Gene Lee
President and
Chief Executive Officer
Jeffrey C. Smith
Chairman of the Board

Dear Fellow Shareholders:

We experienced meaningful change in leadership in fiscal 2015 beginning with the election of a new Board of Directors. The new Board appointed a new Chairman of the Board and then selected a new Chief Executive Officer. This level of change in leadership is virtually unprecedented and provided our team with the clear mandate from shareholders to improve the Company, think differently and challenge past methods in favor of potential improved actions.

We are in the hospitality business. Success is only achieved through great people and great relationships. Our Board and our senior leadership team have quickly developed a terrific relationship of trust and partnership allowing us to align on the key priorities to drive improved business performance. We are proud of our teamwork at the top of the organization and fully recognize that it is the great work and teamwork that happens throughout the organization and in the restaurants which will allow us to continue to succeed.

As the Board continues its transition following the 2014 Annual Meeting, Directors Betsy Atkins and Peter Feld, upon their own recommendations as members of the Nominating and Governance Committee, are not being nominated to stand for re-election. As the Chair of the Nominating and Governance Committee, Betsy Atkins was the main architect of the Company’s substantial governance improvements which were designed to ensure that the Company’s policies are aligned with shareholder interests and corporate governance best practices. Peter Feld served on each of the Nominating and Governance, Compensation, and Finance and Real Estate Committees, and was an important voice in the establishment of the current Board as well as the decisions and operational changes made at the Company subsequent to the Board’s election in October 2014. The entire Board of Directors appreciates all that Betsy and Peter have done for Darden and wishes them well in their future endeavors.

Executing a Plan to Win

The comfortably sophisticated environment, sparkling atmosphere and sounds of live jazz set the tone for an exceptional dining experience at Eddie V’s.

We will succeed by operating fantastic restaurants. In order to improve the guest experience to drive frequency and same-restaurant sales, we have implemented a “Back to Basics” approach which is rooted in strong operating fundamentals:

  • Improving culinary innovation and execution inside each of our brands;
  • Delivering attentive service to each and every one of our guests; and
  • Creating an inviting and engaging atmosphere inside our restaurants.

We support these priorities with smart and relevant integrated marketing programs that resonate with our guests. By delivering on these operational and brand-building imperatives, we expect to increase our market share through same restaurant sales growth and deliver best-in-class profitability.

We also recognize the unique differences of the seven full-service restaurant brands we own. We decentralized areas where it would aid the entrepreneurial decision making of each brand while further defining how the Darden support structure can enable them to achieve their ultimate potential. This includes:

  1. Leveraging our scale to drive advantages in supply chain and efficient General and Administrative (G&A) support;
  2. Applying insights collected from our significant guest and transactional databases to enhance guest relationships and identify new opportunities to drive sales growth; and
  3. Relentlessly driving operating efficiencies and continuous improvement while ensuring a sense of urgency, accountability and a performance-driven culture.

Increasing Shareholder Value

Innovative culinary platforms like Peak Season and Chef’s Showcase allow LongHorn Steakhouse to offer seasonally inspired flavors.

While driving strong operational performance is our top priority, we also have the responsibility to efficiently allocate our capital and utilize our valuable assets to drive shareholder value. To that end, we recently announced a strategic real estate plan to pursue a separation of a portion of the Company’s real estate assets. The separation would be achieved through a combination of selected sale leaseback transactions and the transfer of a portion of our remaining real estate assets to a new real estate investment trust (REIT) that would be separated by a spin-off, split-off or similar transaction, resulting in the REIT becoming an independent, publicly traded company. This decision was reached after conducting an extensive real estate evaluation process. While a significant amount of work remains, we believe this plan will achieve a favorable outcome for all of Darden’s stakeholders by strengthening our balance sheet while positioning two companies to succeed in the future.

Fiscal 2015 Financial Highlights

We are pleased with the progress we made to improve performance and are well positioned to build on the momentum we created in fiscal 2015.

With more than 100 items made from scratch daily, Yard House has become a modern American gathering place where food and beer lovers unite.
  • We had strong total sales growth in fiscal 2015, due to combined same-restaurant sales growth of 2.4 percent, sales from 33 net new restaurants and the 53rd week of operations. Total sales from continuing operations were $6.76 billion, a 7.6 percent increase from the $6.29 billion generated from continuing operations in fiscal 2014.
  • Adjusted diluted net earnings per share* from continuing operations were $2.63 in fiscal 2015, a 54 percent increase from adjusted diluted net earnings per share from continuing operations of $1.71 in fiscal 2014. On a GAAP basis, diluted net earnings per share from continuing operations were $1.51 in fiscal 2015 and $1.38 in fiscal 2014.
  • During fiscal 2015, we implemented far-reaching improvements for all elements of the Olive Garden business to reignite same-restaurant sales growth and support margin expansion. The Olive Garden Brand Renaissance is beginning to deliver positive results, with fiscal 2015 representing the first year of positive same-restaurant sales since fiscal 2011. Olive Garden’s total sales were $3.79 billion, up 4.0 percent from fiscal 2014. This reflected average annual sales per restaurant of $4.4 million, the addition of nine net new restaurants and a U.S. same-restaurant sales increase of 1.3 percent.
  • LongHorn’s total sales were $1.54 billion, up 11.6 percent from fiscal 2014. This reflected average annual sales
    per restaurant of $3.2 million, the addition of 16 net new restaurants and a U.S. same-restaurant sales increase
    of 4.4 percent.
*Represents a non-GAAP measure. A reconciliation of GAAP to non-GAAP numbers can be found on page 61 of our 2015 Annual Report.
    Back to Basics for an Industry Leader
    (click for more information)
  • We continued to build on solid performance at our Specialty Restaurants, where total sales were $1.42 billion, a 14.8 percent increase from fiscal 2014. Total sales increased 11.0 percent at The Capital Grille to $403 million, based on same-restaurant sales growth of 4.8 percent. Total sales increased 23.6 percent at Eddie V’s to $97 million, based on same-restaurant sales growth of 5.4 percent and the addition of one new restaurant. Total sales increased 18.8 percent at Yard House to $470 million, based on same-restaurant sales growth of 3.8 percent and the addition of seven new restaurants. Total sales increased 21.5 percent at Seasons 52 to $239 million, based on same-restaurant sales growth of 2.3 percent and the addition of five new restaurants. Total sales increased 3.8 percent for Bahama Breeze to $209 million, based on same-restaurant sales growth of 1.8 percent.
  • We identified more than $100 million of annualized cost savings, which will not impact the guest experience, to be achieved by fiscal 2017. We recognized $35 million of the identified cost savings in fiscal 2015. This brought our selling, general and administrative (SG&A) expense as a percent of sales in fiscal 2015 to the lowest level since Darden became a public company 20 years ago.
  • Finally, we continued to return significant capital to shareholders through an annual dividend of $2.20 per share. Also, using proceeds from the sale of Red Lobster completed in fiscal 2015, we retired $1.0 billion of debt and repurchased more than 10.0 million shares of stock as part of our share repurchase program. Since the share repurchase program began in 1995, we have repurchased 182 million shares of our common stock for $4.3 billion.
0.2% SAME-RESTAURANT SALES GROWTH Q1 1.5% Q2 3.6% Q3 3.8% Q4 $ 1.60 DARDEN SALES 1 ($ IN BILLIONS) Q1 $ 1.56 Q2 $ 1.73 Q3 $ 1.88 Q4 $ 0.32 DARDEN ADJUSTED EARNINGS PER SHARE 2 Q1 $ 0.28 Q2 $ 0.99 Q3 $ 1.08 Q4

Now is an exciting time to be a Darden shareholder. With seven great brands, we are well positioned to build profitable sales growth and win in the marketplace through a combination of:

  1. Same-restaurant sales growth;
  2. Aggressive cost and capital management; and
  3. Value-creating new restaurants.

Darden benefits from a clear strategy and a culture of accountability that is strongly embraced by our 150,000 team members. We appreciate our people and we appreciate our culture. These are two big reasons why we are confident we will continue our long-term record of delivering compelling value for years to come.

Thank you for your continued support.

1 Total sales in fiscal 2015 Q4 includes the impact of the additional week due to a 53-week fiscal year. Excluding the extra week, total sales were
  $1.75B, a growth of 6.3%.
2 EPS values adjusted for one-time costs, including impairments, G&A transfer to Red Lobster and strategic action costs. A reconciliation of GAAP
  to non-GAAP numbers can be found on page 61.