America, N.A. (BOA), as administrative agent, and the lenders and other agents party thereto. The Revolving Credit Agreement is a senior unsecured credit commitment to the Company and contains customary representations and affirmative and negative covenants (including limitations on liens and subsidiary debt and, prior to the Amendment (as defined below), a maximum consolidated lease adjusted total debt to total capitalization ratio of 0.75 to 1.00) and events of default usual for credit facilities of this type. As of November 24, 2024, we had no outstanding balances and were in compliance with all covenants under the Revolving Credit Agreement. As of November 24, 2024, $275.2 million of commercial paper was outstanding in addition to $0.5 million of letters of credit outstanding, which were both backed by this facility. After consideration of commercial paper and letters of credit backed by the Revolving Credit Agreement, as of November 24, 2024, we had $974.2 million of credit available under the Revolving Credit Agreement.

Previous wording

On September 16, 2024, the Company entered into a senior unsecured $600 million 2-year Term Loan Credit Agreement (the Term Loan Agreement) with BOA, as administrative agent, the lenders and other agents party thereto, the material terms of which are consistent with the Revolving Credit Agreement, as amended by the Amendment. The Term Loan Agreement provides for a single borrowing on any business day until February 17, 2025 (the Funding Date) and matures on the second anniversary of the Funding Date. The Company has not drawn on the Term Loan as of the date of this filing. The proceeds may be used to finance our anticipated acquisition of Chuy’s Holdings.

Current wording

On September 16, 2024, we entered into a senior unsecured $600 million 2-year Term Loan Credit Agreement (the Term Loan Agreement) with BOA, as administrative agent, the lenders and other agents party thereto, the material terms of which were consistent with the Revolving Credit Agreement. The intended use of the proceeds was to finance our acquisition of Chuy’s and we subsequently terminated the Term Loan Agreement on October 3, 2024, in connection with the closing of our senior notes issuance discussed below. We did not draw any funds and there were never any outstanding borrowings under the Term Loan Agreement.

Previous wording

•$500.0 million of unsecured 6.300 senior notes due in October 2033;

Current wording

•$500.0 million of unsecured 6.300 percent senior notes due in October 2033;

Previous wording

Net cash flows provided by operating activities from continuing operations increased to $273.2 million for the first three months of fiscal 2025, from $269.1 million for the three months of fiscal 2024. Net cash flows provided by operating activities include net earnings from continuing operations of $207.6 million and $194.8 million in the first three months of fiscal 2025 and 2024, respectively. Net cash flows provided by operating activities increased in fiscal 2025 primarily due to higher net earnings in fiscal 2025.

Current wording

Net cash flows provided by operating activities from continuing operations increased to $661.8 million for the first six months of fiscal 2025, from $609.9 million for the six months of fiscal 2024. Net cash flows provided by operating activities include net earnings from continuing operations of $423.3 million and $407.1 million in the first six months of fiscal 2025 and

Previous wording

Net cash flows used in investing activities from continuing operations were $149.7 million for the first three months of fiscal 2025, compared to $854.2 million for the first three months of fiscal 2024. Net cash used in the acquisition of Ruth’s Chris was $701.1 million during fiscal 2024. Capital expenditures decreased to $145.2 million for the first three months of fiscal 2025 from $150.9 million for the first three months of fiscal 2024 reflecting a decrease in new restaurant construction and remodel spend during fiscal 2025.

Current wording

Net cash flows used in investing activities from continuing operations were $939.3 million for the first six months of fiscal 2025, compared to $1,022.9 million for the first six months of fiscal 2024. Net cash used in the acquisition of Chuy’s was $613.7 million during the second quarter of fiscal 2025. Net cash used in the acquisition of Ruth’s Chris was $699.9 million during the first six months of fiscal 2024. Capital expenditures increased to $314.5 million for the first six months of fiscal 2025 from $312.4 million for the first six months of fiscal 2024 reflecting a slight increase in new restaurant construction and remodel spend during fiscal 2025.

Previous wording

Net cash flows used in financing activities from continuing operations were $126.7 million for the first three months of fiscal 2025, compared to net cash provided by financing activities of $409.4 million for the first three months of fiscal 2024. Net cash flows used in financing activities for the first three months of fiscal 2025 included net proceeds from issuance of short term debt of $207.1 million, dividends paid of $166.0 million and share repurchases of $172.4 million. Net cash flows provided by financing activities for the first three months of fiscal 2024 included net proceeds from issuance of short term debt of $95.4 million and proceeds from the Term Loan Agreement of $600.0 million, dividends paid of $158.5 million and share repurchases of $142.9 million. Dividends declared by our Board of Directors totaled $1.40 and $1.31 per share for the first three months of fiscal 2025 and 2024, respectively.

Current wording

Net cash flows provided by financing activities from continuing operations were $298.9 million for the first six months of fiscal 2025, compared to net cash provided by financing activities of $216.7 million for the first six months of fiscal 2024. Net cash flows provided by financing activities for the first six months of fiscal 2025 included net proceeds from issuance of short-term debt of $188.4 million, net proceeds from the issuance of long-term debt of $750.0 million, dividends paid of $330.5 million and share repurchases of $314.2 million. Net cash flows provided by financing activities for the first six months of fiscal 2024 included net proceeds from issuance of short-term debt of $350.0 million, proceeds from the 2033 Notes of $500.0 million, dividends paid of $315.7 million and share repurchases of $323.9 million. Dividends declared by our Board of Directors totaled $2.80 and $2.62 per share for the first six months of fiscal 2025 and 2024, respectively.

Previous wording

Other than the planned acquisition of Chuy’s Holdings, which we intend to fund through one or more long-term debt issuances, we are not aware of any trends or events that would materially affect our capital requirements or liquidity. We believe that our internal cash-generating capabilities, the potential issuance of equity or unsecured debt securities under our shelf registration statement and short-term commercial paper or drawings under our Revolving Credit Agreement should be sufficient to finance our capital expenditures, debt maturities and other operating activities through fiscal 2025.

Current wording

We are not aware of any trends or events that would materially affect our capital requirements or liquidity. We believe that our internal cash-generating capabilities, the potential issuance of equity or unsecured debt securities under our shelf registration statement and short-term commercial paper or drawings under our Revolving Credit Agreement should be sufficient to finance our capital expenditures, debt maturities and other operating activities through fiscal 2025.

Previous wording

On March 20, 2024 our Board of Directors authorized a new share repurchase program under which we may repurchase up to $1 billion of our outstanding common stock. This repurchase program does not have an expiration and replaced the prior share repurchase authorization. During the quarter ended August 25, 2024, we repurchased 1.2 million shares of our common stock compared to 0.9 million shares of our common stock during the quarter ended August 27, 2023.

Current wording

On March 20, 2024, our Board of Directors authorized a new share repurchase program under which we may repurchase up to $1 billion of our outstanding common stock. This repurchase program does not have an expiration and replaced the prior share repurchase authorization. During the quarter and six months ended November 24, 2024, we repurchased 0.9 million and 2.1 million shares of our common stock, respectively, compared to 1.2 million and 2.1 million shares of our common stock, respectively, during the quarter and six months ended November 26, 2023.

Previous wording

Our current assets totaled $819.6 million as of August 25, 2024, compared to $822.8 million as of May 26, 2024. The decrease was primarily due to a decrease in receivables and prepaid income tax, partially offset by increase in prepaid expenses and other current assets.

Current wording

Our current assets totaled $879.6 million as of November 24, 2024, compared to $822.8 million as of May 26, 2024. The increase was primarily due to an increase in inventories and prepaid expenses and other current assets, partially offset by a decrease in receivable and prepaid income tax.

Previous wording

Our current liabilities totaled $2.32 billion as of August 25, 2024, compared to $2.19 billion as of May 26, 2024. The increase was primarily driven by an increase in short-term debt .

Current wording

Our current liabilities totaled $2.40 billion as of November 24, 2024, compared to $2.19 billion as of May 26, 2024. The increase was primarily driven by an increase in short-term debt.

Previous wording

•A failure to successfully complete our acquisition and integration of Chuy’s Holdings operations into our business.

Current wording

•A failure to successfully complete our integration of Chuy’s Holdings operations into our business;