Jim Sanderson

Jim Sanderson asked for a breakdown of LongHorn Steakhouse's same-restaurant sales between traffic and ticket, and how pricing is expected to trend relative to inflation throughout the year. He also asked if value-focused menu expansion, similar to Olive Garden's lighter portions, could be seen at LongHorn Steakhouse.

Answer

CFO Raj Vennam reported LongHorn's traffic was up 3.2% and check was up 2.3%, with pricing at 2.5% and a 20 basis point negative mix from alcohol. He expects Darden's pricing to be about 100 basis points below total inflation in Q2, narrowing later in the year. CEO Rick Cardenas stated that the lighter portion test is currently Olive Garden-focused, but other brands might implement similar initiatives based on learnings.

Jim Sanderson asked about the percentage of sales mix from delivery that is incremental for Olive Garden and Cheddar's, and if it has remained stable. He also inquired if the absence of negative mix in Olive Garden's same restaurant sales breakdown implied no meaningful impact from smaller portions or promotions on check.

Answer

Rick Cardenas, President and CEO, confirmed that outside of promotions, delivery is about 50% incremental for both Cheddar's and Olive Garden, remaining relatively stable. Raj Vennam, CFO, clarified that while smaller portions had a negative impact, it was offset by other mix factors, specifically strong preference for higher-priced items like the Calabrian Steak and Shrimp, which tended to shift the entree mix towards higher value.

Jim Sanderson asked about the incremental percentage of delivery sales mix for Olive Garden and Cheddar's Scratch Kitchen, and if the absence of negative mix at Olive Garden implies that smaller portions and promotions are not significantly impacting the average check.

Answer

Rick Cardenas, President, CEO & Director, stated that approximately 50% of delivery sales are incremental for both Olive Garden and Cheddar's, outside of promotions. Raj Vennam, SVP & CFO, explained that while smaller portions could have a negative mix impact, it was offset by other factors, such as strong preference for higher-priced items like the Calabrian steak and shrimp at Olive Garden.

Jim Sanderson of Northcoast Research asked about the implied restaurant closure rate in the fiscal 2026 guidance and if Darden is considering streamlining smaller brands. He also questioned if the incrementality of Uber Direct was consistent during the May promotion.

Answer

CFO Raj Vennam clarified that after a year of higher-than-normal closures as part of a portfolio review, no significant number of closings are assumed for fiscal 2026. President & CEO Rick Cardenas explained that the incrementality of Uber Direct remains fairly consistent, as free delivery offers can also attract existing pickup guests, which increases total delivery sales without necessarily spiking the new-customer percentage.

Jim Sanderson from Northcoast Research asked for the specific unit decline in the fashion category for the quarter and the outlook for bridal unit performance for the full fiscal year. He also inquired about the potential long-term sales mix for the lab-grown diamond assortment and the expected marketing spend trend for the second half of the year.

Answer

Chief Operating & Financial Officer Joan Hilson reported a high-single-digit unit decline in fashion, driven by gold prices impacting Banter and a strategic shift away from low-price promotional items. She stated the outlook for bridal units is relatively flat to up low-single-digits. CEO & Director J.K. Symancyk declined to give a specific LGD penetration target but noted significant runway for growth. He described the marketing spend outlook as neutral overall, not necessarily higher than revenue growth.

Jim Sanderson asked for the unit decline in the fashion category for the quarter and the outlook for bridal units for the fiscal year. He also inquired about the expected long-term penetration mix of lab-grown diamonds in the assortment and the marketing spending trend for the back half of the year.

Answer

COO and CFO Joan Hilson reported a high single-digit unit decline in fashion, mainly due to gold pricing impacting Banter and a strategic shift away from lower-price promotional items in Zales. She expects bridal units to remain relatively flat, potentially up below single-digit, consistent with previous guidance. CEO J.K. Symancyk stated no specific penetration target for LGDs, as they aim to grow both sales and category expansion, emphasizing LGDs are adding to consumption. J.K. Symancyk clarified that marketing spending for the back half is expected to be neutral overall, with adjustments based on performance rather than a fixed increase.

Jim Sanderson of Northcoast Research asked about the company's ability to achieve the high end of guidance if tariffs from India increase, whether bridal unit growth was in line with the industry, and the specific share of bridal sales from lab-grown diamonds.

Answer

CEO J.K. Symancyk expressed confidence in managing potential tariff impacts, stating that lab-grown diamonds are less of a pressure point due to greater control over design, fabrication, and input costs, allowing the company to engineer products to specific price points. CFO Joan Hilson noted that based on external indicators, Signet is gaining traction and market share in bridal. She specified that lab-grown diamonds now represent a 'mid-thirty' percent share of bridal sales, an increase from last year driven by improved assortment architecture.

Jim Sanderson of Northcoast Research asked how the corporate store margin is expected to evolve with the increased development of Bubba's 33. He also inquired about the anticipated mix of company-owned versus franchised units as Bubba's grows towards its 200-unit goal.

Answer

Michael Bailen, Senior Director & Head of IR, stated that Bubba's 33 development is planned to be entirely company-owned. He added that over time, Bubba's is expected to deliver margins similar to Texas Roadhouse, as the brand is proving it can achieve very strong performance.

Jim Sanderson of Northcoast Research asked for an update on performance trends in the UK, specifically its comp performance relative to the international average, and the outlook for new unit development there.

Answer

EVP & CFO Ravi Thanawala reported that the UK has seen a multi-year transformation, with comps accelerating meaningfully in July to outperform the international business. He noted significant improvements in customer satisfaction and delivery times. While there is meaningful comp upside to capture first, the company will turn the development engine back on in the UK "in due course."

Jim Sanderson of Northcoast Research asked for an update on the performance of new markets like Salt Lake City and Louisville, comparing them to the recent Chicago openings. He also inquired about the traffic share from low-income and Hispanic consumers.

Answer

CEO Lance Tucker stated that Salt Lake City and Louisville continue to perform very strongly and that the new Chicago restaurants opened with even higher volumes. Regarding consumer mix, he noted that Jack in the Box 'significantly over-indexes' on Hispanic consumers at about 1.7 to 2.0 times the industry average, while its low-income consumer base is more in line with industry peers.

Jim Sanderson of Northcoast Research asked about the key drivers to achieve the higher end of the same-store sales guidance, the expected impact of the new loyalty program, learnings from the San Mateo opening applicable to other stores, and the outlook for future restaurant closures.

Answer

President & CEO Emanuel Hilario identified improving Benihana's table turn times and a strong holiday event business as key to reaching the upper end of sales guidance. He expects the new 7-million-member loyalty program to build momentum in Q3 and show a payoff in Q4. Key learnings from San Mateo to be applied elsewhere include moving sushi bars to add tables and creating dedicated takeout stations to improve flow. He also noted that portfolio optimization is ongoing, with capital allocation decisions weighing heavily on whether to renew leases for older, underperforming assets.

Jim Sanderson sought clarification on the traffic outlook, asking if achieving a flat full-year result implies positive traffic in Q3 and Q4. He also asked if recent marketing was the primary driver of the July traffic improvement.

Answer

CFO Katie Fogertey confirmed traffic trends have improved monthly and were positive in July, but did not provide a specific quarterly forecast. Both she and CEO Rob Lynch clarified that the 3.2% comp in July was driven primarily by the culinary launch itself, as the significant media spend began at the very end of the reporting period.

Jim Sanderson inquired about the ultimate store capacity for the Flower Child concept given its rapid AUV growth. He also asked if there were any noticeable traffic trend changes in Q2 or July related to weather events like heat waves.

Answer

Matthew Clark, Executive VP & CFO, stated that they don't know Flower Child's ultimate capacity, as the team continues to improve throughput, with some locations already reaching $6.5 to $7 million in sales. He noted there is a long runway for AUV growth. Regarding traffic, he said trends have been very steady and predictable across the company, with no significant widespread impact from weather.

Jim Sanderson asked about the expected progression of the sales mix component of same-store sales, whether the new reservation system has increased loyalty memberships, and for an update on technology initiatives like the robotic dishwasher.

Answer

SVP Benjamin Porten expressed excitement about improving the sales mix in fiscal 2026, driven by initiatives like 'light rice' and higher-threshold IP giveaways. He noted that loyalty membership growth rates are currently stable as the reservation system has not yet been marketed to non-members. For technology, he highlighted the dish robot as a major FY26 opportunity that could reduce headcount, and mentioned ongoing improvements to the reservation system to enhance front-of-house efficiency.

Jim Sanderson asked for more detail on the expected drivers of G&A leverage going forward. He also requested clarification on the components of the quarterly comp, noting that the price and traffic figures implied a negative mix, and asked for an update on DoorDash's contribution to sales.

Answer

CFO Jeff Uttz identified support center salaries as the biggest driver of G&A leverage, emphasizing efficiency gains from technology over headcount growth. CEO Hajime Uba, via interpreter, added that regional density from infill growth creates synergies, allowing area managers to handle more stores and reducing travel for facilities teams. Mr. Uttz explained that while the mix was slightly negative, it was a significant improvement from high single-digit negative mix in prior years and they were happy with the result. Benjamin Porten stated that off-premise sales were 3.2% of total sales, up from 2% before the DoorDash launch.