Darden Restaurants, Inc. · NYSE:DRI
Darden Restaurants — FY2014 Earnings Presentation
32 slides from Darden Restaurants's earnings presentation, Jun 20, 2014
Slide 1: FY2014 Review | FY2015 Outlook
FY2014 Review | FY2015 Outlook JUNE 20, 2014
Slide 2: Forward-Looking Statement
Forward-Looking Statement During the course of this presentation, Darden Restaurants’ officers and employees may make forward-looking statements concerning the Company’s expectations, goals or objectives. Forward-looking statements regarding our expected earnings per share and U.S. same-restaurant s
Slide 3: Important Additional Information
Important Additional Information The Company, its directors and certain of its executive officers are participants in the solicitation of proxies from shareholders in connection with the Company’s 2014 annual meeting of shareholders (the “Annual Meeting”). The Company intends to file a preliminary p
Slide 4: FY2014 Overview
4 FY2014 Overview FOLLOWING A TRANSFORMATIONAL YEAR, DARDEN IS WELL POSITIONED FOR SIGNIFICANT VALUE CREATION -- DRIVEN BY EXECUTION OF OUR STRATEGIC ACTION PLAN • Launched a comprehensive Brand Renaissance Plan to regain momentum at Olive Garden • LongHorn Steakhouse’s same-restaurant sales exceede
Slide 5: FY2014 Combined and Continuing Sales by Brand
FY2014 Combined and Continuing Sales by Brand Combined Basis ($Millions) Sales Same-Restaurant Sales FY2013 FY2014 % Growth Q4 FY2014 FY2014 YTD FY2015 Olive Garden $3,685 $3,643 -1.1% -3.5% -3.4% Flat Red Lobster 2,622 2,460 -6.2 -5.6 -6.0 NA LongHorn 1,231 1,384 12.4 +2.4 +2.7 +3.0% Specialty Rest
Slide 6: FY2014 Reported to Adjusted Earnings Reconciliation
FY2014 Reported to Adjusted Earnings Reconciliation Combined Basis Diluted EPS FY2013 FY2014 % Change Darden on a Combined Basis (Unadjusted) $ 3.13 $ 2.15 Strategic Action Plan Costs with Related Impairment 0.27 Other Impairment Charges¹ 0.05 Darden on a Combined Basis (Adjusted)2 $ 3.13 $ 2.47 (21
Slide 7: Key Drivers of Full Service Dining's Maturation
7 Key Drivers of Full Service Dining’s Maturation Important Demographic and Economic Dynamics and the Share Growth Opportunity Slower growth of Baby Boomers age 50 to 60, whose dining out frequency within full service dining is highest Significant increase in Millennials Slower growth in household i
Slide 8: Priorities for Value Creation
Priorities for Value Creation Progress Made Separate Red Lobster through a spin-off or sale to enhance focus • Red Lobster sold for $2.113 billion to Golden Gate Capital; on track to close in July 2014 Execute Olive Garden Brand Renaissance • Dinner menu refreshed and new lunch menu rolled out, oper
Slide 9: Robust Process Maximized Value / Minimized Risk from Red Lobster Sale
(2.6)% (2.7)% (6.6)% 3.2 % (5.2)% (4.5)% (8.8)% (7.6)% Robust Process Maximized Value / Minimized Risk from Red Lobster Sale • Red Lobster Sale Facts • $2.1 billion is a premium multiple compared to comparable restaurant deals — Total consideration of $2.113 billion in cash — Purchase multiple of ap
Slide 10: Red Lobster Sale: Delivering on Our Previously Communicated Objectives
Red Lobster Sale: Delivering on Our Previously Communicated Objectives Objectives for Darden Achieved By the Red Lobster Sale Transform Darden’s restaurant portfolio into two independent companies that can each focus on separate and distinct opportunities to maximize shareholder value Allow “New D
Slide 11: What's Different for New Darden
1 1 What’s Different for New Darden Same Different Leading multi-brand operator Higher and more consistent sales and earnings growth driven by stronger overall positioning with attractive consumer segments and an expanding restaurant footprint Commitment to quality and menu innovation More balan
Slide 12: Darden is Better Positioned for Growth Post the Red Lobster Sale
(10%) (5%) 0% 5% 10% 15% 20% 25% 30% 35% 40% 45% Jun-2009 FY2010 FY2011 FY2012 FY2013 FY2014 Darden excl. Red Lobster +40% Darden Overall +23% Red Lobster -5% ` Darden is Better Positioned for Growth Post the Red Lobster Sale Sales Growth ($ billions) CAGR Darden Overall $ 1.7 +4.3 % Darden excl. Re
Slide 13: Olive Garden
Olive Garden 1 3 • Premier brand with broad appeal that shows in leading restaurant-level returns and annual traffic and sales per restaurant¹ • Recently launched Brand Renaissance Plan is more sustainably addressing erosion in visit frequency among core guests • Plan is aggressively enhancing alrea
Slide 14: Brand Renaissance Plan Update: Objectives
Brand Renaissance Plan Update: Objectives 1 4 Food Prepared with fresh ingredients, presented simply with a sense of flair that is very Italian Service Approachable and genuine so guests can focus on sharing and conversation Atmosphere Natural, clean and tasteful while its tone is warm, relaxed and
Slide 15: Brand Renaissance Plan Update: Key Growth Drivers
Brand Renaissance Plan Update: 4 Key Growth Drivers 1 5 Core Menu Innovation Reinforce value leadership, expand choice / variety and capitalize on convenience trend A Culinary Operations & Service Enhancements Simplify operations, improve quality and intensify focus on the guest B New Approach to Ad
Slide 16: Core Menu Evolution
Core Menu Evolution 1 6 Progress Achieved in FY2014 Growth Drivers in FY2015 Dinner Menu Renovation New Lunch Menu New Dinner Menu & Design Lunch Menu Refresh V al u e F o cu s • Cucina Mia, 23 combinations • $9.99 price point section • Tuscan Trio Combinations extends Olive Garden’s Soup, Salad & B
Slide 17: Culinary Operations & Service Enhancements
Culinary Operations & Service Enhancements 1 7 Progress Achieved in FY2014 Growth Drivers in FY2015 Si mpl if y O p e ra ti o n s • Simplified recipes and reduced production pars by 25% captured $20 million in savings • Streamlined take-out procedures to support growth • Ongoing culinary simplificat
Slide 18: New Approach to Advertising & Promotions
New Approach to Advertising & Promotions 1 8 Progress Achieved in FY2014 Growth Drivers in FY2015 B ra n d C o m m u n ic at io n • Developed new creative content to showcase new food and reinforce culinary credentials • Implemented social media engagement and recovery team • Social media roadshow t
Slide 19: Reimaging Program
Reimaging Program 1 9 Progress Achieved in FY2014 Growth Drivers in FY2015 Th e F o u r W al ls • Reimaged the interior and exterior of an existing Revitalia restaurant • Remodel the interior and exterior of 75 restaurants G u e st T o u ch p o in ts • Tested new plateware to enhance food presentati
Slide 20: Brand Renaissance Plan is on Track to Deliver Improvement
Brand Renaissance Plan is on Track to Deliver Improvement 2 0 • Brand Renaissance Plan is a large and complex project • We have made significant progress to date in many areas • There will be meaningful change that comes to life in FY2015 • Results improvement will build with time and with more Bran
Slide 21: LongHorn: Journey to Becoming America's Favorite Steakhouse
2 1 Annual Sales Growth LongHorn: Journey to Becoming America’s Favorite Steakhouse FY2015 Strategic Imperatives • Drive Same-Restaurant Sales and Profit Growth by: – Continuing to differentiate the LongHorn guest experience – Delivering value creating new restaurants – Strengthening the business mo
Slide 22: Differentiate the LongHorn Guest Experience
Strengthen quality & freshness perceptions via seasonal features $3 / $4 / $5 food & drink specials 2 2 Differentiate the LongHorn Guest Experience ELEVATE QUALITY AND CULINARY CREATIVITY WHILE BROADENING RELEVANCE FOR MORE OCCASIONS Inspired by food trends at independent and fine-dining restaurants
Slide 23: Specialty Restaurants: Strong, Differentiated and Well-Positioned Brands
Specialty Restaurants: Strong, Differentiated and Well-Positioned Brands Demographic Appeal Well Positioned… • Acquired in 2012 • Strong appeal to Millennial and Generation X households • …for SRS success while adding at least 100 new restaurants • Accelerating beverage and culinary innovation • Exp
Slide 24: Cost Reduction and Operating Support Savings
• Transformative changes in Darden operations have significantly reduced costs (by $150 million annually) in selected high spend operating support areas, including supply chain, facilities management and water and energy usage • During the past two years, these efforts have been supplemented with br
Slide 25: $2.5 Billion in Product Spend is Well Diversified
2 5 $2.5 Billion in Product Spend is Well Diversified and Exposure to Seafood Inflation Will Be Lower Product Spend by Category Contract Coverage of Main Products Purchased Coverage Jun-Nov FY2015 Outlook Seafood 62% Low double-digit inflation Beef 38% Mid single-digit inflation Chicken 85% Low sing
Slide 26: New Management Compensation Plan Now in Place
New Management Compensation Plan Now in Place Focuses on Higher SRS and Stronger FCF Growth 2 6 Incentive Program Prior Plan New Plan Annual Management Incentive Plan • EPS (Darden) or Operating Profit (Business Units): 70% • Total Sales: 30% • EPS (Darden) or Operating Profit (Business Units): 70%
Slide 27: Robust Cash Flow Generation and Disciplined Capital Allocation
2 7 Robust Cash Flow Generation and Disciplined Capital Allocation FY 2 0 1 4 R e ca p • Cash from continuing and discontinued operations of $770 million • Returned $288 million to shareholders through dividend payments • On a continuing basis, spent $563 million on capital expenditures (down from $
Slide 28: FY2015 Outlook: Unit Growth and Same-Restaurant Sales
2 8 FY2015 Outlook ¹ Does not includes 2 fire rebuilds and 4 synergy restaurant conversions; openings are units that were well down the development pipeline in mid-FY2014 Unit Growth Net New Restaurants + 37 Olive Garden + 6¹ LongHorn + 15 The Capital Grille + 1 Seasons 52 + 5 Bahama Breeze + 1 Eddi
Slide 29: FY2015 Outlook: Cash Flow, Capex and Return of Capital
2 9 FY2015 Outlook Operating Cash Flow $MM Total $670 - $730 Earnings (Includes Earnings from Red Lobster prior to sale) $250 - $275 Depreciation & Amortization $330 Working Capital $25 - $50 Other Cash Items $65 - $75 Available for Dividends & Share Repurchase $320 - $405 Capital Expenditures $MM T
Slide 30: FY2015 Outlook: Return to EPS Growth
3 0 FY2015 Outlook …AND A RETURN TO EPS GROWTH FY2014 FY2015E¹ % Growth Darden Continuing Operations: Reported $ 1.38 $1.81 – 1.90 30 – 36% Shared Support Costs Moving to Red Lobster with Sale $ 0.15 $ 0.02 Strategic Action Plan Costs 0.13 - ² Impairments 0.05 - Debt Breakage - 0.39 Darden Continuin
Slide 31: Darden to Leverage its Market Leadership Position and Scale
3 1 More than sufficient operating cash flow to address emerging trends Balanced same-restaurant and new restaurant sales growth to leverage our operating support and restaurant operating costs Talented workforce able to provide unmatched collective experience and expertise Well-positioned portfolio
Slide 32: J. DARDEN.
J. DARDEN. PBsere