Darden Restaurants Inc Q1 FY2024 Earnings Call

Welcome to the Darden Fiscal Year 2024 First Quarter Earnings Call. Your lines have been placed on listen-only until the question-and-answer session. This conference is being recorded. If you have any objections, please disconnect at this time. I will now turn the call over to Mr. Kevin Kalicak. Thank you. You may begin. Thank you, Daryl. Good morning, everyone, and thank you for participating on today's call. Joining me today are Rick Cardenas, Darden's President and CEO; and Raj Vennam, CFO. As a reminder, comments made during this call will include forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. These statements are subject to risks and uncertainties that could cause actual results to differ materially from our expectations and projections. Those risks are described in the company's press release, which was distributed this morning and in its filings with the Securities and Exchange Commission. We are simultaneously broadcasting a presentation during this call, which is posted in the Investor Relations section of our website at darden.com. Today's discussion and presentation include certain non-GAAP measurements, and reconciliations of these measurements are included in the presentation. Looking ahead, we plan to release fiscal 2024 second quarter earnings on Friday, December 15, before the market opens, followed by a conference call. During today's call, any reference to pre-COVID when discussing first quarter performance is a comparison to the first quarter of fiscal 2020. Additionally, all references to industry results during today's call refer to Black Box Intelligence’s, casual dining benchmark, excluding Darden, specifically Olive Garden, LongHorn Steakhouse and Cheddar's Scratch Kitchen. During our first fiscal quarter, industry same-restaurant sales increased 0.9% and industry same-restaurant guest counts decreased 4.2%. This morning, Rick will share some brief remarks on the quarter, and Raj will provide details on our financial results. Now, I'll turn the call over to Rick.

Good morning, everyone. Thanks, Kevin. We had a strong quarter as we continued to outperform the industry benchmarks for same-restaurant sales and traffic. For the quarter, total sales were $2.7 billion, an increase of 11.6% and adjusted diluted net earnings per share were $1.78. We also opened 10 new restaurants in nine different states during the quarter. Our ability to drive profitable sales growth is a testament to the strength of our business model and adherence to our strategy. We continue to strengthen and leverage our four competitive advantages of significant scale, extensive data and insights, rigorous strategic planning, and a results-oriented culture, while our restaurant teams remain intensely focused on executing our back-to-basics operating philosophy, anchored in food, service and atmosphere. This focus on growth with the basics continues to drive strong guest satisfaction. In fact, our internal guest satisfaction metrics remain at or near all-time highs across all our brands. Additionally, several of our brands continue to rank number one among major casual dining brands in key measurement categories within Technomic’s industry tracking tool, including LongHorn Steakhouse for food quality and taste, and Cheddar's Scratch Kitchen for value. Our team members bring our brands to life each day, and we know engaged team members are vital to creating great guest experiences. That's why our brands are focused on leveraging their unique cultures to strengthen team member engagement. For example, LongHorn Steakhouse created the Grill Masters Legends program that honors Grill Masters, who have grilled more than 1 million steaks throughout their career, which typically takes more than 20 years for a team member to accomplish. Five Grill Masters Legends were honored during the quarter, bringing the total to 25 team members who have received this recognition. Also during the quarter, Yard House completed its first Best On Tap competition. Known for having more than 130 beers on-tap, Yard House tested its bartenders from every restaurant, giving them the opportunity to showcase their beverage knowledge, party expertise and service skills. Congratulations to this year's winner, Alyssa Hurley from the Yard House in Willow Grove, Pennsylvania, who was named Best On Tap. Programs like these give us an opportunity to celebrate team members who play a critical role in the guest experience and who serve as torchbearers for their brand culture. One of the most significant ways our brands drive culture is through their annual leadership conferences, which provide the opportunity to get in front of every general manager and managing partner across all our restaurants to discuss the plans for the year and generate excitement among our operators. I was pleased to see the high levels of engagement and strong alignment on what our restaurant teams must do to continue creating exceptional guest experiences across each of our iconic brands. To further strengthen our brands, we are focused on highlighting what makes each one unique. That's why when it comes to marketing, any activity our brands undertake is evaluated through three filters. First, it needs to elevate brand equity by bringing the brand's competitive advantages to life. Second, it should be simple to execute. We will not jeopardize all the work we have done to simplify operations, which allows our teams to consistently deliver memorable guest experiences. And finally, it will not be at a deep discount. We are focused on providing great value to our guests, but doing so in a way that drives profitable sales growth. A great example of this activity was the Capital Grille's Generous Pour event that took place during the quarter. This specially curated wine experience allows guests to sample award-winning wines that pair with items on the Capital Grille menu. And in the second quarter, Olive Garden is bringing back the Never Ending Pasta Bowl, which brings to life its competitive advantage of Never Ending Abundant Craveable Italian food. Olive Garden's eClub members received a special invitation to begin enjoying NEPV this week. This guest favorite returns for everybody on Monday and will be offered at the same price point as last year. Turning to Ruth's Chris. Since the day we announced the completion of the acquisition, we have been guided by three key objectives. First, we want to preserve the team member experience and the brand's unique culture. Ruth's Chris has many long-tenured team members and we are committed to ensuring this is a people-focused process. The team is engaged and we have strong buy-in across the executive and operations leadership levels, all of which helps ensure a smooth transition. Next, we want to maintain and even strengthen the guest experience. Ruth's Chris is an incredibly strong brand and it ranks as one of the top brands across multiple metrics within Technomic’s industry tracking tool. We now expect to realize more synergies than we originally anticipated and we plan to reinvest some of them in the guest and team member experience. Raj will provide more details during his remarks. And last, we want to successfully migrate Ruth's Chris under the Darden platform. The team leading the integration is wrapping up the planning stage and we're about to embark on the hardest part, the actual conversion to new systems and processes. We know that it's not easy, which is why we plan to complete it in phases over the next nine months to limit disruptions as much as possible. Looking across our entire portfolio, I am pleased with the quarter. Our strategy is working; we continue to grow share, strengthen margins and make meaningful investments in our business while returning capital to shareholders. And while I'm proud of our continued success, there is a larger purpose to what we do, and that is to nourish and delight everyone we serve. Not just within the four walls of our restaurants, but in the communities that our guests and team members call home. September is Hunger Action Month and we are uniquely positioned to help fight hunger. This marks the 20th anniversary of our Harvest program. Since 2003, our restaurants have collected excess nutritious food that was not served to guests and prepared it for weekly donation to local non-profit partners. Over the life of the program, we have donated the equivalent of more than 113 million meals. And for the past 13 years, we have partnered with Feeding America to help fight hunger. Over that time, the Darden Foundation has donated more than $16 million to support their network of more than 200 food banks. Last week, together with our partners, Penske Truck Leasing and Lineage Logistics, we added 10 more refrigerated trucks for mobile food pantry programs at 10 local food banks. To date, we have added a total of 35 trucks across Feeding America food banks in 18 states. Our ability to make a difference in the fight against hunger would not be possible without the efforts of our 190,000 team members and their passion to nourish and delight everyone we serve. I'm grateful for everything you do to help make our company successful. Now I will turn it over to Raj.

Thank you, Rick, and good morning, everyone. Total sales for the first quarter were $2.7 billion, 11.6% higher than last year, driven by the addition of 77 company-owned Ruth's Chris Steakhouse restaurants, same restaurant sales growth of 5% and 46 legacy Darden net new restaurants. Our same-restaurant sales for the quarter outpaced the industry by 410 basis points and same-restaurant guest counts exceeded the industry by 430 basis points. First quarter adjusted diluted net earnings per share from continuing operations were $1.78, an increase of 14.1% from last year's reported net earnings per share. We generated $388 million of adjusted EBITDA and returned approximately $300 million of capital to our shareholders with $159 million in dividends and $143 million of share repurchases. As we look at pricing and inflation during the quarter, we had total pricing of approximately 6%, which was 300 basis points above total inflation of roughly 3%. Now looking at our margin analysis compared to last year. Food and beverage expenses were 130 basis points lower, driven by pricing leverage. While beef inflation continues to track in line with our expectations, most other categories are seeing slight favorability. As a result, total commodities inflation of approximately 1% was better than our expectations. Restaurant labor was 40 basis points better than last year, driven by productivity improvements. We expected these productivity improvements to start materializing in the second quarter, but we began realizing them sooner. Pricing and labor inflation were roughly equal at 6%. Restaurant expenses were 10 basis points favorable as leverage from higher sales more than offset elevated repairs and maintenance expense. Marketing expenses were 20 basis points higher than last year consistent with our plan and including impacts from Ruth's Chris. All of this resulted in restaurant level EBITDA of 19%, 170 basis points higher than last year. G&A expenses were 110 basis points above last year, driven by three primary factors: first, higher incentive compensation due to significant growth in sales and EPS for the quarter and wrapping a very low incentive accrual in the first quarter of last year. Second, approximately $9 million of stock-based compensation expenses related to the immediate expensing of equity awards for retirement-eligible employees. And third, the addition of Ruth's Chris. Impairments were 30 basis points unfavorable to last year. We're wrapping on a $5 million gain from last year and we incurred $3 million of impairments related to a handful of closings anticipated for this year. Interest expense increased 30 basis points versus last year due to the financing expenses related to the Ruth's Chris acquisition. And for the quarter, adjusted earnings after tax was 7.9% of sales flat to last year. Now turning to our segments. Sales increased at Olive Garden and LongHorn driven by same-restaurant sales and traffic growth. This sales growth along with labor productivity and higher overall pricing related to inflation drove segment profit margin increases of 230 basis points at both Olive Garden and LongHorn. Fine Dining segment total sales increased with the addition of Ruth's Chris company-owned restaurants, but same-restaurant sales were negative at both Capital Grille and Eddie V’s consistent with what we indicated on our earnings call last quarter. This resulted in lower segment profit margin for fine dining than last year. As we anticipated, the year-over-year same-restaurant sales decline in our Fine Dining segment was the result of ramping on a resurgence of demand in the first quarter last year that drove traffic retention to 107% of pre-COVID levels. Fine dining traffic retention in the first quarter of this year was 100% of pre-COVID levels, more in line with the retention levels for the prior three quarters. The other business segment increased sales driven by positive same-restaurant sales and the addition of Ruth's Chris franchised and managed locations royalty revenue resulting in 140 basis points of segment profit margin growth. As a reminder, all of our franchise operating results are included in the other business segments. Now, I'd like to provide an update on Ruth's synergies. As Rick mentioned, we've identified more synergies than we had initially expected and are choosing to reinvest some of them in the guest and team member experience at Ruth's Chris. Previously, we anticipated $20 million in annualized run rate synergies. We now expect approximately $35 million of gross run rate synergies and other cost savings and we anticipate investing approximately $10 million into the business, resulting in annualized net run rate synergies of approximately $25 million. And for fiscal 2024, we now expect approximately $12 million of net synergies. Finally, as shared in the press release distributed this morning, we are reiterating our full year financial outlook for fiscal 2024. Our outlook still anticipates adjusted diluted net earnings per share from continuing operations of $8.55 to $8.85, including Ruth's Chris operating results, but excludes approximately $55 million of pre-tax transaction and integration-related costs.

Thank you. We will now be conducting a question-and-answer session. Our first questions come from the line of Andrew Charles with TD Cowen. Please proceed with your questions.

Great. Thank you. Your Olive Garden and LongHorn showed impressive performance in 1Q, while fine dining saw headwinds as you previously warned. And I guess I'm curious, what led the decision to keep full year same-store sales guidance despite 1Q strong result? And are you perhaps seeing something in September that gives you pause on the outlook for the balance of the year? I know restaurant investors have been keen that industry data seems to be taking a breather? Thanks.

Thank you for the question, Andrew. Let's discuss the guidance. Looking at our first quarter performance, it was largely in line with our expectations. We were very close to our same restaurant plan. Overall, the year is progressing as anticipated. This consistency is why we are not altering our guidance for the year. However, we are just one quarter in, and there is still a lot of uncertainty ahead. With three quarters remaining, we started with a range, and while we exceeded our bottom line expectations, we still believe the point estimate remains within the range we initially provided.

Thanks and congrats on strong results. I just want to follow-up with Andrew's question a little bit. There is a lot of anxiety, I think, out there regarding how the evolving macro could impact industry sales trends moving forward, specifically for casual dining as the benefits of pricing normalize. Just based on all your insights, do you believe that the current health of the consumer remains strongly intact? And can you help us understand what weapons you do have to keep traffic within your full year guidance range of flat to down 1.5% if the macro does deteriorate relative to your original expectations?

Hey, Brian. This is Rick. Overall, we think the consumers continue to be resilient, but there seems to be a little bit more selective. We are seeing a little softness versus last year with household incomes above $125,000 and that primarily affects our fine dining brands, but it does affect all of our brands. Now this could be because of the increase in luxury travel, particularly international travel, which you've heard a lot of people talk about. But as I've said before, many times, there is attention to being what people want to pay and what they can afford, and they're going to continue to seek value, not always about low price. They're making trade-offs and food away from home is one of the most difficult things they can give up. So again, what does that mean for our brands? We believe that operators deliver on their brand promise and value will continue to be with consumers. And so we're going to keep doing that. We're going to deliver our promise. We're going to execute our brands and we're going to keep doing that and deliver value to our guests. And I'm confident we're well positioned for whatever we have to deal with. Thanks to the breadth of our portfolio and the outstanding team members in our restaurants who are committed to exceptional guest experiences. Our marketing programs, we told you what we're going to do with marketing in the prepared remarks. It's again at whatever we do is going to elevate brand equity. It's not going to be a deep discount and it's going to be simple to operate. And if it means that our traffic is at the lower end of our guide and then it's at the lower end of our guide. We're not going to do things that are going to impact us in the long-term just for short-term.

In the first quarter, our inflation expectations were about 1 point better than we anticipated, primarily influenced by other categories as I noted earlier. There's still considerable uncertainty surrounding beef, and our coverage is limited, especially as we approach and move past the holidays. This uncertainty affects our outlook. The favorable conditions in the first quarter might result in guidance that is slightly below the 2.5% range we provided. However, there are three more quarters ahead, and beef continues to carry significant risks.

Thanks and good morning. My question is about the guidance as it relates to Olive Garden. And specifically, I'm curious how you're thinking about the second quarter, which is typically a seasonal low volume period for the industry. Historically, there's been a bit of a step down in revenue in Olive Garden from 1Q to 2Q, but last year was a little bit different with the return of the possible. So perhaps you can help us think about how to model that second quarter relative to your guidance and your own expectations, whether you see that fiscal second quarter revenue increasing or decreasing sequentially? Thanks.

I don't expect a significant change from quarter to quarter. We are relaunching now, which may help, and that’s part of why we do it in the second quarter, coinciding with back-to-school time when there’s typically a lull and slowdown in casual dining. Looking at last year compared to this year, there will be some differences, especially with pricing being a bit lower in the second quarter compared to the first. However, I don't want to predict exactly how it will look from quarter to quarter.

Yeah. Thank you. Maybe just on the risk synergies, what were some of the additional things that you found? And then when you talk about reinvesting, would that primarily kind of be in staffing or are you also referring to kind of food and menu? Where would we kind of see that impact?

Yeah. So route synergies, generally, where we're getting them is between both the entire supply chain as well as in the G&A, right? So we initially started with an estimate as we go through the year, we're finding that as we are now in the process, we've been able to identify more, and it's in both places. So from an investment perspective, we have a long history of investing in the guest and team member experience across our brands. And so we're investing some of these additional synergies and cost savings in a similar manner, with investments that the routes guests and team members will notice and appreciate.

Thank you, Raj. Regarding your earlier comments on G&A for the year and its quarterly progression, is that still accurate? It seems that some aspect of stock-based compensation was a one-time occurrence in the first quarter. Can you provide an update on the G&A outlook?

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 one-time. 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.

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.

Thank you, David. Regarding development and unit growth, we aim to achieve the upper end of our long-term goal of 3% unit sales growth from new restaurants. As we’ve mentioned previously, we’re still experiencing some delays with permitting. Utility connections are improving slightly, but permits are still taking longer than we’d like. We are being more selective, particularly where inflation and elevated costs have made deals less appealing. We prefer to maintain a good margin of error with our projects, which has led us to turn down a few due to higher costs. In the past, we’ve revisited these projects when costs became more favorable. We’re willing to wait a bit for costs to realign. That said, we believe inflation has peaked, and we’re starting to receive more bids that align with our budgets, with some even coming in under budget. This gives us confidence moving forward. We still see a chance to grow close to the upper end of our target, and we are actively building our pipeline.

David, regarding the returns, they remain quite strong. Any project we approve must provide a positive net present value for us. Additionally, we typically prefer having some margin for error when approving projects. While that buffer may not be as large as it once was, we consistently outperform our internal benchmarks on average.

Yeah. And David, I'm going to add one more thing. If you think about us saying that we'd like to see a little bit of a buffer in our net present value over our cost of capital, that's because we have all the capital we need and so we're going to be selective in projects. And the thing that's going to keep us from growing way faster than our long-term framework unit growth is having people ready to run those restaurants and that's what we focus on as well. We're focusing on developing people and we think we've got a great pipeline of people as well.

Thanks for the follow-up. This question was asked previously, but I’m not sure I fully understood the response. Given the current food costs and route synergies, we were surprised that you haven't increased the lower end of your EPS guidance for the fiscal year. What are the potential offsets to the apparent upside in your EPS and EBITDA projections?

I appreciate your question, David. It's important to note that we're only one quarter into the year, with nine months remaining. There's been a mix of data regarding consumer behavior, and we're still trying to gauge what the future holds. Therefore, we believe it's premature to adjust the range we initially provided. Our estimated figures have improved slightly since the start of the year, mainly due to our strong performance in the first quarter, but this doesn’t indicate we’re outside the original range. Consequently, we don’t think a change to the guidance is necessary. Regarding uncertainty, there are several factors to consider. The primary risk is related to consumer behavior. Another concern is commodity prices, particularly beef, as it constitutes 22% of our basket. The pricing of beef has remained high due to a slight decrease in supply. While we're beginning to see some increases in imports that could alleviate pressure on beef prices, it’s still too early to determine the impact. Given these factors, we believe it’s sensible to maintain our current guidance.

Thank you for that. I understand you won't share specific marketing strategies or any potential pivots. However, I'm curious if you are noticing a worsening trend in the industry compared to the flat trend that aligns with your current guidance. If your traffic is declining more than slightly or if you anticipate that happening, how would you respond? What adjustments could you make with your major brands? Thank you.

Yeah, Dave. You're right. We're not going to give you too much information on what we would do. But just understand that we believe that the best long-term health of our business is to keep our strategy of overall pricing below inflation, running better restaurants and not getting into a huge deep discounting to buy guests. We think that brings in the guests that just come in that are a little bit less core to our business and we're going to continue to operate our restaurants to drive one more visit from our core guests. And if that means that others start doing some heavy discounting, we’re going to stick to our strategy. And even if it means that it’s a short term, it impacts us a little bit in the short term because we think we’ll be better off in the long term if we stay with where we’re going.

Great. Thank you very much. Two questions. One, just on the competition. Rick, I know you were pretty clear that you're not keen to start being more aggressive with discounting, doesn't benefit you long term. But are you seeing any changes in the broader competitive behavior? I think there are some that are concerned of an uptick in promos and discounting to drive traffic, especially with the commodity inflation easing. So contrary to your strategy, just wondering what you're seeing across the broader landscape. And then I had one follow-up.

Yes, Jeff. While commodities might be showing some signs of easing, labor costs remain high. It is getting slightly better, but even with deflation in commodities, we are still experiencing net inflation in our business, and I suspect many others are too. However, we have noticed a slight uptick in promotional activities, particularly from one bar and grill competitor and within the family dining segment. Overall, there isn't a significant rise in competitive activity among brands in the Olive Garden range or higher, aside from that one bar and grill competitor that appears to be stepping up their efforts. Olive Garden typically ranks as one of the top brands in terms of share of voice. Regardless of any competitive actions or television promotions, Olive Garden remains one of the leading brands in this area. Our message focuses on giving more—more food, more value, more refills. We are committed to our strategy, and the Never Ending Pasta Bowl campaign reinforces this. The campaign is centered on offering endless, craveable Italian food at excellent value, aligning perfectly with our plan. We are executing exactly what we intended to do with the Never Ending Pasta Bowl since the start of this fiscal year, and there are no new changes.

Got you. And then just a follow-up. I know earlier you mentioned something about seasonality. I know you're referring specifically to fine dining relative to last year. But as you think about broader casual dining historically, I get the feeling right sales slow in September post maybe a stronger summer and battling now back-to-school. But I feel like the past couple of years, there was a lot of pent-up demand post-COVID and therefore, maybe there was no seasonality. People are willing to go out even during this time frame, and therefore, less seasonality. I'm just wondering, should we now expect to return to seasonality that maybe could explain if you were to see a slowdown in coming weeks? I'm just wondering how you kind of think about that if seasonality were to return, how you decipher whether it's traditional seasonality or slow in consumer? Any thoughts there around that would be great. Thanks.

Yeah, Jeff. We actually do think seasonality is getting back to historic trends. And the data we talked about for fine dining with getting back to kind of 100% of pre-COVID levels. We're seeing the same thing. I'm not saying at the 100%, but the same kind of trends back towards similar trends of pre-COVID levels now, where last year, we do think there was a little bit of pent-up demand. And so we're going to watch it. We're going to see what happens for the rest of this month and the rest of next month. But it appears like now we’re getting much closer to what the seasonal patterns were.

Great. Thank you for taking my question. When we think about the trends you reported here in the first quarter, I understand that the strength was largely in line with what you were expecting. Curious, if you could dive into any sort of comments around pacing, geographic performance, daypart, day of week, anything there or perhaps sales channel kind of in the to-go business for Olive Garden?

Yeah, Josh. I think from a geography perspective, we're seeing more strength in New England, Northeast, we're seeing some softness or at least below company average in California, Texas and Florida when we look at the entire portfolio. Now brand by brand, there's a little bit of variability. But when you look at across our portfolio, that's the areas where we're seeing in terms of regional differences. Most others are kind of in between, and so kind of closer to the company average, if you will. But definitely seeing strength in the Northeast and especially New England area overall. From a daypart perspective, we are seeing some lunch getting better at casual brands. And so that's really it. Outside of that, I don't know that there's any additional color we can provide on the sales detail.

That's helpful. And then one point of clarification, Raj, there. When we think about maybe California, Texas, Florida being a little bit softer on a relative basis, do we think about that just from a kind of base of comparison? It feels like they were probably stronger over the last couple of years. So maybe it's just a kind of point of comparison. And then maybe, Rick, when you think about just that opportunity to drive the marketing and messaging, I would totally agree about the opportunity for the balance of operational execution and value to be a big key component in the second half of the year. It doesn't sound like you need to lean in or change the messaging. Is that correct? I mean you feel good with how you're communicating that it's about going out and executing it.

Okay. You're correct about the year-over-year comparison. It's mainly influenced by last year's market conditions, which were quite different. This is truly a one-year issue, and now I'll let Rick discuss the marketing aspect.

Yeah, Josh. I think we are starting to see a return to more seasonal patterns. Our traffic trends compared to pre-COVID have been quite steady over the last four quarters across most of our brands and segments. We believe that our current approach is getting us back to where we were before, even with slightly lower traffic due to less marketing spend. We plan to continue our current strategy and monitor for any significant changes in patterns. If changes occur, we have options to explore that don’t involve heavy discounts. One recent strategy we implemented with the Never Ending Pasta Bowl was giving our eClub members a preview, which was part of our initial plan for this fiscal year. We are not altering our approach, but rather learning from it. By providing our eClub members with added value to remain in the club without offering discounts, we hope to encourage more engagement. We are still learning and examining our digital marketing efforts and other insights gained during COVID. Should we take action, we might utilize those strategies rather than resorting to heavy discounts.

Great. Thanks, guys. Wondering if you could speak a bit more or a bit to the dining room traffic levels broadly across the portfolio or even an Olive Garden specifically. And sort of how you think about where those dine-in traffic levels are currently, where they can go relative to the to-go business? Have we normalized or is there still an opportunity to see more dine-in recovery gains on the traffic side at this point?

Our off-premise sales have improved significantly since before COVID. In terms of traffic at our largest brand, Olive Garden, we're currently around 80% of pre-COVID levels. However, when it comes to sales, we are closer to where we were before the pandemic. This is partly due to our decision to reduce promotional activities, couponing, and marketing expenditures at Olive Garden, which has allowed us to establish a healthier business. We are satisfied with our current position. Additionally, this situation opens up opportunities for us. There is available capacity in the dining room, which allows for more chances to grow, but we intend to approach this in a sustainable manner. Our goal isn't just to attract customers temporarily; we want to build a lasting relationship over time. That’s why we are concentrating on our core menu, offering everyday value, and executing with the highest standards possible to gradually build our business back up.

Helpful, Raj. And then just one quick one, just on the quarter itself. Anything to notable to call out either traffic or on the mix side of things at Olive Garden or LongHorn?

Our traffic was actually a bit better than we expected heading into the quarter, but our mix was slightly worse. From a check perspective at Olive Garden and LongHorn, we are experiencing a slight pullback in alcohol sales and a negative entree mix. That's all I can share at this time.

Good morning. Can you comment on the level of absolute pricing you're facing versus your local peers? And why is a prudent strategy for Darden to be increasing prices above inflation. I know that you spoke several times about how you might deviate from pricing below inflation in specific period, but why now? Is it a prudent strategy?

So Danilo, let me begin by discussing our pricing situation. Our overall pricing for the quarter was approximately 6%. We anticipate that for the full year, it will be closer to the mid-3% range, possibly between 3% and 4%, around 3.5% to 4%. In comparison to pre-COVID levels, our pricing has increased by about 17% to 18%, with this quarter reflecting an 18% rise. Most of our competitors are experiencing pricing increases averaging 600 to 700 basis points more than ours during the same time period, which indicates we have established a significant gap. This quarter's pricing largely stems from actions taken last year, with this year's contributions accounting for less than 10% of our total pricing. The impact from last year represents 3%. Overall, we are confident in our pricing strategy and believe we have created a sustainable lead over our competitors, which we anticipate will not diminish. Although we may see slight fluctuations quarter-to-quarter, we expect to remain ahead of the competition overall. This is partly due to our ability to manage inflation more effectively than many of our peers, allowing us to set our pricing accordingly, and our scale generally results in lower inflation impacts compared to some of the local competitors mentioned. So route synergies, generally, where we're getting them is between both the entire supply chain as well as in the G&A, right? So we initially started with an estimate as we go through the year, we're finding that as we are now in the process, we've been able to identify more, and it's in both places. So from an investment perspective, we have a long history of investing in the guest and team member experience across our brands. And so we're investing some of these additional synergies and cost savings in a similar manner, with investments that the routes guests and team members will notice and appreciate.

Hey, Danilo. As we mentioned earlier, we have completed the planning process and are about to begin the most challenging part, which will take us nine months. We need to focus on integrating 80 owned and operated Ruth's Chris restaurants, the franchise systems, and getting all of our operated restaurants onto our point-of-sale and payroll systems, along with other systems. We want to avoid moving faster than the nine-month timeline as it could result in significant disruption in the restaurants. We'll move at a suitable pace. We've already increased our synergy estimate for this year from $5 million to approximately $10 million, and now to about $12 million, which also includes reinvesting some of the synergies we've identified. This indicates that we are progressing a bit quicker. However, we plan to make investments similar to those in our other brands. If we notice that we can achieve synergies even more quickly than we’ve analyzed, we may choose to invest more. Our priority is the long-term health of the business, and we will not rush the integration but will maintain our pace.

Great. Thank you. Some big picture casual dining questions. So some of the NAP data, some of the other traffic source data, so that casual lining traffic growth slowed in August, has slow it into early September. You guys are obviously taking a lot of market share. But again, bigger picture from your perspective, what sort of consumer or macro factors are contributing most to that softening traffic trend for that casual dining consumer?

Yeah, Jeff. I'll begin with the topic of seasonality. As we've discussed previously, September usually sees a low seasonal pattern. Last year was an exception, similar to August. I would say seasonal patterns are returning to normal when we compare our segments to pre-COVID levels; we've shown consistency over the past four quarters. Additionally, we've noted that consumer confidence is slightly declining, and they are becoming more selective. We'll keep focusing on our existing strategies. It's possible that industry pricing has influenced this situation; however, we've been pricing our products significantly lower than the industry average and feel positive about our pricing position relative to competitors. We will continue to execute our plans.

Hey. Good morning. Thanks for taking the questions. I just had two quick ones for me. The first is on your commodity baskets. It looks like you have less lock than you did with the last update. Now I'm just wondering if that's typical. Is it intentional or things getting a little bit more difficult there with those conversations with suppliers. So that would be the first question.

Hey, Brian. so Olive Garden was about 22%, a little over 22%. So that's about a couple of points lower than where we were a year ago. This is not one of the high quarters. And then from a LongHorn perspective, they were about 13% off-premise. From a traffic perspective, I'd say Olive Garden was low-single digit or slightly positive. It might have been 0.3%, 0.4%. LongHorn was in the 1.5% range for traffic.

We have reached the end of our question-and-answer session. I would now like to turn the floor back over to Mr. Kevin Kalicak for any closing comments. Thank you. That concludes our call. And I'd like to remind you that we plan to release second quarter results on Friday, December 15, before the market opens with the conference call to follow. Thank you for all for participating in today's call.

Thank you. This does conclude today's teleconference. We appreciate your participation. You may disconnect your lines at this time. Enjoy the rest of your day.