Earnings Call Transcript - DRI Q1 2020

Operator, Operator

Thank you for standing by. We now welcome you to Darden Restaurants First Quarter Earnings Conference Call. At this time, all participants are in listen-only mode and we will have a question-and-answer session. Please take note that we'll only take one question and one follow-up. Now, let me hand the call over to your host, Kevin Kalicak. You may begin.

Kevin Kalicak, Host

Thank you, Ray. Good morning, everyone, and thank you for participating on today's call. Joining me on the call today are Gene Lee, Darden CEO; and Rick Cardenas, 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. We plan to release fiscal 2020 second quarter earnings on December 19 before the market opens, followed by a conference call. This morning Gene will share some brief remarks about our quarterly performance and business highlights and Rick will provide more detail on our financial results from the first quarter. As a reminder, all references to the industry benchmark during today's call refer to estimated Knapp-Track excluding Darden, specifically, Olive Garden and LongHorn. During our first fiscal quarter, industry total sales growth was flat, industry same-restaurant sales declined 1.2% and industry same-restaurant guest counts decreased 3.3%. Now, I'll turn the call over to Gene.

Gene Lee, CEO

Thank you, Kevin, and good morning, everyone. As you've seen from our press release this morning, we had a solid quarter. Total sales from continuing operations were $2.1 billion, an increase of 3.5%. Same-restaurant sales increased 0.9% and diluted net earnings per share were $1.38. Comparable same-restaurant sales for the industry continued to weaken during the quarter as the industry once again faced tougher comparisons. However, the industry performing negatively is surprising considering unemployment remains at an all-time low and there continues to be strong wage growth, which historically has been a positive for the industry. I'm particularly pleased with the performance of Olive Garden and LongHorn Steakhouse, given the industry performance and their difficult comparisons over the first quarter of last year. We remain focused on our back-to-basics operating philosophy and leveraging our four competitive advantages. And I'm pleased we continued to take share and protect our margins. Turning to brand highlights for the quarter. Olive Garden had a strong quarter, which resulted in its 20th consecutive quarter of same-restaurant sales growth. Total sales grew 3.6%, driven by same-restaurant sales growth of 2.2% and 1.4% growth in new restaurants. Olive Garden's same-restaurant sales gap to the industry was 340 basis points this quarter, representing the largest gap to the industry since the first quarter of fiscal 2019. And on a two-year basis, Olive Garden grew total sales by nearly 10%, outperforming the industry benchmark by 840 basis points. Olive Garden's results were driven by the team's ongoing focus on flawless execution, everyday value, and convenience. Guest satisfaction ratings remain impressive, and catering delivery metrics reflect the highest intent to recommend within the brand, giving us confidence that our teams are delivering great experiences inside and outside the four walls of our restaurants. The Olive Garden team made a strategic decision to change the order of their first quarter promotions. This was necessary to separate their two strongest value promotions, Buy One Take One and Never Ending Pasta Bowl, to more evenly deliver the value messaging throughout the year. While this change, along with associated media shifts and weakening industry trends, resulted in lower traffic than last year, it was the right strategic decision for the long term. Recognizing the strength of the Buy One Take One promotion, Olive Garden added $5 take-home entrées to the Everyday value lineup, which was supported with national advertising to drive awareness. It has been met with strong guest demand, and it will be a catalyst to continue to grow the off-premise business. Everyday value was also strengthened with the introduction of a new weekday lunch menu with 21 options under $10, including guest favorites like Chicken Parmigiana and items from the Taste of the Mediterranean menu like Chicken Margarita. This initiative was supported by integrated marketing and resulted in stronger weekday lunch traffic and guest preference. Finally, the Olive Garden team remains focused on their off-premise capabilities to meet their guests' needs for convenience. A key part of that focus has been optimizing the digital sales channel for both mobile and desktop. During the quarter, digital sales grew by more than 30% and represented approximately 40% of to-go sales. Overall, off-premise sales grew 12%, representing 14% of total sales. Olive Garden remains a truly iconic and broadly appealing brand, and the team is doing an excellent job of focusing on this strategy and competing effectively. LongHorn Steakhouse had a strong quarter as well. Total sales grew 4.6%, driven by 2% growth from new restaurants and same-restaurant sales growth of 2.6%, the 26th consecutive quarter of same-restaurant sales growth. On a two-year basis, LongHorn grew total sales by 11%, outperforming the industry benchmark by 940 basis points. The LongHorn team remains focused on their long-term strategy of investing in the quality of the guest experience, simplifying operations to drive execution, and leveraging their unique culture to increase team member engagement. During the quarter, the LongHorn team ran two successful menu promotions; Grill Master Favorite and Fire Crafted Flavors, which were supported by their award-winning You Can't Fake Steak advertising campaign. They also supported these promotions by reinforcing their quality story through multiple guest touch points. The team also continued to focus on ensuring the to-go experience equals their in-restaurant experience for guests who choose this convenience. The team simplified the online ordering process, which significantly reduced the order time. During the quarter, digital sales grew almost 50% and represented more than one-third of total to-go sales. Additionally, they have now completed a dedicated to-go area in more than half of their restaurants. These actions led to continued improvement in guest satisfaction scores for order accuracy and timeliness and helped to drive to-go sales growth nearly 12%. Finally, LongHorn's industry-leading retention rates continue to improve despite the tight labor market. Team member turnover during the quarter was 68% compared to approximately 120% for casual dining, and management turnover during the quarter was 13% compared to approximately 36% for casual dining. We know that engaged team members provide better guest experiences, and the LongHorn team's ongoing focus on retention and culture building is a key driver of the strong business performance. Cheddar's Scratch Kitchen total sales decreased 2%, driven by same-restaurant sales decline of 5.4%, and partially offset by sales growth from new restaurants of 3.4%. The trend change was driven by reduced marketing efforts and overall industry softness in the quarter. In addition, the same-restaurant sales decline continued to be more pronounced in the former franchise locations. These restaurants experienced significant disruption during the quarter as they were the last restaurants to complete the kitchen transformation project. While it's disappointing to see the sales trend decline, the Cheddar's team made significant progress against their priorities during the quarter. At the beginning of the new fiscal year, they established three new strategic priorities; create a people-focused, results-oriented culture, reduce friction in the guest experience, and build a brand people talk about, with the goal of building on the progress they made last year, repairing fundamental elements of the business, and improving the sales trajectory. During the quarter, the Cheddar's team continued to see improvements in both the manager and team member turnover trends as they implemented initiatives that led to higher retention levels. Overall, staffing levels for both the manager and team members improved during the quarter. Because of the progress made this quarter in staffing and intention, the Cheddar's team was able to better execute operational improvements designed to enhance the guest experience. For example, they implemented standards that significantly upgraded their abilities to successfully serve large parties. With these and other improvements, they saw better guest experience results compared to last year across all key metrics. Near the end of the quarter, Cheddar's introduced a new menu with more price diversity within categories, and they launched their Quick Pick Lunch Combos starting at $5.99. These combos are generating strong preference at lunch and have led to higher value and intent-to-return ratings compared to last year. I recognize there's still a lot of work to do, but the progress the Cheddar's team has made operationally and their improved HR metrics are encouraging. Now that they feel they're moving in the right direction from an operation and staffing perspective, they will begin to increase their working media spend. Cheddar's has the highest guest frequency of any Darden brand, and this investment is intended to build upon the strong position, improve brand awareness, and drive trial. They will be leveraging Darden resources and best practices to implement the media plan. Finally, during the quarter, we acquired four previously franchised restaurant locations in Texas, and I'm pleased to say that each of these four restaurants is performing at a very high level. In closing, I’m pleased with the progress our teams made executing against the strategic initiatives. Our strategy is working, allowing us to continue to grow sales, increase market share, improve margins, and invest in our people and brands, all while continuing to return capital to our shareholders. Of course, none of this would be possible without having the best people in the business, so I want to take this opportunity to thank our 185,000 team members who continued to create memorable dining experiences for our guests. Now, I'll turn it over to Rick.

Rick Cardenas, CFO

Thank you, Gene, and good morning, everyone. We had another good quarter with total sales growth of 3.5%, driven by 2.6% growth from the addition of 40 net new restaurants and same-restaurant sales growth of 0.9%. First quarter diluted net earnings per share from continuing operations were $1.38, an increase of 3% from last year's diluted net earnings per share. We paid $108 million in dividends and repurchased $95 million in shares, returning over $200 million to shareholders this quarter. Before I get into the detailed results from this quarter, I want to mention that we adopted the new accounting standard for leases at the beginning of this fiscal year. Consistent with the expectation discussed on last quarter's call, we estimate that this will negatively impact EPS by approximately $0.05 in fiscal 2020. However, the more meaningful impact was to our balance sheet, as you saw from this morning's press release. This quarter, we also updated our segment reporting. Beginning in fiscal 2020, our calculation of segment profit now excludes non-cash, real estate-related expenses and fiscal 2019 has been restated for comparability. This change allows for more consistent evaluation of our business across segments and fiscal periods. Now turning to our detailed margin results. Food and beverage costs were flat to last year, as pricing of 2% and continued cost savings initiatives offset commodity inflation of approximately 1.5% and continued investments. I'm impressed with restaurant labor being flat to last year, particularly in light of same-restaurant sales growth of 0.9%. Total labor inflation of 4% was offset by pricing, check mix, and productivity improvements in new and existing restaurants. Restaurant expense was unfavorable 10 basis points due to deleverage, as our comp sales growth was below inflation. As a result, restaurant level EBITDA margin of 18.1% was 10 basis points unfavorable to last year. General and administrative expense was 50 basis points lower than last year due to favorable mark-to-market expense, which is generally offset in the tax line, lower management incentive expense, and sales leverage. Our Q1 effective tax rate of 9.8% was slightly below the range in our annual guidance. We still anticipate our effective tax rate to be between 10% and 11% for the fiscal year. Overall, I'm pleased with our performance this quarter and impressed with our strong EBITDA margin of 8.1%. Turning to our segment performance. Olive Garden grew sales and profit in the quarter, driven by positive same-restaurant sales and net new restaurant growth. Segment profit margin increased 40 basis points by leveraging the same-restaurant sales growth and managing cost-effectively. LongHorn also grew sales and profit in the quarter, driven by positive same-restaurant sales and net new restaurant growth. Segment profit margin decreased slightly due to elevated beef inflation and continued investments during the quarter. Fine Dining grew sales and profit in the quarter as well, driven by positive same-restaurant sales and net new restaurant growth. Segment profit margin decreased because of higher pre-opening expense and inefficiencies related to three new restaurants. Sales for our Other Business segment grew 1.8%, driven by net new restaurants. Both segment profit dollars and margin decreased this quarter due to margin deleverage from negative same-restaurant sales growth in the quarter. As you saw in the press release, we reiterated all aspects of our fiscal 2020 outlook. Looking ahead at our second quarter performance, there are two things I would like to address before we open up the call for questions. Both of which are contemplated in our annual guidance. First, the timing of the Thanksgiving holiday this year, relative to last, is shifting from the second quarter into the third quarter. Since we are closed in the majority of our restaurants on this day, this shift should positively impact Darden's second quarter same-restaurant sales by approximately 80 to 100 basis points, with a corresponding offset in the third quarter. Second, given the prolonged media coverage and the storm's duration, Hurricane Dorian had a meaningful impact on the first two weeks of our fiscal second quarter. We are currently estimating a drag of 20 to 30 basis points to same-restaurant sales in the second quarter. And with that, we'll take your questions.

Operator, Operator

Thank you. We'll now begin the question-and-answer session. Our first question is from Matt DiFrisco from Guggenheim Securities. Your line is open, sir.

Matt DiFrisco, Analyst

Thank you. My question is with respect to Cheddar's, I guess, lagging in difference between Olive Garden and LongHorn. Would you attribute that mostly, I guess, to the marketing spend? Can you sort of bracket or compare how much pullbacks of marketing spend there was versus last year in either terms of dollars or in terms of weeks of support, so we could get a better understanding of that?

Gene Lee, CEO

I'm not going to provide detailed specifics about our spending in Cheddar's. However, we now have sufficient transactional data to analyze aspects of Cheddar's that we haven't been able to explore before. One significant insight is that our visit frequency at Cheddar's surpasses that of any other Darden brand. We compared this information with our research and found that brand awareness is notably low. Our previous advertising strategy focused primarily on frequency. After gaining this insight during the quarter, we decided to scale back such activities and shift our approach towards testing and learning how to effectively boost awareness in different markets. We realize that in the current environment, it's crucial to enhance our market presence, operate more efficiently from a media perspective, and rely more on traditional media to boost awareness and drive the business. This quarter provided us with valuable insights, prompting a change in our direction and a slight reduction in media spending during the quarter.

Matt DiFrisco, Analyst

Okay. And then, I guess, is there something different to the menu that may have triggered a change in frequency to the heavy, heavy user from the past, or is it the change in ownership that they noticed or something like that?

Gene Lee, CEO

No, it's just the fact that we actually now have the transactional data to analyze and have that insight. That's why it’s so important when we do an acquisition for us to put our systems in, so that we can get the data and then do our analysis.

Operator, Operator

Thank you. Our next question is from David Tarantino from Baird. Sir, your line is open.

David Tarantino, Analyst

Hi. Good morning. Gene, I just wanted to talk to about the industry trends that you're seeing. It seems like your analysis in the prepared remarks that this was a little surprising that we've seen such soft trends, especially in the most recent months. Just curious to get your thoughts on why you think that's happening? And secondly, do you think you need to adjust any of your marketing or promotional strategies to the new environment?

Gene Lee, CEO

Good morning, David. As I mentioned earlier, the overall conditions for consumers appear to be quite strong, with good wage growth and robust employment, which has historically been beneficial for us. However, looking at the data and consumer behavior, I sense that there is some uncertainty affecting consumer confidence lately. It's hard to predict how long this situation will last, especially with all the media coverage about current events. We haven't identified any structural changes, but there seems to be a bit more uncertainty now than in previous times. Moving forward, we need to focus on creating compelling guest experiences and reinforcing our value propositions. We should also think about how to market our smaller brands and advertise them effectively across various channels to enhance our competitiveness. This is an important shift we need to make in the coming quarters. We're excited about the upcoming Never Ending Pasta Bowl promotion at Olive Garden, which has generated a lot of interest, and I believe it's a great initiative given the current consumer landscape.

David Tarantino, Analyst

And maybe just a follow-up, Gene, does the current environment, or what you've seen recently, make you think differently about the degree of difficulty in hitting your comp guidance for the year? I know you have maybe lesser fiscal comparisons coming up. How should we think about the middle or upper end of the comp guidance relative to where you were three months ago?

Gene Lee, CEO

Well, I guess, we reiterated our guidance today. We believe our same-restaurant sales for the year will be somewhere between 1% and 2%.

Operator, Operator

Thank you. Our next question is from Will Slabaugh from Stephens. Your line is open.

Unidentified Analyst, Analyst

Hey, guys. This is actually Neal on for Will. Thanks for taking the question. Just quick one here. Wondering if you can give any insights into commodity costs? You spoke to some elevated beef costs there. Just wondering how you're feeling about this going forward, whether you’ve seen any effects from African swine fever?

Rick Cardenas, CFO

Thanks, Neal. This is Rick. We were about 1.5% inflation in the first quarter, which is around where we expected it to be. We have seen a little bit of elevation in beef, but the boards are coming back down and are a little bit more in our favor. So, we still expect our inflation to be where we thought at the beginning of this fiscal year. As a result, or as an answer to your African Swine Flu question, we still haven't seen a very big impact in African Swine Flu. As we mentioned in the last call, pork is really only about 2% of our sales. So, it's a relatively small impact. And we haven't seen the downstream impacts of pork prices yet.

Operator, Operator

Thank you. Next question is from Joshua Long from Piper Jaffray. Your line is open.

Joshua Long, Analyst

Great. Thank you for taking my question. I wanted to circle back to the trends you've seen here lately and maybe any sort of regional variations, or any regional variations you've seen across the system? And then, also, in terms of your initiatives and kind of the underlying trends you've seen, any sort of differences in the weekday, weekend trends? You've got some very strong lunch offerings in there, but didn't know if that was maybe moving the needle like you expected or ahead of expectations?

Gene Lee, CEO

No. I really don't have a lot to add to your question. We’ve really not seen much from a geographic standpoint and there's really been no trend change to any of the weekday, weekend day, weekday lunch, or weekend business. I would say that the trends have weakened in all areas of the business.

Joshua Long, Analyst

Great. Thanks. And then one follow-up, if I may, in terms of your work on the To-Go business, the strength there is still very promising. Any sort of learnings you've had as you stuck with this and worked on the fulfillment internally versus the thought process of working with external partners? I know you're always testing and always learning, but curious on what you're seeing there, if there's any update.

Gene Lee, CEO

I believe the main focus of our teams is to reduce friction in the process. As with anything, repetition leads to improvement; the more business we do, the better we become. LongHorn has made significant advancements, with improvements in their scores and satisfaction levels. Olive Garden has also refined this process and is continually discovering new ways to enhance it. I'm particularly impressed with the digital growth in both of those brands. We see that as an area worth further attention. Ultimately, our goal is to make the customer experience as engaging as possible while providing great value. Our strategy has been to ensure strong value in our takeout options, encouraging customers to pick up their orders rather than relying on delivery.

Operator, Operator

Thank you. Our next question is from Brett Levy from MKM Partners. Your line is open.

Brett Levy, Analyst

Good morning. Thanks for taking the call, gentlemen. If we could just hone in a little bit more, I'm going to ask the consumer question a different way and hopefully get some sentiment of a different answer. When you think about…

Gene Lee, CEO

We could try.

Brett Levy, Analyst

I'll try. When you think about the consumers right now, are you seeing any changes in how they're using you? Obviously, take-home is further building out your off-premise, but are you seeing any changes in terms of full price value add-ons, size of parties, something like that? Thank you.

Gene Lee, CEO

No, Brett. We haven't seen any change at all. When I look at the quarter, let's consider what Olive Garden has accomplished in the last two years. Despite the industry's decline, I'm truly impressed that we've grown our Olive Garden business by approximately 10% with a two-year comparable that I find extremely notable. While the industry is slowing down, I believe our two major brands are competing very well. Their performance significantly outpaces the industry. We are capable of competing effectively with these two brands, and I'm enthusiastic about that. We keep an eye on the industry and provide some insights, but our primary responsibility, along with our leaders, is to find ways to compete effectively in any situation, and I think our teams have excelled in this first quarter.

Operator, Operator

Our next question is from John Ivankoe from JPMorgan. Your line is open.

John Ivankoe, Analyst

Thank you for taking my question, Gene. It seems that Knapp all-store traffic has been negative, yet you mentioned a strong underlying consumer environment, particularly regarding some top-line trends. Where do you see consumers heading in terms of dining, whether at home or out, if they have higher incomes? Also, do you anticipate that independence will be negatively affected as we navigate this cycle?

Gene Lee, CEO

John, you get the award for most questions inside one question.

John Ivankoe, Analyst

It's all related. I think you can do it in one paragraph.

Gene Lee, CEO

I got independence, I got discount. What was the first?

John Ivankoe, Analyst

The first one was where are people going.

Gene Lee, CEO

We are definitely noticing some strength in limited service, including fast casual and quick service. There is solid income growth at the lower end, and those individuals appear to be dining out more often. It's unclear where people are shifting away from in casual dining. Our focus remains on our brands, and we appear to be gaining a larger share. The data suggests that larger chains are capturing more market share, mostly from independent establishments. However, independents and small regional chains that are in affluent trade areas are still making a positive impact. On a national level, independents continue to lose market share to larger brands that are performing better by taking share from smaller and older brands, as well as independents. Regarding discounting, we will leverage any strategies available to grow our business. When considering incentives, we don’t view them as a standalone element; we must evaluate our overall advertising efforts, including television, digital initiatives, and incentives. We have various methods to implement incentives, and we possess significant leverage that can be utilized over time based on the market conditions. We will deploy these appropriately to drive profitable growth. One thing I take pride in is that we are successfully growing our business while safeguarding our margins. We continue to invest in quality, food, portion sizes, and our team while maintaining our margins. Our EBIT margins are impressive in this environment. When evaluating incentives, we take a comprehensive approach to build our brands sustainably over the long term.

John Ivankoe, Analyst

That's great, very helpful, excellent answer.

Operator, Operator

Thank you. Our next question is from Andrew Strelzik from BMO Capital Markets. Your line is open.

Andrew Strelzik, Analyst

Hey, good morning. Thanks for taking the question. Over the last couple of months, we've been hearing a lot more about delivery take rates coming down, being renegotiated lower. Wondering if that changes your perspective on the viability of delivery for Darden at all, especially as you've kind of highlighted some of the changes on the digital side and the willingness given the numbers that you cited for customers to engage with the brands digitally, if your thoughts are evolving at all on delivery?

Gene Lee, CEO

No, we really haven't changed our views. We recognize that the cost burden seems to be shifting from the company to the consumer, and we will keep a close eye on that. However, I do have concerns about it. It all comes down to value and how much of the overall experience consumers are willing to invest in convenience. This is an important trend that we anticipated internally, and we will monitor it. But I want to return to what I mentioned earlier; our focus right now is to provide an appealing off-premise experience that delivers significant value, encouraging consumers to come and get it. This approach appears to be effective for us, and we will continue to prioritize it.

Andrew Strelzik, Analyst

If I could just follow-up on the value piece then quickly. The Olive Garden price was about 2% for the quarter. Was that what the underlying price was? Not that it's a huge deviation from where you've been prior, but should we expect a little bit more price broadly at Olive Garden going forward?

Rick Cardenas, CFO

Andrew, this is Rick. The price was 2.2%, I believe in the first quarter, and that's just due to timing of pricing year-over-year. We still expect our pricing to be below 2%, which is our long-term goal; to keep pricing below our inflation and below our competitors to increase our value perception in the marketplace, while still making great investments. So, yes, this was just a little bit of a timing anomaly for the quarter.

Operator, Operator

Thank you. Our next question is from Stephen Anderson from Maxim. Your line is open.

Stephen Anderson, Analyst

Yes. Good morning. I actually wanted to ask about the test you have underway for your rewards programs to see a multi-concept. As I recall, it’s about 7% of your stores that you're testing that out right now. I wanted to ask about how the test is progressing, and whether you are ready to roll that out to additional locations or potentially the entire system? Thank you.

Rick Cardenas, CFO

Hey, Stephen, this is Rick again. Thanks for the question. As you said, yes, we have our loyalty program in about 7% of our restaurants across the nation. We're still monitoring that test. As we have said quite a few times, this is going to take a long time to understand the frequency-driving nature of the loyalty program and how much we’d have to provide discounts to our most loyal consumers to come to us versus other incentives for them to come. The test is going okay. It's going well, but we're not ready to pull the trigger on adding more restaurants. When we do, I am sure all of you will be the first to know. But right now, we're holding steady on our test. The fact that it's still out there suggests that it’s going well, but we want to make sure that it's the right thing to do in the long run, as part of our overall strategy of how we market to our consumers.

Operator, Operator

Thank you. Our next question is from Dennis Geiger from UBS. Your line is open.

Dennis Geiger, Analyst

Great. Thank you. I just wanted to ask about mix, and I guess specifically on Olive Garden. Is the impact that you saw in the quarter roughly in line with expectation prior to the quarter? And more importantly, just looking out over the next few quarters, anything that would make you think the mix contribution could remain above kind of a long-term steady state? I guess if you could just highlight some of the mix considerations this year, some of the puts and takes, thinking about incentives, trade-up promotions, catering delivery, or catering off-premise, et cetera.

Rick Cardenas, CFO

Yes. Two things that will probably drive mix slightly above our target will be continued growth in catering and catering delivery, along with the addition of the $5 Take Homes. Those two things will likely drive that mix a little bit above our long-term expectations. The $5 Take Home is a great value offering, and it's something that we think is a real catalyst to continue to drive the off-premise business, which should have a little bit more of a positive mix than what we want to try to do for the long term.

Operator, Operator

Thank you. Our next question is from Eric Gonzalez from KeyBanc Capital Markets. Your line is open.

Eric Gonzalez, Analyst

Hey. Good morning. Thanks for taking the question. I think in the first quarter you benefited from a few extra weeks of the Buy One Take One as you pull that forward. But I think you said in your comment that it was a drag on traffic due to media shift. So I was wondering if you can maybe clarify what you meant there. And I know you had the hurricane impact, but perhaps you can quantify what the impact of not having those extra weeks of the Buy One Take One in the early part of the second quarter?

Rick Cardenas, CFO

No. We're not going to talk about the second quarter impact. We shifted some media; we moved things around, which always moves our comparisons somewhat. But I'll refer back to my statement; this was something we think strategically needed to be done. Shifting media spending is the only way you can really discern what is working and what's not working. So, we shifted a little bit inside the quarter. I wouldn't get caught up in that; I point back to a great two-year stack as we outperformed the industry. We made a strategic choice to separate the two value promotions that gives us more balance in our value messaging throughout the year, which is really important. Let's not get hung up on weekly media shifts.

Eric Gonzalez, Analyst

If I could maybe sneak in a follow-up there. On the $5 take-home and the Buy One Take One are similar types of promotions; are you moving away from Buy One Take One next year or is that something that's on the table?

Gene Lee, CEO

No, I think they're similar but different. They're different types of value offerings, and our team will continue to reenergize Buy One Take One; it's an important part of our value proposition. If it's done right, it will continue to support the $5 take-home. It shouldn't be a cannibalistic thing. It really should support it; running Buy One Take One should be the springboard for a $5 take-home for the rest of the year. That's how we're thinking about that. It should be additive, not dilutive at all.

Operator, Operator

Thank you. Our next question is from John Glass from Morgan Stanley. Your line is open.

John Glass, Analyst

Thanks. Thanks very much. First just a point of clarification and a question. Is the $5 Take Home entrée promotion considered a new off-premise transaction or is it just an add-on to the dining check? And then, Gene, can you provide some more detail about how Cheddar's plans to broaden reach with its advertising? And when we might start to see that investment?

Gene Lee, CEO

Yeah. The $5 Take Home is an off-premise transaction. As far as Cheddar's goes, I mean, we're out there testing and learning with different digital vehicles to see what we can generate for awareness with that. We're out at a small scale and will continue to increase that scale as we learn.

Operator, Operator

Thank you. Our next question is from Peter Saleh from BTIG. Your line is open.

Peter Saleh, Analyst

Great. Thanks. Gene, I have a couple of questions about Cheddar's. Can we revisit the guest satisfaction scores? Are they improving or have they started to decline? Also, regarding turnover at both the management and crew levels at Cheddar's, how do those figures compare to Darden's average? How much more work needs to be done in that area? Thanks.

Gene Lee, CEO

Good question, Peter. Guest satisfaction scores are increasing across the board as we've improved management, employee staffing. There's still opportunity there, and I would say that the differences between the better operating stores and the ones facing challenges is still too great, and we've got to close that gap down. As far as turnover, the metrics are still outside Darden norms but are inside industry norms for the first time, which is a really good trend. It's going to take us a while to get them hopefully to Darden norms, but they are on their way and again inside industry trends at this point in time.

Operator, Operator

Thank you. Our next question is from Jeffrey Bernstein from Barclays. Your line is open.

Jeffrey Bernstein, Analyst

Thank you very much. I have a clarification to ask. Gene, in your prepared remarks, you mentioned that industry comparisons are continuing to weaken. You also referenced whether you believe it is due to tough comparisons or if there has been a change in consumer behavior. When we look at the last couple of quarters, the two-year trends in comparable sales and traffic appear to be relatively stable. Are you analyzing broader industry data that we may not have access to, or do you believe it is primarily about the difficult two-year comparisons? Or do you think there has been a real change in consumer behavior?

Gene Lee, CEO

Well, I think it’s a combination of both. I think that's what I was trying to get at in the comment. The industry is facing some tougher comparisons, but our view was that the industry would stay positive in this environment. It may not return to previous growth rates, but it was surprising to see the industry go all the way back to negative. While the growth rate has decelerated, it is still strong.

Jeffrey Bernstein, Analyst

Understood. And then just want to talk about Cheddar's. I'm just wondering if some of the under-the-hood metrics are getting better and you seem excited about the opportunity longer term. I was just wondering whether frustration on the sales in the short term might lead you to delay when you would otherwise ramp-up the new unit growth which seem like that was the big opportunity over time. I'm just wondering whether that timeframe might have changed or been pushed back at all?

Gene Lee, CEO

Only the timeframe has changed. We've been consistent in stating that the main factor for new unit ramp-up growth is human resources, and I'm not sure we have completely won that battle yet. Whenever a new restaurant opens, there's an investment to be made, and it's essential to have an excellent managing partner. I don’t believe we are currently at a stage where we can accelerate growth. We are still opening five or six locations a year, which is the appropriate number at this moment. I want to see more depth in management develop, and only when we reach that stage can we begin to increase growth. However, we haven't set a timeline for that, and I won’t provide one today. My main focus is on securing great managing partners for these restaurants because I know that when we achieve this, our chances of success significantly improve.

Operator, Operator

Thank you. No more questions at this time. Let me now hand the call over to Kevin Kalicak.

Kevin Kalicak, Host

Thank you, Ray. That concludes our call. I want to remind you all that we plan to release second quarter results on Thursday, December 19th before the market opens with a conference call to follow. Thank you all for participating in today's call.

Operator, Operator

Thank you. That concludes today's conference. Thank you for participating. You may now disconnect.