Darden Restaurants, Inc. (DRI) Earnings Call Transcript & Summary

Welcome to the 2020 Annual Meeting for Darden Restaurants, Inc. Our host for today's call is Chuck Sonsteby, Chairman of the Board. [Operator Instructions] I will now turn the call over to your host, Mr. Sonsteby. You may begin.

Thank you and good morning. Welcome to our 2020 Annual Shareholders' Meeting, our first virtual shareholder meeting. I'm Chuck Sonsteby, Chairman of the Board of Directors of Darden Restaurants. We're holding the meeting virtually due to public health concerns as a result of the COVID-19 pandemic. If you've already submitted your proxy, there is no need for you to vote now unless you wish to revoke that proxy and change your vote on any of the items being considered at the meeting. If you have not yet voted your shares, you can vote now or during the business portion of the meeting by clicking on the red box on the virtual meeting website that says Vote Here. After we've concluded the formal business, Gene Lee, our President and Chief Executive Officer, will respond to questions posed by shareholders in advance of the meeting as described in our proxy statement. [Operator Instructions] The rules of conduct for this meeting are available in the Meeting Materials section of the virtual meeting website. And now I will call to order the 2020 Darden Shareholders' Meeting. We will begin this meeting with the formal business and voting of the proxies. First, I'd like to introduce your Board of Directors, each of whom, along with myself, have been nominated for election to the Board. Each of the directors is in attendance today: Shân Atkins, Jim Fogarty, Cindy Jamison, Gene Lee, Nana Mensah, Bill Simon and Tim Wilmott. I'd like to thank each of our current directors for their commitment to Darden and for their support and guidance to the management team and to me over the past year. A number of members of our management team are in attendance today virtually. In addition, our President and Chief Executive Officer, Gene Lee, is joining the meeting from our restaurant support center in Orlando, Florida, along with: Rick Cardenas, Senior Vice President and Chief Financial Officer; Matt Broad, Senior Vice President, General Counsel, Chief Compliance Officer and Corporate Secretary; Sarah King, Senior Vice President, Chief Human Resources Officer; and Susan Connelly, Senior Vice President, Chief Communications and Public Affairs Officer. Also in attendance today are representatives of our auditors, KPMG: Roddy Melendez, lead audit engagement partner; Kathy Nguyen, Senior Audit Manager; and [ Eric Redlock ], Senior Audit Manager. And now our General Counsel and Corporate Secretary, Matt Broad, will introduce the formal business portion of the meeting. Matt?

Thank you, Chuck, and good morning, everyone. A certified list of shareholders as of July 29, 2020, the record date for this meeting is available for inspection through the virtual meeting website by any shareholder who registered to attend the meeting as a shareholder. Also available for inspection by any shareholder are the minutes of last year's annual meeting and the related notice of meeting, proxy statement, form of proxy and annual report. These documents will be filed with the records of the company. The proxies appointed by the Board of Directors for today's meeting are Anthony Morrow, Jessica Lange and me. The inspector of elections for this meeting is Peter Descovich from IOE Services Inc., an affiliate of Broadridge Financial Solutions. Mr. Descovich is in attendance. The inspector reports that based on valid proxies on file before the meeting began, there are represented, by proxy, the holders of approximately 88% of the company's common stock entitled to vote as of the record date. The number of shares of common stock represented at the meeting is more than a majority of the total number of shares entitled to vote, and therefore, pursuant to Article 1, Section 2 of the company's bylaws, I declare that a quorum is present, so the meeting may proceed. The minutes of last year's annual meeting, having been made available for inspection, are deemed approved, subject to any correction or objection a shareholder may make prior to the end of this meeting. We now turn to the items of business. First item of business, the election of directors, along with the 2 additional items of business, were described in detail in the proxy statement furnished to shareholders. If anybody needs that proxy statement, a copy is available on the virtual meeting website. I now declare the polls open until the final votes have been submitted, and we will now proceed with the voting on the items of business. All shareholders entitled to vote at the meeting have the ability to vote online by clicking on the red box on the virtual meeting website that says Vote Here. As a reminder, if you have already submitted your proxy, there is no need for you to vote now unless you wish to revoke that proxy and change your vote on any of these issues. We will now pause for the submission of any final vote. [Voting]

Polls are now closed for these items of business. The corporation's bylaws require that any shareholder wishing to bring other matters before this meeting must notify the secretary in writing prior to the meeting. No advanced notice was received. The Chairman has also advised me that the Board has no other items of business to be brought before the meeting. The inspector has provided to me his certification of the preliminary results of the tabulation, which shows that each of the 8 director nominees have been elected and each of the other proposals before this meeting has been approved. This concludes the report of the preliminary voting results. The final certificate of the inspector will be filed with the minutes of this meeting, and the final results will be included in our report on Form 8-K that we plan to file promptly with the Securities and Exchange Commission. Before I turn the meeting over to Gene Lee, our President and Chief Executive Officer, I would like to call your attention to our forward-looking statement disclaimer. During the course of this meeting, Darden officers may make forward-looking statements, which are subject to risks and uncertainties, and investors are cautioned not to place undue reliance on those statements. Darden's forward-looking statements are made under the safe harbor provisions of the securities laws. We refer you to the full text of our disclaimer, which appears in our Form 10-K and also to the information contained in our reports on Forms 10-K, 10-Q and 8-K, which have been filed with the Securities and Exchange Commission. I would also like to remind you that we will be releasing our fiscal 2021 first quarter financial results before the market opens tomorrow, September 24, with the conference call to follow at 8:30 a.m. Eastern Time and that Gene will not be commenting on or answering questions about those results today. Now I will turn the meeting over to Gene, who will respond to questions that were asked in advance of the meeting as described in our proxy statement. We received 17 questions in advance of the meeting, and we have excluded 9 questions that did not meet the meeting rules that are posted in the Meeting Materials section of the virtual meeting website, primarily because they were related to individual matters. Our answers to the questions will also be posted on the company's Investor Relations website at darden.com soon after the meeting. Gene?

Thank you, Matt, and good morning, everyone. I'll now respond to your questions. Matt will read the questions and I will respond appropriately. Matt?

The first question is, why has the press in the Orlando area not received details of your layoffs and early retirement packages given the number of employees at your RSC affected?

Information about these actions was included in our supplemental proxy materials filed with the Securities and Exchange Commission on August 31, 2020, which are publicly available.

Why, in a time of pandemic, when you could be cutting wasteful spending, are you looking at some of your finer dining establishments like LongHorn and Capital Grille doing a store-by-store assessment of where it makes fiscal sense to be closed for lunches as well as Sunday and Monday night dinners? There are numerous locations losing money during these times, and you could easily breach the flow of losses by cutting back in these areas temporarily until full capacity dining is a reality again, which, let's be frank, won't be for a year at the earliest? Diners will understand, especially in the situation we are in as a nation, but stockholders can't sit back and watch Darden throw good money after bad, no other reason than saving face, which makes no sense.

As we stated in our last earnings call, from the very beginning of this situation, we've been focused on strong cost management. The work our teams have done to streamline our menus and improve our processes and procedures has helped reduce key variable expenses in our restaurants, especially direct labor. We also reduced or eliminated other fixed costs in our restaurants -- in our Restaurant Support Center and eliminated nonessential capital spending. Again, we'll be providing a public update tomorrow morning that will address our first quarter performance.

I have not seen any DRI brand-change strategy to address COVID. Why is not DRI aggressively innovative to draw guests back, as example, expand outdoor seating, even by petitioning zoning laws to use parking lot space, new menu items for takeout like salads and sandwiches?

As I just mentioned, we'll be speaking tomorrow morning during our first quarter earnings call. I will be addressing the substance of this question at that time.