Earnings Call Transcript - DRI Q1 2026

Operator, Operator

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 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 2026 second quarter earnings on Thursday, December 18, before the market opens, followed by a conference call. During today's call, I'll reference to the industry Chuy's results refer to Black Box Intelligence Casual Dining Benchmark, excluding Darden. During our fiscal first quarter, average same-restaurant sales for the industry grew 5% and average same-restaurant guest counts grew 2.6%. Additionally, due to the continued divergence between average and median results, we are sharing that median same-restaurant sales for the industry grew 3.3% and median same-restaurant guest counts grew 1.3%. This morning, Rick will share some brief remarks on the quarter, and Raj will provide details on our first quarter and share our updated fiscal 2026 financial outlook. Now I will turn the call over to Rick.

Rick Cardenas, President and CEO

Thank you, Courtney, and good morning, everyone. We had a great quarter with same-restaurant sales and earnings growth that exceeded our expectations. For the first quarter, 3 of our 4 segments generated positive same-restaurant sales and traffic growth. The strength of our results is a testament to the power of our strategy. Across our portfolio, our restaurant teams remain focused on being brilliant with the basics through culinary innovation and execution, attentive service and an engaging atmosphere, all enabled by our people. And at the Darden level, we continue to strengthen and leverage our 4 competitive advantages of significant scale, extensive data and insights, rigorous strategic planning and the quality of our employees to further position our brands for long-term success. Olive Garden same-restaurant sales grew 5.9%, driven by compelling food news and the continued growth of first-party delivery. Early in the quarter, Olive Garden's marketing highlighted their Create Your Own Pasta platform from the core menu. Their television creative featured a new Spicy 3-Meat Sauce and Bucatini pasta starting at $12.99. This new sauce taps into guest evolving tastes for bolder, more flavorful offerings. It was well received and helped drive a significant increase in preference for the Create Your Own Pasta platform. Olive Garden built on the momentum of bold and spicy flavors by debuting Calabrian Steak and Shrimp Bucatini for a limited time during the quarter. The dish exceeded expectations and quickly became a new guest favorite, ranking among the top 10 entrees for preference. First-party delivery through our partnership with Uber Direct is helping capture younger, and more affluent guests who value convenience and crave Olive Garden. This represents a significant incremental opportunity for the brand as these guests have a higher check average and typically do not use Olive Garden for an in-restaurant dining occasion. Olive Garden's advertising featuring 1 million free deliveries concluded in the first quarter with all the free deliveries being redeemed. Average weekly deliveries doubled throughout the campaign. Following the campaign, delivery order volume has remained approximately 40% above the pre-campaign average. The team will continue to promote delivery across a number of channels. On our last call, we talked about putting a greater emphasis on sales growth and reinvesting to drive long-term growth. One of the ways we're doing this at Olive Garden is by strengthening affordability on the menu to give guests more variety at approachable price points. During the quarter, Olive Garden began testing a lighter portion section of the menu, featuring 7 of their existing entrees with reduced portions and a reduced price. These items available at dinner and all day during the weekend still offer abundant portions and come with Olive Garden's never-ending first course of unlimited Breadsticks and unlimited soup or salad. 40% of Olive Garden restaurants currently offer this menu and the initial response from guests has been encouraging, with affordability scores increasing 15 percentage points and high satisfaction with portion size. I have confidence in Olive Garden's initiatives for the year as well as their 5-year road map to sustain long-term growth and success. LongHorn Steakhouse grew same-restaurant sales by 5.5%, driven by continued adherence to their strategy rooted in quality, simplicity and culture. The team continues to raise the bar in food quality by consistently executing every dish on their menu to their high standards. This is reflected by LongHorn's top ranking among major casual dining brands for food quality, service, atmosphere, and value. I am really proud of the operational consistency at LongHorn and the team's efforts to maintain their momentum. Same-restaurant sales for our Other Business segment grew by 3.3% during the quarter, driven by strong performance at Yard House, Cheddar's Scratch Kitchen, and Seasons 52. During the quarter, Yard House strengthened their competitive advantage of distinctive culinary offerings with broad appeal by enhancing their taco platform with higher-quality ingredients and more options for guests. As they have seen with similar investments in their burger and pizza platforms, this resulted in higher preference and guest satisfaction. To help strengthen their competitive advantage of a socially energized bar, Yard House held its third annual Best On Tap Competition during the quarter. What began as a test of knowledge and hospitality skills has grown into a cornerstone of the Yard House culture where every bartender competes. Congratulations to this year's winner, Michelle Younes from the Yard House at City Center in Houston, Texas. The Cheddar's team leverages efficiency and Darden's purchasing power to provide great food served at a wow price. During the quarter, they introduced a Hawaiian sirloin, a center cut top sirloin finished with pineapple and a sweet Hawaiian glaze, starting at $16.49. This limited time offer also included a Honey Butter Croissant and 2 sides for that price. In Technomic's most recent survey, Cheddar's ranked first among casual dining brands for both price and affordability. During the quarter, Cheddar's also saw strong off-premise sales growth driven by first-party delivery. Off-premise sales grew 15% during the quarter, and the Cheddar's team will continue to promote delivery through owned and digital channels as well as in restaurants. Same-restaurant sales for the Fine Dining segment was slightly negative for the quarter, but I'm encouraged by the actions each of our Fine Dining brands are taking to address the softness. For example, in the current environment, more guests are seeking price certainty, and Ruth's Chris Steakhouse introduced a 5-week limited time offer featuring a 3-course menu that drove positive comps for the quarter. For $55, guests could select 1 of 3 entrees as well as a super salad, an individual side and dessert. The offer was well received with strong guest preference and sales lift. Now I want to share a quick update on the sale of 8 Olive Garden locations in Canada that I referenced during our last call. On July 14, we closed on the sale of those locations to Recipe Unlimited, the largest full-service operator in Canada. At closing, we also entered into an area development agreement with Recipe Unlimited to open 30 more Olive Gardens over the next 10 years, 5 of which have already been approved. Our franchising team is focused on growing our global presence. Today we have 163 franchise locations, which includes 63 in the Continental United States and 100 outside the Continental U.S. Last month, we held our annual leadership conference, which provides a powerful way for us to engage with every general manager and managing partner across our brands, celebrate past performance and align on key operational priorities. This was also an opportunity for these restaurant leaders to learn about their brand's 5-year business plan and understand what they need to do to win today and into 2030. The opportunity to interact with this talented group of operators is one of the highlights of the year. I came away energized by the level of engagement and passion on display, which further reinforced the results of our most recent engagement survey, a new all-time high for Darden. Overall, I am pleased with the strong start to our new fiscal year. Our strategy is working, enabling us to grow sales and take market share while making meaningful investments in our business and returning capital to our shareholders. Beyond that, we have a larger purpose at Darden: to nourish and delight everyone we serve. One of the ways we do this is by fighting hunger. Once again this year, Darden is helping Feeding America add refrigerated trucks for 9 member food banks. With the addition of these new trucks, the Darden Foundation, with support from our partner, Penske Truck Leasing, has funded more than 50 vehicles to meet the increasing demand for food assistance in communities where we operate. Our philanthropic giving would not be possible without the efforts of our 200,000 team members and their passion to nourish and delight our guests and communities. Thank you for all you do. Now I'll turn it over to Raj.

Rajesh Vennam, CFO

Thank you, Rick, and good morning, everyone. The first quarter was another strong quarter for Darden. Sales and earnings growth exceeded our expectations as our sales momentum from the fourth quarter continued into the first quarter. This strong top line sales growth and our significant scale provide us with the opportunity to keep a long-term perspective and continue investing in our business. In addition to the menu investments Rick mentioned, the largest investment we made over the past several years is pricing below total inflation. During the first quarter, our pricing was 30 basis points below inflation. We generated $3 billion of total sales, 10% higher than last year, driven by same-restaurant sales growth of 4.7%, the acquisition of 103 Chuy's restaurants and the addition of 22 net new restaurants. Both our same-restaurant sales and same-restaurant guest counts for the quarter were in the top quartile of the industry. Adjusted diluted net earnings per share from continuing operations of $1.97 were 12.6% higher than last year. We generated $439 million of adjusted EBITDA and returned $358 million to our shareholders this quarter by paying $175 million in dividends and repurchasing $183 million in shares. Now looking at our adjusted margin analysis compared to last year. Food and beverage expenses were 20 basis points lower, driven by pricing leverage as commodities inflation was approximately 1.5% for the quarter. Restaurant labor was 20 basis points unfavorable as a result of high performance-based compensation expense, including a higher 401(k) match for our restaurant teams. Total labor inflation of 3.1% was fully offset by pricing of 2.2% and productivity improvements. Restaurant expenses were 10 basis points higher as sales leverage was more than offset by Uber Direct fees and the brand mix with the addition of Chuy's. Marketing expenses were flat as cost savings in marketing helped fund additional marketing activity in the quarter. This resulted in restaurant-level EBITDA of 18.9%, 10 basis points lower than last year. Adjusted G&A expenses were 30 basis points favorable. Synergies from the acquisition and leverage from sales growth were partially offset by unfavorable mark-to-market expense on our deferred compensation. Due to the way we hedge mark-to-market expense, this unfavorability is fully offset in the tax line. Interest expense increased 10 basis points due to the financing expenses related to the Chuy's acquisition. Our adjusted effective tax rate for the quarter was 10.5%, helped by the mark-to-market hedge I mentioned earlier. Our effective tax rate would have been approximately 12.5% without this impact. In total, we generated $231 million in adjusted earnings from continuing operations, which was 7.6% of sales. Looking at our segments for the quarter. Total sales for Olive Garden increased by 7.6%, driven by strong same-restaurant sales and traffic growth. The sales from the addition of 18 new restaurants more than offset the sales loss from the refranchising of 8 Canadian restaurants. Their sales momentum continued from the prior quarter with same-restaurant sales in the top decile of the industry and outperforming the industry benchmark by 90 basis points. Olive Garden delivered a strong segment profit margin of 20.6% for the quarter, which was only 10 basis points below last year, even with the investments in affordability and the impact of delivery fees. At LongHorn, total sales increased 8.8%, driven by same-restaurant sales growth of 5.5% and the addition of 18 new restaurants. The sustained sales and traffic outperformance resulted in same-restaurant sales in the top quartile of the industry for the 13th consecutive quarter, with this quarter ranking in the top decile. The LongHorn team is doing a great job of staying focused on their strategy and maintaining momentum within the business despite continued cost pressures. Higher-than-expected beef cost towards the end of the quarter and pricing below total inflation of approximately 100 basis points resulted in segment profit margin of 17.4%, 60 basis points below last year. Total sales at the Fine Dining segment increased 2.7%, driven by the addition of 5 net new restaurants. While same-restaurant sales for the segment were slightly negative, the strong performance of the limited time offer at Ruth's Chris helped to offset the continued challenges within the Fine Dining category. Overall, segment profit margin was lower than last year. The Other Business segment sales increased 22.5% with the acquisition of Chuy's and positive same-restaurant sales of 3.3%. The positive sales momentum and continued productivity improvements in multiple brands within the segment resulted in segment profit margin of 16.1%, 90 basis points higher than last year. Now turning to our financial outlook for fiscal 2026. This morning, we updated a few items in our guidance, taking into consideration actual performance year-to-date and the evolving commodities outlook for the remainder of the fiscal year. We are raising our expected total sales growth and tightening the range of same-restaurant sales to reflect the outperformance in the first quarter, acceleration in our new unit pipeline and any incremental pricing we may take to partially offset the additional commodities costs. We now expect total sales growth for the year of 7.5% to 8.5%, same-restaurant sales growth of 2.5% to 3.5%, approximately 65 new restaurant openings and total inflation of 3% to 3.5% with commodities inflation of 3% to 4%. All other aspects of our guidance remain unchanged, including adjusted diluted net earnings per share between $10.50 and $10.70. While we are reiterating our full year earnings per share guidance, we expect the lowest year-over-year EPS growth to be in the second quarter, driven by the significant step-up in beef costs and our measured approach to pricing for these costs. We expect our pricing for the second quarter to be approximately 100 basis points below total inflation. We have a proven track record of successfully navigating through higher costs, and we'll continue to take a disciplined approach to ensure the long-term health of our business. We believe our strategy remains the right one for our company. Now we'll take your questions.

Operator, Operator

Our first question today is from Brian Harbour from Morgan Stanley.

Brian Harbour, Analyst

Maybe just on that last point first, Raj, could you talk about sort of contracting through the balance of the year and sort of what gives you visibility that you've kind of encompassed the range of food cost outcomes?

Rajesh Vennam, CFO

Yes, Brian, if you look at what we published this morning, our coverage is lower than usual, particularly in beef. Currently, we only have about 25% coverage in beef for the next six months. This represents one of the biggest opportunities as we are facing significant challenges. There has been a significant increase in beef costs recently, particularly for tenders and rebuys, and we believe these price levels are not sustainable, which is why our coverage is lower. This price increase is also causing some demand disruption in retail. The key factor here is beef. Additionally, we are experiencing higher inflation in seafood, mainly due to tariffs on shrimp. Our team is working on strategies to mitigate some of these effects. This is why we are raising our inflation outlook from 2.5% earlier in the year to now between 3% and 4%. However, the situation remains quite dynamic.

Brian Harbour, Analyst

Rick, could you share your thoughts on the new portion sizes at Olive Garden? Are you noticing a different type of customer requesting this? Do you believe it could drive traffic to Olive Garden? Conversely, might it have an impact on the overall check amount? What insights do you have regarding customer reactions to these new items?

Rick Cardenas, President and CEO

Yes, Brian, it's still pretty early. We do believe in the long run, this is a traffic driver. It will dilute our check a little bit if people trade from a higher portion size item to a lower portion size item. But we believe that's the portion that those guests want. And it's very early indications are that we're seeing a little bit more frequency. But it's not necessarily new guests because we haven't marketed it, and we put it in restaurant without even any fanfare and it's just people are gravitating towards that. It's not significant preference gravitating towards it, but there is some preference moving there.

Operator, Operator

Next question is coming from Jon Tower from Citi.

Jon Tower, Analyst

Great. In the same context, can you discuss the impact of the affordability pivot and the growth of Uber Eats during this quarter on the cost line? I noticed that the restaurant margin wasn't leveraged as much despite a solid comparison in the period. Raj, could you provide insights on those costs during the period and what you anticipate moving forward?

Rajesh Vennam, CFO

Yes, Jon, I want to start by saying that these were planned items and we had included them in our strategy. That's why we're actually exceeding our expectations. The fact that the segment profit margin is only down 10% while still being above 20% highlights the strength of the business model at Olive Garden. Let me elaborate a bit. First, we have priced below the overall inflation rate, with Olive Garden's pricing being only 1.9%, which is relatively low in this environment. Secondly, regarding the two specific items, their impact on the margin percentage is roughly about 20 basis points each. If we account for that, we would have been positive 30, even with pricing below inflation. This is an important metric to consider because we believe that, in the long term, these decisions are right for us. Any business would be envious of a segment profit margin of over 20%.

Jon Tower, Analyst

Could you elaborate on the delivery business at Olive Garden? Rick, you mentioned that you're seeing more younger and affluent guests. Can you provide more details regarding the frequency of these guests? Are they using the delivery service more often than in-store visits? Additionally, since it hasn't been a year yet, how are they utilizing the delivery channel compared to in-store?

Rick Cardenas, President and CEO

Yes, Jon. As we've mentioned previously, we are seeing a higher frequency of delivery guests compared to dining guests. It's still early since we haven't had delivery for a year yet, as you noted. Regarding seasonality, Uber has informed us that typically, delivery orders tend to decline over the summer, but we haven't experienced that decline yet. We will gain more insights into the seasonality of delivery after we've had a full year or possibly two, as it continues to grow for us. That said, we're very enthusiastic about the delivery performance. As Raj mentioned earlier, we are utilizing the increase in guest count and margin to invest in all guests, and we feel confident about this for the long term.

Operator, Operator

Next question is coming from David Palmer from Evercore ISI.

David Palmer, Analyst

Aside from the beef cost question, I think there's probably 2 areas that are major areas of curiosity, and I certainly share them. And one is the strong performance of the casual dining segment, which is becoming increasingly unusual after fast casual has slowed through the year, through the middle of this year. And another, I think, is Olive Garden against more difficult comparisons later in your fiscal year. How will it do and what are you lining up against that? So those are really my 2 questions. What are your thoughts about why casual dining is doing as well? And do you think that will continue? And then separately, Olive Garden, you're rolling out a pretty large test on small portions, but what are your thoughts? And what are you kind of lining up to keep the momentum going as you get into lapping some of the good stuff you've been doing in the last 3 or 4 months?

Rick Cardenas, President and CEO

Yes, David. I think the strong performance in the casual dining segment is primarily due to lower prices compared to other dining segments. The larger players in casual dining are offering even better pricing. Customers are beginning to recognize the value that casual dining provides. This has been evident for a few years, and now others are catching on as well, with guests appreciating the value. Additionally, when consumers decide where to spend their money, they prefer places where they can connect and enjoy time with friends and family. While there may be a decrease in snacking and casual eating, when people choose to dine out, they are looking for a great meal at a good price while spending quality time with their companions. In regard to Olive Garden for the second half of the year, we plan to maintain our momentum. We recognize that the comparisons will become more challenging. However, the Olive Garden team is focused on initiatives we can implement during this period. We have a solid plan in place. We believe that, over time, menu items that offer the right portion sizes at the right prices for certain consumers will help increase traffic. This might not happen in the second half of the year as we haven't begun promoting it yet, but we may start discussing it then. We have numerous strategies in mind. Our team is strong, and we will adapt to the sales trends at Olive Garden moving forward.

Operator, Operator

Next question is coming from Jim Salera from Stephens.

James Salera, Analyst

I was hoping you could provide a breakdown on LongHorn, specifically the comparison between traffic and ticket. Additionally, have you noticed any increase in consumer engagement? You mentioned that pricing is 100 basis points below inflation. Should we expect this similar gap to continue through the year, or do you have any insights on how pricing might trend?

Rajesh Vennam, CFO

Yes. So let's start with the LongHorn traffic. LongHorn traffic was up about 3.2% for the quarter. The same-restaurant sales were 5.5%. So the check was 2.3%. Their pricing was 2.5%. They had a slight negative mix of 20 basis points. In terms of pricing versus inflation, at LongHorn, we experienced a significant increase in beef prices, which was somewhat unexpected at the end of the quarter. We also intended to have a pricing gap, and this gap widened slightly by the end of the quarter. Looking ahead, we anticipate that for the second quarter, on a Darden level, pricing will be approximately 100 basis points below inflation, and we expect that gap to decrease as the year progresses. You would expect the pressures on the margin to follow that trend. We probably have the largest gap in Q2, which we may reduce by half by the time we reach Q3, and then aim to narrow it further as we approach Q4. In line with our philosophy, our pricing for the full year will likely end up below inflation.

James Salera, Analyst

Great. And then you guys mentioned the value-focused menu expansion at Olive Garden. Is that something that we could see maybe in a more limited fashion at LongHorn as well, maybe focus on like appetizers or smaller plate items? Or is that something that right now it's just Olive Garden focused?

Rick Cardenas, President and CEO

Yes. We're doing this at Olive Garden to see how that works out. And if other brands think that it makes sense for them and they get the learnings from Olive Garden, maybe they will implement. But right now, the focus is the Olive Garden and it's the Olive Garden team that's driving it. And as I said, we'll see how that goes. Now there might be some things that LongHorn does in the future or other brands do in the future, but they'll make those decisions as those times come.

Operator, Operator

Next question is coming from Eric Gonzalez from KeyBanc Capital Markets.

Eric Gonzalez, Analyst

Just a few quarters ago, you talked about some strength among the lower income consumers. Obviously, most of your peers, particularly on the fast food side, are talking about weakness among that cohort of income. So if you maybe you could talk about what you're seeing from an income perspective, and are you gaining share among lower-income consumers? Do you think that part of the equation is actually holding yourselves up relative to your peers? And are you seeing some maybe trade into the category from some of the higher-income folks, particularly on the casual dining side?

Rick Cardenas, President and CEO

Yes, Eric, specific to casual dining, all our casual dining brands experienced an increase in visits year-over-year from guests across all income groups, particularly among higher-income groups. This might indicate some trade down, but it could also represent a trade up from a lower-income group seeking better value in casual dining. We are noticing some shifts in behavior, with guests leaning toward price certainty, meaning they prefer to know the price before they arrive, or seeking greater perceived value, even if the item is priced higher. So if you think about the Calabrian Steak and Shrimp that we had at Olive Garden, great preference, great perceived value. It was the highest priced menu item on the menu. But we are seeing, as I said, for casual dining brands, growth among all income groups.

Operator, Operator

Next question is coming from Dennis Geiger from UBS.

Dennis Geiger, Analyst

I wanted to ask if there’s anything to note regarding the behaviors at Olive Garden, LongHorn, or across the portfolio in terms of performance during different times of the day or within the menu, such as desserts and alcohol. Is there anything specific to highlight?

Rajesh Vennam, CFO

Yes, I think we are observing a decrease in preference for alcohol across most of our brands. For instance, LongHorn has experienced more growth at lunch compared to dinner, although all dayparts are showing growth there. In Fine Dining, we are witnessing a decline in business travel, which is resulting in some weakness on weekdays. Those are some of the consumer dynamics I can share.

Operator, Operator

Next question is coming from Chris O'Cull from Stifel.

Christopher O'Cull, Analyst

Rick, the conversation around eliminating the tip wage seems to be ramping up. Do you believe there's a risk that it could be eliminated? And how are you thinking about any potential impact it could have on the business?

Rick Cardenas, President and CEO

I would start by saying this industry has really diverse business models. And we believe that the policy environment should reflect the level of diversity in the model. As a full-service operator, our business model continues to be the best choice for our guests and our team members. And I will tell you that whatever happens, we're going to be okay with it, okay in the way we react. So I don't foresee a big change in that. But if it does, we will work through those things and come out okay.

Operator, Operator

Next question is coming from Brian Vaccaro from Raymond James.

Brian Vaccaro, Analyst

Just two quick ones, if I could. First on the housekeeping side. Raj, could you break out the Olive Garden comps between traffic and check? And as we think about check at Olive Garden, I think it's been exceeding pricing for the last several quarters. Is it still reasonable to expect check to exceed price as you think about the next few quarters?

Rajesh Vennam, CFO

Yes, Brian. Let me start with the breakdown. Olive Garden same-restaurant sales was 5.9%. Their traffic, as we measure was 2.8%, but then they also had catering of 80 basis points. So I would categorize that as 3.6% traffic growth. And then when you think about the check, the pricing was 1.9%, and Uber fees, basically the delivery service fee net of the discount, was about 40 basis points. So yes, as we go into the future, do we expect check to be a little bit higher than pricing? Yes, but it will be because of the delivery fee and service fee. That's really the driver. Yes.

Brian Vaccaro, Analyst

And then just as a follow-up, obviously, talking about investing in the guest experience, as you've been doing for a while, but thinking about fiscal '26 specifically as well. When you look at labor in the first quarter, it looks like labor per operating week as we look at it, was up 4.5%, maybe closer to 5%. You talked about the higher incentive comp, and obviously you have higher traffic, which takes more labor to service. But I'm curious to what degree that also reflects some reinvestments that you're making in the guest experience. And maybe you could provide a few examples of the specifics on those reinvestments.

Rajesh Vennam, CFO

So Brian, to begin with, our total inflation from a labor perspective was 3.1%. While you pointed out a 4.5% increase in dollars, that 3.1% is a part of that figure. It increased by about 1 point or so, but our traffic rose by closer to 3% when factoring in the catering at the Darden level. This indicates we are achieving some leverage from that traffic, which is why I noted in the script that our productivity has actually improved year-over-year. We are continually exploring ways to invest in labor. While I won't go into specifics, some of the aspects Rick mentioned regarding speed are areas we are examining to ensure improvements. However, this doesn’t necessarily mean a reduction in labor efficiency since we actually achieve more throughput with these investments.

Operator, Operator

Next question today is coming from Andrew Charles from TD Cowen.

Andrew Charles, Analyst

I wanted to ask about delivery. Can you provide insight into the delivery mix in the first quarter and the exit rate following the promotion? Also, do you anticipate running similar promotions as we move into 2026? I have a follow-up question as well.

Rick Cardenas, President and CEO

Yes, Jake, I'll speak specifically to Olive Garden. I think that's what you're asking for. So for Olive Garden delivery in the first quarter was about 5%. We exited at about 4%. As we mentioned, when we stopped 1 million free deliveries, we exited a little bit lower, but still 40% above where we were before the promotion. I think that was... Sorry. I don't know if we may do another 1 million free deliveries. I don't know, but we do have marketing funds that Uber gives us based on our volume. And so we're going to utilize those somehow. Whether it's 1 million free deliveries or doing something different, we will utilize those funds.

Operator, Operator

Got it. Regarding the Never Ending Pasta Bowl promotion, I believe the timing is comparable to last year. I noticed you mentioned that consumers are increasingly focused on price certainty, showing some positive trends in August. Can you share your expectations for the performance of the Never Ending Pasta Bowl this year compared to last year and whether it's currently resonating with consumers?

Rick Cardenas, President and CEO

Yes. I will say that Never Ending Pasta Bowl is off to a good start for us. It's really at the center of Olive Garden's core equity of Never Ending Craveable abundant Italian food. And preference is up versus last year, and the team is doing an amazing job ensuring that guests get refilled. So the refill rate is way up. So I think guests are understanding that promotion more and more as we brought it back and they really understand the value that it brings. And I will say that the performance to date is in our guidance.

Operator, Operator

Next question is coming from Peter Saleh from BTIG.

Peter Saleh, Analyst

Great. Maybe just one question, on the beef situation. Can you elaborate a little bit more on maybe what's driving it higher in the near term or more recently? And why do you think this is not sustainable? And then just more specifically, if these prices are sustained or maybe even go higher, would you take a little bit more price at LongHorn in the back end of the year? Just trying to understand the strategy there if beef prices actually go a little higher from here.

Rajesh Vennam, CFO

Yes, Peter, let's just start with the dynamics, right? Right now, supply is constrained from a few things. One, there have been some pack or cutbacks and also Mexican cattle imports have been halted because of the screwworm outbreak. So those are kind of the drivers of the supply constraint. In addition to that, tariffs on Brazil are causing a significant reduction in beef imports into the U.S. So that's also creating a constraint. So those are the supply-side factors. The main reason we don't think the recent price increases, especially the double-digit ones, are sustainable is that consumers cannot afford them. Over time, we expect some demand reduction. Additionally, the number of cattle on feed has remained consistent month to month, and eventually, those cattle need to be utilized. So those are the reasons we consider regarding potential price movements. It's difficult to predict exactly what will happen. However, we are more open to possibilities now. If prices remain very high, it indicates high demand, which could allow us to increase prices. While that's not our preferred strategy, if the market conditions suggest strong demand, we may decide to raise prices.

Operator, Operator

Next question is coming from John Ivankoe from JPMorgan.

John Ivankoe, Analyst

I want to explore a couple of different topics. First, Raj, in your prepared remarks, you mentioned observing some demand destruction at retail. I’d like to know if you're actually seeing that recently. Some of the data I have reviewed suggested that demand at the retail level was quite high. So I hope you can clarify what we are observing in retail and whether there are any significant signs of a slowdown, as that could certainly be beneficial for us from a supply standpoint in the restaurant sector.

Rajesh Vennam, CFO

Yes, John. You're correct that a few months ago the data was quite strong. However, if you look at the most recent month's data, we are beginning to see a decline. The data indicates that retail volume has actually decreased in the low single digits compared to the previous year. This wasn't observed in the prior four to five months. There was some resilience earlier, but in the most recent month, we've noted a shift into a low single-digit decline compared to last year.

Operator, Operator

Next question is coming from Lauren Silberman from Deutsche Bank.

Lauren Silberman, Analyst

So, I just want to go back to top line. A lot of questions, obviously, what's going on in the restaurant industry broadly. You talked about strong August. Can you just help unpack sort of what you saw in terms of cadence of comps during the quarter? Any more color on September from that? And then any differences in performance that you're seeing across the regions?

Rajesh Vennam, CFO

Yes, Lauren, the largest gap to the industry for us occurred in August. When we analyzed our internal comps, we found that July was our weakest month. June performed well, and although July was still strong overall, it was weaker compared to June and August. As I mentioned, August showed the largest deviation from the industry. In terms of regional performance, there isn't a significant amount of variation. What we are observing aligns closely with industry reports, indicating that some markets, like Texas, are underperforming, while Florida seems to be improving. Depending on the brand, California also demonstrated some strength. That's all I can provide regarding regional performance. And then just a follow-up on the commodity side. What are you expecting in terms of cadence to get to the 3% to 4% for the year? I understand like there's a commodity price dynamic, but do you expect like 2Q to peak in terms of actual commodity inflation? At this point, yes, we think Q2 will probably be the peak. But Q3, Q4, probably not that much lower. I mean by the time we get to Q4, we expect it to be a little bit better than where we would be. But Q1 would be the lowest that we just had, right? It was 1.5%. I think pretty much every quarter going forward is, we're expecting to be north of 3%, and that's how you get to the 3% to 4% guide. But Q2 is probably the peak.

Operator, Operator

Next question is coming from Danilo Gargiulo from Bernstein.

Danilo Gargiulo, Analyst

Maybe a year ago or so, you started talking about the relevance and importance of improving the speed of service and maybe, arguably, with the increased focus on affordability or right portion for the right price, there could be even more of an overlap between consumers who might be choosing casual dining over fast food. And so I'm wondering if you have any early signs or any KPIs that are showing some momentum that you're picking up in the improvement in speed of service so far.

Rick Cardenas, President and CEO

Yes, Danilo, across our brands, we're seeing some brands with some improvement and other brands that haven't really made a whole lot. And so we had a refocus on that this year at our general manager conference, and we would expect to see greater improvement in speed of service in the upcoming years. Recall, when I mentioned that, I said this is going to take a while. And it is taking a while. But the managers are really getting on board with it over the last year, and the reinforcement of our conference gives me great confidence that we're going to get better. In regards to, do we have any data to say that we're taking share from other categories, the only thing I can say is all of our consumer groups and all of our income groups were positive year-over-year in casual dining, which is probably the best chance to take share from other categories. And those other categories have had a little bit more traffic decline. So maybe we're taking share or maybe they're just losing some share.

Operator, Operator

Our next question today is coming from Dennis Geiger from UBS.

Dennis Geiger, Analyst

I wanted to ask if there’s anything noteworthy regarding the behaviors at Olive Garden, LongHorn, or across the portfolio in terms of performance by daypart or within the menu, such as desserts or alcohol. Is there anything specific to highlight?

Rajesh Vennam, CFO

Yes. I mentioned earlier about alcohol, and we are observing a decline in preferences for alcohol across most of our brands. For instance, LongHorn has experienced greater growth during lunch compared to dinner, but all meal periods are showing growth. In Fine Dining, we notice a slight decrease in business travel, which is contributing to some weakness on weekdays. Those are some insights from a consumer standpoint that I can share.

Operator, Operator

Next question is coming from Chris O'Cull from Stifel.

Christopher O'Cull, Analyst

Rick, the conversation around eliminating the tip wage seems to be ramping up. Do you believe there's a risk that it could be eliminated? And how are you thinking about any potential impact it could have on the business?

Rick Cardenas, President and CEO

I would start by saying this industry has really diverse business models. And we believe that the policy environment should reflect the level of diversity in the model. As a full-service operator, our business model continues to be the best choice for our guests and our team members. And I will tell you that whatever happens, we're going to be okay with it, okay in the way we react. So I don't foresee a big change in that. But if it does, we will work through those things and come out okay.

Operator, Operator

Next question is coming from Brian Vaccaro from Raymond James.

Brian Vaccaro, Analyst

Just two quick ones, if I could. First on the housekeeping side. Raj, could you break out the Olive Garden comps between traffic and check? And as we think about check at Olive Garden, I think it's been exceeding pricing for the last several quarters. Is it still reasonable to expect check to exceed price as you think about the next few quarters?

Rajesh Vennam, CFO

Yes, Brian. Let me start with the breakdown. Olive Garden same-restaurant sales was 5.9%. Their traffic, as we measure was 2.8%, but then they also had catering of 80 basis points. So I would categorize that as 3.6% traffic growth. And then when you think about the check, the pricing was 1.9%, and Uber fees, basically the delivery service fee net of the discount, was about 40 basis points. So yes, as we go into the future, do we expect check to be a little bit higher than pricing? Yes, but it will be because of the delivery fee and service fee. That's really the driver. Yes.

Operator, Operator

Thank you. We reached end of our question-and-answer session. I'd like to turn the floor back over for any further or closing comments.

Operator, Operator

This concludes our call. I want to remind you that we plan to release second quarter results on Thursday, December 18, before the market opens, with a conference call to follow. Thank you for participating.

Operator, Operator

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