Greetings, and welcome to the Darden Restaurants Q2 Fiscal Year 2026 Earnings Conference Call and Webcast. At this time, participants are in a listen-only mode. A question and answer session will follow the formal presentation. You may be placed into the question queue at any time by pressing star one on your telephone keypad. If anyone should require operator assistance, please press star 0. As a reminder, this conference is being recorded. It's now my pleasure to turn the call over to Courtney Aquilla, Vice President, Finance and Investor Relations. Courtney, please go ahead.

Thank you, Kevin. Good morning, everyone, and thank you for participating on today's call. Joining me 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 the filings with the Securities and Exchange Commission. We are simultaneously broadcasting a presentation during this call, which is available on the Financials tab in the Investors 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 2026 third quarter earnings on Thursday, March 19, before the market opens, followed by a conference call. During today's call, all references to industry results refer to the Black Box Intelligence casual dining benchmark, excluding Darden. During our fiscal second quarter, average same restaurant sales for the industry grew 1.3% and average same restaurant guest counts decreased 0.4%. Additionally, median same restaurant sales for the industry grew 1.9% and median same restaurant guest counts decreased 0.5%. This morning, Rick will share some brief remarks on the quarter, Raj will provide detail on our second quarter financial performance and share our updated fiscal 2026 financial outlook. Then Rick will close with some final comments. Now I'll turn the call over to Rick.

Thank you, Courtney, and good morning, everyone. We had a strong quarter that exceeded our sales expectations as each of our segments delivered positive same restaurant sales. Commodity headwinds were stronger than we anticipated as beef prices remained at historically high levels throughout the quarter. Our restaurant teams did a great job of being brilliant with the basics during the quarter, driving record or near record guest satisfaction scores across all of our brands. At the Darden level, we continue to leverage our four competitive advantages to enable our brands to compete effectively and continue providing strong value to our guests. The power of our scale enables us to continue to price below inflation over the long term and not pass all the costs on to our guests. While the breadth of our portfolio enables our brands to stick to their strategy, even if they are overly impacted by a single commodity. We opened 17 new restaurants during the quarter and are on pace to exceed our planned openings for the full fiscal year. These new restaurants opened faster than planned, collectively contributing forty additional operating weeks, versus our plan for the quarter. This is a testament to the outstanding job Todd Burrows and the entire development team led by Mark Braun have done to strengthen our pipeline. Olive Garden delivered positive same restaurant sales of 4.7% for the quarter driven by the success of the Never Ending Pasta Bowl promotion and first-party delivery combined with strong operational execution that led to all-time high guest satisfaction scores. For the fourth consecutive year, the starting price for the Never Ending Pasta Bowl was $13.99. Preference was strong and refill rates reached a record high, demonstrating that guests continue to find abundance and meaningful value at Olive Garden in this environment. First-party delivery through our partnership with Uber Direct continues to drive strong results. This channel attracts younger, more affluent guests who crave Olive Garden at home, value convenience, and order more frequently. These guests have a higher check average than dine-in guests. Uber Direct sales represented 4% of total sales for the quarter and approximately half of that was incremental. As we have discussed on recent calls, across the portfolio we are placing a greater emphasis on sales growth and reinvesting to drive long-term success. At Olive Garden, the success of first-party delivery is helping fund investments such as the addition of the lighter portion section on their menu, which features seven existing dishes with a smaller portion and a lower price. This section is designed to give guests more choices and is offered in addition to Olive Garden's regular portion sizes. Olive Garden has seen a double-digit increase in affordability perceptions from guests who order from the lighter portions menu and an increase in frequency among these guests, which should help build traffic over time. 40% of restaurants offered this menu during the quarter and they added another 20% of locations early in the third quarter. Olive Garden plans to complete the rollout system-wide in January. As we begin the third quarter, the Olive Garden team is poised to build on their momentum. They are currently offering two fan favorites for a limited time, ravioli de portobello and braised beef tortelloni. Thousands of Olive Garden fans requested the return of these iconic dishes, which included multiple online petitions to bring them back. Turning to LongHorn Steakhouse, the team's ongoing commitment to their strategy rooted in quality, simplicity, and culture continues to guide their success as they delivered strong top-line momentum driven by same restaurant sales growth of 5.9%. The relentless focus on executing every dish on their menu to their high standards was reflected in an all-time high Steaks Road Correctly score for the quarter. Their ability to consistently operate at this high level is enabled by having one of the most experienced teams in the industry. In fact, LongHorn further strengthened their impressive retention by setting their record low for team member turnover during the quarter. The investments LongHorn has made in food quality, combined with their grilling expertise, have built strong guest loyalty. And to further build on their leadership in food quality, LongHorn brought back a guest favorite for the holidays, the 14-ounce seven pepper crusted New York strip with brown butter sauce, which was met with enthusiastic reviews by guests and social media influencers. Same restaurant sales for our other business segment grew 3.1% during the quarter driven by strong performance at Yard House. During the quarter, Yard House's Oktoberfest event returned for the fifth year. This event continued to deepen guest engagement and drive results through limited-time menu offerings, that strengthen Yard House's competitive advantages of a socially energized bar and distinctive culinary with broad appeal. The event also featured a $5 refillable beer stein that was a hit with guests, with all steins selling out within the first few weeks. Also during the quarter, Yard House began rolling out first-party delivery through our partnership with Uber Direct. While the impact on total sales won't be as significant as what we've seen at Olive Garden, the team is pleased with the initial results and plans to continue rolling it out to additional restaurants in the third quarter. Same restaurant sales for the fine dining segment grew 0.8% for the quarter driven by strong performance at Ruth's Chris Steakhouse and improving trends at the Capital Grille. As guests continue to seek price certainty, Ruth's Chris brought back its limited-time offer featuring a three-course menu for $55. It was a key driver of sales and traffic growth and featured a new eight-ounce prime thick cut strip and two guest favorites, stuffed chicken, and salmon and shrimp. Each entree came with a soup or salad, an individual side, and a dessert. The Capital Grille's Wagyu and Wine event returned during the quarter, featuring the choice of a Dave's Finney Wine and Wagyu Burger for $35. This event delivered strong guest preference and sales momentum at the Capital Grille continued to grow throughout the quarter. I'm pleased with our performance as we move back into the back half of our year. Our brand teams have the appropriate plans in place and the power of Darden positions us well to win in a competitive environment. Now, I'll turn it over to Raj.

Thank you, Rick, and good morning, everyone. As Rick mentioned, the second quarter was another strong sales quarter for Darden with top-line momentum exceeding our expectations. While elevated commodity costs driven by beef were a significant headwind for the quarter, we priced 130 basis points below inflation, as we remain committed to providing strong value to our guests. This large investment in underpricing inflation resulted in level margins being below last year. The near-record beef cost has sustained longer than we anticipated and is likely to remain elevated into the third quarter with some relief as we get into the fourth quarter. In the second quarter, we generated $3.1 billion of total sales, 7% higher than last year driven by same restaurant sales growth of 4.3%, the addition of 30 net new restaurants, and the acquisition of Chewy's in October. Both our same restaurant sales and same restaurant guest counts were in the top decile of the industry again this quarter. Same restaurant sales exceeded the industry benchmark by 300 basis points. And the positive gap widened throughout the quarter. Adjusted diluted net earnings per share from continuing operations of $2.8 were 2.5% higher than last year. We generated $466 million of adjusted EBITDA and returned $396 million to our shareholders this quarter by paying $174 million in dividends and repurchasing $222 million in shares. Now looking at our adjusted margin analysis compared to last year, food and beverage expenses were 90 basis points higher primarily due to elevated beef costs driving total commodities inflation of approximately 5.5% for the quarter. Restaurant labor was 10 basis points higher with total labor inflation of 3.3%. That's our labor in our comparable restaurants was favorable to last year driven by productivity improvements that more than offset pricing below labor inflation. Restaurant expenses were 10 basis points higher as sales leverage was more than offset by Uber Direct fees and brand mix with the addition of Chewy's. Marketing expenses were 10 basis points lower due to sales leverage. We had incremental marketing activity in the quarter that was funded by cost savings. This all resulted in a rational level EBITDA of 18.7%. Adjusted G&A expenses were 60 basis points favorable driven by leverage from sales growth and lower incentive compensation accrual as well as favorable mark-to-market expense on our deferred compensation. Due to the way we hedge mark-to-market expense, this favorability is fully offset in the tax line. Our adjusted effective tax rate for the quarter was 13.2%, and we generated $243 million in adjusted earnings from continuing operations which was 7.8% of sales. Looking at our segments, all segments grew sales for the quarter driven by positive same restaurant sales. The high beef cost pressured segment profit margins at all of our segments except for Olive Garden. Total sales for Olive Garden increased by 5.4% driven by strong same restaurant sales and traffic growth as well as the addition of 11 net new restaurants. The sales momentum continued from prior quarters with same restaurant sales in the top decile of the industry and outperformed the industry benchmark by 340 basis points. Olive Garden delivered its strong segment profit margin of 21.8% for the quarter, which was 30 basis points above last year even with an approximate 20 basis points of margin investment related to the lighter portions menu, and the continued impact of delivery fees. At LongHorn, total sales increased by 9.3% driven by same restaurant sales growth of 5.9% and the addition of 21 new restaurants. The sustained sales and traffic outperformance resulted in same restaurant sales and traffic in the top decile again this quarter. The LongHorn team is doing a great job of staying focused on their strategy and maintaining momentum despite elevated beef costs. Our measured approach in reacting to inflation resulted in pricing 320 basis points below inflation at LongHorn that resulted in a segment profit margin of 16.2%. Total sales at the fine dining segment increased 3.3% driven by positive same restaurant sales and the addition of three net new restaurants. High beef costs also had a large impact on the brands in this segment resulting in a segment profit margin of 14.8%, 280 basis points lower than last year. The other business segment sales increased 11.3% with positive same restaurant sales of 3.1% and the acquisition of Chewy's benefiting part of the quarter. The positive sales growth and the continued productivity improvements in multiple brands within this segment were not enough to fully offset the elevated commodity pressures from beef and the impact of delivery fees. This resulted in a segment profit margin of 13.4%, 60 basis points lower than last year. Turning to our financial outlook for fiscal 2026, we have updated our guidance to reflect year-to-date performance, the evolving commodities environment, and the expectations for the back half of the year. We now expect total sales growth for the year of 8.5% to 9.3%, same restaurant sales growth of 3.5% to 4.3%, 65 to 70 new restaurant openings, total capital spending of $750 million to $775 million, total inflation of approximately 3.5%, with commodities inflation of 4% to 5%, and approximately 116.5 million diluted average shares outstanding. All other aspects of our guidance remain unchanged, including adjusted diluted net earnings per share between $10.60 and $10.70, of which approximately 20¢ is related to the addition of the fifty-third week. We expect earnings per share growth in the third and fourth quarters to sequentially improve as the gap between pricing and total inflation narrows in the back half of the year. Specifically for the third quarter, we expect earnings per share growth in the mid-single digits compared to the third quarter of last year. In summary, we're pleased with our strong top-line performance and continued industry outperformance this quarter. While our pricing strategy amid elevated commodity costs has impacted margins in the near term, we believe it's the right approach to support our long-term success. As we move through the rest of the fiscal year, we remain confident in our ability to grow sales, manage costs, and deliver value to our guests and shareholders. Now back to Rick.

As I reflect on our performance, I'm reminded of the power of the platform we built over time and our ability to navigate whatever comes our way. When you look at our company, there are three key factors that we believe make Darden a great company and a great stock. First, our winning strategy grounded in our four competitive advantages and our commitment to managing the business for the long term has led to a long track record of success. Over our thirty-year history as a public company, Darden has achieved an annualized total shareholder return of 10% or greater for any ten fiscal year period when considering Darden stock appreciation plus dividend yield. Second, we have a clear roadmap to grow our portfolio of iconic brands which includes two dominant brands, three high potential growth brands, and several balanced brands that are leaders in their respective categories. And third, our strong commitment to disciplined capital stewardship enables us to return capital to shareholders while making appropriate investments in the business for long-term success. I'm incredibly proud of the results we continue to deliver for our shareholders and we remain committed to executing our strategy to drive shareholder value now and for generations. Finally, I want to take a moment to acknowledge the recent passing of Darden's first CEO, Joe Lee. Joe was a visionary leader whose leadership helped shape not only Darden, but the entire casual dining industry. I was fortunate to work with Joe, and one of the things that always stood out to me was the care and compassion he had for his people. He always said, if you take care of your people, they will take care of your guests. Those words remain fundamental to Darden's culture today and they are especially meaningful during the holidays. Now is the busiest time of the year in our restaurants, and I'm so proud of our 200,000 team members who do such a remarkable job of nourishing and delighting everyone they serve. On behalf of our entire leadership team and the Darden board of directors, thank you to all of our team members for everything you do. I wish you and your families a happy holiday season. Now we'll take your questions.

Thank you. We'll now be conducting a question and answer session. You'd like to remove yourself from the queue, please press 2. Once again, that's 1 if you place in the question queue. And please ask one question and one follow-up, then return. Our first question today is coming from Brian Bittner from Oppenheimer. Your line is now live.

Good morning, and happy holidays, and congratulations on solid top-line results. First question is on the lighter portions menu and the strategy. As you roll that out to 100% of the Olive Garden restaurants here in January, how impactful do you think this will be to sales just based on what you've seen so far? Is it something that actually gonna be able to identify here from the outside or is it more of an impact to internal metrics like value perception, etcetera?

Hey, Brian. There is an impact to internal metrics, value perception, affordability, and portion and the right portion size. But we will see some impacts to sales in a couple of ways. In the long term, as we said, we've got higher frequency in the guests that are ordering this versus the guests that aren't. And the guests that aren't are increasing frequency as well. So this is a good, tough spend. In the short term, there will be a little bit of check mix. So as Raj mentioned, in the second quarter, we had about 20 points of mix from 20 to 30 basis points of mix from the lighter portion. As we roll it out to more restaurants, there will be a little bit of a bigger mix impact. But that's being offset by the other things we have. With the strong performance of delivery, it might not be necessarily in mix offset, but in total sales. So we believe this is the right thing to do for our guests in the short term and the long term. And that's why we've actually accelerated the rollout.

Thanks for that. And my follow-up is on labor and the margins on labor. Over the last couple of quarters, you've seen some labor margin deleverage despite growing comps over 4%. The last couple of quarters. What do you attribute this to? Because historically, you've been able to better leverage labor margins on these types of comps. Is there any specific investments going into labor or mix issues within the brands worth pointing out? How are you thinking about the ability to maybe better leverage labor margins moving forward?

Hey, Brian. This is Raj. So from a labor margin perspective, I think I said in my prepared remarks, if you actually look at our comparable restaurants, which is where we obviously had the same restaurant sales growth, you have actually labor leveraging. We actually saw labor improve year over year even with us underpricing inflation. Because labor inflation, as I said, was about 3.3%. Our pricing was 2.6%. So we were able to offset that underpricing inflation and drive labor leverage through productivity improvements. The reason you don't see it at the total Darden level is because of the growth over the last year and the acquisition of Chewy's. And so that's really what you gotta look at, the brand mix combined with some of the nuances. So it's more, I would say, idiosyncratic versus a systematic issue. We actually feel like as we go through the back half, you should start to see labor start to be more of the good guy.

Thank you. Next question is coming from David Palmer from Evercore ISI. Your line is now live.

Thanks, and congrats on this particularly this Olive Garden same store sales result in the quarter which should help with concerns about that brand lapping the tough comparisons coming up in the fourth quarter, but I'm wondering, what is your guidance generally anticipate with regard to Olive Garden comps going into that quarter? Are you factoring any benefit from fiscal stimulus? And just generally, what do you think you'll be doing in general to help maximize your chances of keeping positive comps going over those tough comparisons? And I have a quick follow-up.

Yeah, David. Thanks for those comments. So from a same restaurant sales perspective, if you look at our guidance, we talked about for the full year, 3.5% to 4.3%, which essentially means roughly 2.5% to 4% in the back half. Which would imply basically flat traffic at the midpoint of that range. I don't want to get specifically into the brands, but here is how we think about the total. When we look at the, you know, take into consideration the first half of the year, some macro uncertainty, but potential consumer spending benefit from the fiscal stimulus in early 2026. And, you know, we have several initiatives at the brand levels to drive sales. We feel like the outlook we provided is reasonable. And so I think that's really all I have to say on that front. Thanks.

You know, the other thing I'm curious about is how you're thinking about pricing versus the path of inflation on beef and steak? Clearly, I think you said something about your pricing was trailing inflation by three points or more. I think I didn't quite catch that. At LongHorn. So I'm just wondering about whether you think that does your guidance anticipate additional pricing at LongHorn through the rest of the year? Any thoughts on that? Thank you.

Hey, David. So yeah, on the pricing front, let me start at a bigger picture and then get back to LongHorn specifically. So we did price, you know, for the quarter at the Darden level was about 130 basis points below inflation. You know, one, we're taking some pricing. And we do expect that to cut in half by the time we get to the third quarter and actually catch up to inflation as we get to the fourth quarter, primarily because of. But also we expect inflation to come down, especially as we go into the fourth quarter. And, specifically at LongHorn, yeah, I don't expect LongHorn to have underpricing by 320 points as you move forward. We'll take some modest price increases. But, look, that's the benefit of the portfolio. Right? We talked about Rick mentioned this in his prepared remarks. That when there is some near-term pressure on one of the commodities, the portfolio provides the air cover to be able to kind of deal with this for the near term. And so all that said, look. Our bias is to minimize pricing, and we'll do what we think is right to protect the guest even if that means some margin erosion in the near term, primarily we're talking about second and third quarter because we expect margin growth as we get into the fourth quarter. Thank you.

Thank you. Next question today is coming from Brian Harbour from Morgan Stanley. Your line is now live.

Yes, thanks. Good morning, guys. Raj, could you maybe just talk more about the beef piece and what kinda gives you the confidence that that starts to come down by 4Q?

Yes, Brian. I guess maybe let me start with what happened in the second quarter and how we're transitioning and how we see this because beef prices peaked in our fiscal second quarter. And they were well above the normal seasonal trends due to supply constraints that stem from packer cutbacks, and, you know, halted Mexican cattle imports due to this screw worm outbreak. We have seen retail demand destruction accelerate over the past few months. And we think November was actually down about 14% demand volume down in steaks. Prices have started to improve in recent weeks, and we've been able to take some coverage for the back half. I think we want this morning, we showed about 45% coverage for the back half. And actually, as we're speaking, our team is getting a little bit more coverage. So and, so that's and the prices that were the coverage we're getting at is at the levels that are in line with our updated thinking. And all of that is contemplated in our guidance. You know, if you look at what happened in the near term, prices are expected to ease a little bit as beef production actually increased to near prior year levels the last couple of weeks driven by packer profitability and lower cattle prices. Now there is enough inventory on feedlot to support a recent production increase.

Okay. That's helpful. Thank you. The first-party delivery is 4% of sales, you know, is that kinda where you expected to be at this point? Or I guess, you know, what else do you think could continue to push that higher? If you know, in fact, want that, are you still seeing sort of sequential increases in delivery mix?

Yes, Brian, we're really pleased with 4%. As you recall, we didn't do any marketing. You didn't know. But we didn't do any marketing in Q2. We're at 4%. I think the way that would increase is if we do some more marketing and get more people into it, but it's tracking pretty closely to our overall to-go business. And we feel good where that is with the incrementality we're getting. But if we want to drive that up, we have some options on the marketing side.

Thank you. Next question today is coming from Jacob Aiken-Phillips from Melius Research. Your line is now live.

Hi, good morning. So I want to ask on Olive Garden delivery. As delivery grows, the income and travel will stay where it is or get better because it's these folks that are ordering delivery or higher frequency, and then just more broadly, you've talked about guests moving between channels depending on value or occasion. And, lower, a little bit younger and more affluent. So as it grows, if it continues to grow, we would expect a little bit more. Have you seen any meaningful shifts in where full service or casual dining fits into the broader food spend mix?

Yeah. As you see our sales performance, in the casual dining industry itself, I think the industry has been growing faster than other segments. And we've been growing faster than the industry. So I would say that we're continuing to take share from casual and we're taking share from a little bit on the limited service.

Thank you. Next question today is coming from Jake Bartlett from Truist Securities. Your line is now live.

Great. Thanks for taking the question. My first was about marketing. And marketing as a percentage of sales was down a little bit in the second quarter, I think roughly flat in the first. What are your expectations for the year? Is it still the 10 to 20 basis points? And I guess that would imply acceleration, maybe if you can confirm that. And then I have a follow-up.

Hey, Jake. So recall we said at the last quarter, I think we talked about we got about, you know, call it roughly $20 million of savings in marketing. It's all the work our, you know, great work our teams did to go back and take a look at how we spend the dollar. So anyway, when we take that into consideration, that helped increase marketing activity even though the dollars were basically flat to last year. Now as we look at the full year, we're probably closer to, you know, somewhere around 10 basis points increase year over year. But if something changes, we'll update you next quarter.

Okay. And, you know, my follow-up was just on the macro environment. I'm, you know, not sure if I heard you kinda, you talk about what you're seeing from a consumer perspective, lower income whether some of the weakness is bleeding up into the middle income, you know, what is the baseline macro environment that you're basing the back half sales guidance on?

Yeah. I would say that we see the same reports you see we've said that before, but the consumer is still resilient. They're being cautious. As we've said a few times, the weaker consumer sentiment doesn't necessarily translate into reduced spending. During the quarter so this is what's happening with our brands. During the quarter, our casual brands saw an increase of visits year over year. From guests within middle to higher income groups. So it hasn't kinda moved up for us to the middle income group with the largest growth, though, coming from our higher income households. We did see strong traffic growth from guests 55 and over as well. So on the demographic side, but there was a little pullback in those earning less than $50,000 in the casual brands. But I'll end it with the way we always talk about it. We know casual dining is the number one category where consumers intend to treat themselves and indulge. When they're thinking about where they spend their hard-earned money, they want to go to a place that they get a great value. And a good experience. For a great price. So we'll continue to focus on delivering an excellent experience and deliver value for every guest that chooses to dine with us.

Thank you. Next question today is coming from Andrew Charles from TD Cowen. Your line is now live.

Great. Thank you. Raj, just curious, with the updated same store sales guidance, does that embed any incremental pricing? You talked about the higher inflation forecast and you're not going to fully price to offset inflation. Just curious if there's an increased pricing factor contemplated within the updated guidance?

Yes, Andrew. There is a little bit of increase in price. As I said, we actually expect our pricing to be closer to mid threes in the back half, for the full year to be close to 3%. So if you think about where we started the year, I think we were 2.2% in the first quarter. 2.6% in the second quarter. So there's a little bit of an increase there. That we incorporated into our guidance.

Very good. Thanks. And Rick, in the past, you've laid out your hesitations around listing Olive Garden on third-party delivery. I'm curious if any of those pieces around you've laid in the past, like data sharing, tip sharing, the ability to throttle it on and off. Do you believe are better addressable as ultimately contemplating the decision to add Olive Garden to third-party delivery?

Yes, Andrew. I would say the two big third-party delivery providers know what our concerns are on third-party. And as long as we get a solution for those concerns, then we would look at it. It wouldn't make sense for us not to look at it, but we really do have some concerns, and they know what they are.

Thank you. Next question is coming from Jeffrey Bernstein from Barclays. Your line is now live.

Great. Thank you very much. My first question is just on the comp commentary. Just I think Raj, you mentioned that the favorable gap to the industry improved through fiscal 2Q. Was wondering whether you would assume or you are assuming that that continues, maybe you have some quarter to date third quarter numbers, but your assumption for the back half of the year in terms of maybe a further widening of that gap? And then I had a follow-up.

Hey, Jeff. Look. We did see an increase in our performance. And we've said historically when the industry slows down a little bit, we have widened the gap, you know, and as we look at the back half, we don't really start with what the industry numbers are. We actually look at a lot of, you know, what's macro and then all the things I mentioned about the brand initiatives. Because you know, industry is a representation of some of it, but not all of it. And so we just, you know, we do it differently. And so I don't want to comment on what we expect the gap to be going forward.

Understood. And then the follow-up is just on the Uber addition. It sounds like Yard House is next up, third in line, therefore, behind Olive Garden and Cheddar's. I think you mentioned it's not likely to be as meaningful of a contributor as it is more of a bar type concept. But just wondering where LongHorn sits or where I know you don't dictate it, so where perhaps management of LongHorn specifically. Think about it. It would seem like that's the next big brand that could have more of a meaningful contribution offsetting that, I know often discussed that maybe their food doesn't travel as well. So just wondering your updated thoughts in terms of whether LongHorn could add 1P delivery? Thank you.

Hey, Jeff. I'll start with the Yard House part. We don't anticipate it to be as big an impact because Yard House is a smaller brand. Not just because they're a bar, but they also do a little bit lower to-go business. So you know, you think about when we implemented it at Olive Garden, and then at Cheddar's, the percent to-go the percent delivery aligned up pretty well with the percent to-go. So you know, Cheddar's right now, I think, is doing about 15% off-premise. LongHorn does about 15% off-premise. So it's not a small off-premise business. And we do know that when guests order at LongHorn off-premise, the mix is different. So they order more chicken and seafood, and a little less steak than they do in the dining room. So, you know, it's something that LongHorn is learning from the other brands. To see if it makes sense for us to go onto Uber Direct. And if it does, then we'll start testing it. But we don't have anything to say about that right now.

Thank you. Next question today is coming from Sara Senatore from Bank of America. Your line is now live.

Thank you. I was interested just to on the topic of value at sounds like that's resonating even actually in fine dining. Talked about these sort of combos and these you know, and the $55 at Ruth's. I guess, are you bringing in different customers to the across the brands? I mean, I know you mentioned maybe some softness in below 50%, but if I just think about you know, while the pricing may be up low single digits, there's presumably some negative mix and the sort of entry-level price points are lower across sounds like across maybe all your brands. So are you seeing different come in, for that? Or is it just more increasing frequency among the customers you do have as you offer these kinds of very accessible price points?

Yes, Sara. Most of our promotions really help our core customers. We are seeing a little bit of an increase in new customers or customers who haven't seen in a while that when we do these, but we actually see an increase in our core too. So it's not targeted to get new people. It's targeted for anybody. And we do see a little bit of a mix at Ruth's Chris when we do the $55 prefix menu but that's because guests are looking for certainty and price certainty. And so that's what we're giving them. And it drives quite a bit of volume at Ruth's Chris, and it's a good thing for us. It's not a it's a profitable deal for us.

Right. Right. Thank you. Understood. And then just on the follow-up, Raj, you mentioned, I think that demand has declined about 14% November for beef. I guess do you are there certain kind of rules of thumb about, you know, what that would mean for beef prices just as I think about it. It seems like this is the first time we've really seen, like, retail demand pull back. So just trying to understand, you know, how that translates into you know, kind of the market prices for beef? Thanks.

Yeah. I would say, you know, the last few months have been different from what we would have seen historically. Historically, there was retail demand destruction. You saw the prices come down sooner. I don't want to get into a lot of the dynamics, but there is something with how the between the packers and, you know, how things are working. It seems like there is some constraining of supply, but it's hard for us to really know what's happening. You know, maybe there are other challenges. But so it's really going to be a function of how much production is out there. Right? And so I yeah, I don't think we have a good crystal ball on that. But I did share we are seeing some, you know, some green shoots, and that's, you know, that are actually starting to see the car coverage that comes come more in line with our expectations.

Thank you. Next question is coming from Jim Salera from Stephens. Your line is now live.

Hey, Raj. Good morning. Thanks for taking our question. Raj, I wanted to start and maybe ask if you could give us the comp components for Olive Garden breaking out particularly mix and traffic? And then as an add-on to that, are you able to give us any details around the type of consumer that you're seeing in the near term with Olive Garden, given that it's a well-established brand, but they have a lot more avenues that consumers can access the brand. I wonder if that has any noticeable changes in the type of guests, whether it's income level, age, group sizes, anything like that you could provide would be great.

Yeah. So from a guest, from Olive Garden breakdown, the comp same restaurant sales were 4.7%. The traffic as we measure was 1.7%, but when you add the catering of 1.1%, basically a traffic growth of 2.8%. And their pricing was, you know, 2.6%. So there was some negative mix, but also there was some help from Uber Direct fees. But that's the mix of the traffic and the sales. From a guest perspective, I think Rick already addressed it in the script. In or in his prepared remarks. About we're seeing more increased growth across, all income levels above 50k. And we're seeing a little bit more growth from the as we move up the age spectrum, there's a little bit of a pullback the below 50k and lowering, you know, lower or younger folks. But that's really it.

Okay. And then if I could shift gears a little on LongHorn. Continued outperformance there, I think value stake in general. Is there any way for us to maybe match that up with the outperformance in fine dining as well? Because I think a lot of people expect the value to continue to do well, but we're surprised by the outperformance in fine dining. I don't know if there's a read to make there if there's some maybe aspirational guests that are accessing fine dining or if we just reached a point where you know, we've lapped enough and the sales base is lower that we can get back to positive on fine dining.

Yes, Jim, start with LongHorn. And I think LongHorn their outperformance is driven by years of what they've done focusing on their strategy. Continue to price a little below inflation, invest in their food, and cook their steaks better. And that's been very helpful for them. Now I think they may be benefiting right now with such a high price of beef. That consumers are actually going to LongHorn instead of eating at home. And when we talk about the 50k consumer, under 50k, think 50,000. So interesting. They have a higher check than Olive Garden, but they grew their guest count at an under $50,000 range. That could be because such a disparity between how much you have to pay in the grocery store versus what you pay in the restaurant could be driving some of the traffic growth. But it is impacting their margin. So, on the fine dining side, I'll finish with one other thing at LongHorn. I still think they might be taking a little bit of share from fine dining. That said, fine dining had a good quarter this quarter. The trends are improving. And it may be that we're getting closer to kind of clearing everything out that happened during COVID. We're seeing some good value some good performance at Ruth's Chris, Capital Grille, had a good quarter. But, you know, we don't it's not over yet. We've gotta see that continue for a while to feel really great about it. We feel good about it. We only feel great about it. So you know, as we think about what's happening in the industry, we continue to say that as long as we do the things that we're supposed to do, provide a great value, cook the food properly, give a great experience to our guests, they're gonna be coming back.

Thank you. Next question is coming from Lauren Silberman from Deutsche Bank. Your line is now live.

Great. Thank you, guys. Can you just help unpack what you saw in terms of cadence of actual comp as you move through the quarter? I know there's a lot of volatility and noise in the industry. And then anything that you can provide on what you're seeing quarter to date as well as differences that you may be seeing across regions? Thank you.

Hey, Lauren. I want to get into the quarterly cadence of comps, but I'll just say from an earnings perspective, I think we kinda provided the high level how we're thinking about it. It's really more driven by pricing. As I said, pricing gap to inflation is expected to cut in half as we get into the third quarter. As we take a little bit more price and inflation actually is probably closer to Q2 level. But then as we get to the fourth quarter, we expect pricing to go up a little bit more and inflation to come down a little bit more. And so that's kind of why we talked about what we expect the earnings growth to be more in the third quarter to be in the mid-single digits. But I don't want to get too much into the quarterly sales comp.

Okay. And then just on stimulus, there's some excitement about stimulus into '26. If you go back to prior fiscal stimulus, which brands tend to benefit the most in your portfolio? And do you see it through traffic or average check?

Yeah, Lauren. I would say all of our brands benefit from stimulus depending on how it comes in. But I will say that if you think about the folks that benefit from no tax on tips, and no tax on overtime, they may be a median income and lower. So that could help our brands like Olive Garden or Cheddar's, or Chewy's that have a little bit higher mix there. But all of our brands benefit when there's stimulus that gives more money to consumers.

Thank you very much. Next question is coming from Peter Saleh. Your line is now live.

Great. Thanks for taking the question. I just wanted to follow-up on the conversation around the marketing efforts around Uber Direct. I think you guys mentioned you didn't do any marketing this quarter. Can you just talk about that decision? And what's the game plan for the back half of the year? Are you planning on increasing marketing around that effort? Any thoughts on that would be helpful.

Hey, Peter. The reason we didn't do any marketing on Uber Direct in the second quarter was we had just kind of done some in Q1, and we had other things that we wanted to spend our marketing dollars on. Particularly NeverEnding Possible. NeverEnding Possible is our best promotion at Olive Garden. And, you know, I think others had some concern that we were wrapping on NeverEnding Possible and how that would go. And as Raj mentioned, our gap to the industry grew every month in the quarter. Even though NeverEnding Possible was kinda coming towards the end of the promotion period. So we think that we were better off spending marketing dollars on NeverEnding than we are on delivery. At that time. I can't comment on if we're going to do it in the third or fourth quarter. But it's something that people will see pretty quickly if we do.

Great. And then just following up my last question on tariffs. Is there any sort of update on the impact there, tariffs on either commodities or on development costs? I think in the past you had mentioned there was maybe a slight impact on development costs from tariffs. Just any update on that front would be helpful too.

Yeah, Peter. Not a lot. I mean, at this point, you know, of our commodities inflation includes all the tariff impact. You know, it's in the tens of basis points as a percent of sales, which is in line with what we had indicated earlier. From a construction cost, I'd say we're still, you know, from the data we're seeing, it's in that mid-single-digit impact. No change there.

Thank you very much. Next question is coming from Jon Tower from Citi. Your line is now live.

Hey, great. Thanks for taking the question. Maybe going back to the small plates that you're rolling out now and getting it done by January. I'm just curious, have you tested any media behind it? What's your intention behind doing that? Obviously, you're seeing a bit of negative mix now that you've rolled it out to some of the stores. So, how are you thinking about communicating it to guests? And, you know, obviously, there could be some pressure on the business if you were to market it to them so, how are you thinking about that the trade-off there?

Yeah, Jon. Currently, we're not expecting or we're not thinking about marketing it to our guests. Because it's doing pretty well on the menu the way it is, and it's driving a little bit more frequency and the guests should order it. And maybe the word-of-mouth from other guests will do that. But our plans right now don't include marketing it. But those could change.

Okay, and is this something that will be available to delivery so one p guests as well?

Yes. The way we think about 1P is if it's on our menu, it's probably available for delivery.

Okay, cool. And then just on the unit growth update, it's nice to see you guys taking up the numbers by another five potentially for the year. Can you just give us some color on where you're seeing those numbers or what brands it's coming from? And then is this just a pull forward from what you were thinking for fiscal 2027?

Yeah, Jon. When we're talking about five restaurants, it's a couple of brands that are driving that. So without telling you exactly which one, because that can change throughout the year. We end up at fiscal year. So we did say 65 to 70. It isn't necessarily a pull forward from next year that doesn't get backfilled by other brands. So don't anticipate that this year's growth a little bit ahead of plan will damper next year's because our teams are out there working hard going and finding sites, and getting deals done faster than they had before. And as you recall, in the June call, I said, that we are farther along in development than any point in any June we've had in years. So we feel really good about it. And, you know, that team is still doing great work to get us more sites.

Great. Thanks for taking the questions, and happy holidays.

Thank you.

Thank you. That does conclude today's teleconference and webcast. You may disconnect your line at this time, have a wonderful day. We thank you for your participation today.