Question-and-Answer Session
Operator
(Operator Instructions) Ladies and gentlemen we’ll now begin our question-and-answer session of our conference. If you wish to ask a question please depress the * followed by the 1 on your touchtone phone. You’ll hear a tone indicating that you’ve placed yourself in a queue and all questions will be polled in the order they are received. You may remove yourself from the queue at any time by depressing the pound key on your touchtone phone. And if you are using a speakerphone please pick up your handset before depressing any of the keys. And as a reminder please limit yourself to one question and one follow up and then you may re-queue again. Once again limit yourself to one question and one follow up and then re-queue if necessary. Our first question comes from the line of Jeff Omohundro of Wachovia. Please go ahead.
Jeffrey Omohundro – Wachovia Capital Markets
Thank you. Referencing Drew’s remarks on Red Lobster, the shifting emphasis to value and affordability, is this a messaging change or will there be something more significant occurring at the menu of that concept during 2010? Thanks.
Andrew H. Madsen
Jeff this is Drew, just to clarify my comments there, the overarching goal for Red Lobster this year is to continue their brand refresh, continue to broaden appeal, but we know it’s a very value-sensitive environment where affordability is a major concern in general and the higher your check is, the more of an opportunity is for brands in particular, and Red Lobster has taken steps to be able to augment their brand building messaging with more affordability and specific value messaging. So their quick catch lunch program that started late in the second half this year would be an example of something that they would be using more consistently this fiscal year.
Jeffrey Omohundro – Wachovia Capital Markets
And do you see a need to respond to the more aggressive couponing, discounting and messaging around that within a mid-scale at that concept?
Andrew H. Madsen
Well, we have three broad filters for when we think about our promotion plans and discounting and Clarence touched on these. We want to make sure that anything we do in that area contributes to profitable sales growth, maintains the integrity of our business model, and maintains the integrity of our brands going forward. And as we look at what we did in fiscal 2009, all of our brands, Red Lobster included, maintained their competitive level of out-performance of the industry in same-restaurant sales and so we don’t see a…as well as contributing to broadening the appeal of their brand, so we don’t see a need to dramatically change what we did in the advertising and promotion side. In fact, we’re not sure that would be the best thing for our brands long-term in any event.
Operator
Our next question comes from the line of Matthew DiFrisco of Oppenheimer. Please go ahead.
Matthew DiFrisco – Oppenheimer & Co
Thank you very much. Clarence, I just wanted to get a little clarification on your guidance with respect to, you said that you are being somewhat conservative here but can you comment a little bit on did trends get worse as far as June or the underlying consumer trends you’re seeing? And could you put that in context with what we lapped a year ago with the influence from the rebate checks? Are you seeing as we get through the end of June the rebate checks having potentially less of an effect than they may have had in the beginning of May?
Clarence Otis
Yeah Matthew this is Clarence. I would say that we are not going to comment specifically on June but if we look at our fourth quarter, so March, April, May, each month was roughly about the same. I mean, when you look at the industry, May was slightly weaker but a lot of that I think had to do with the rebate checks year-ago. It was hard for us to get a real handle on what the contribution was. We talked at that time that maybe it added about a point to the comp side. Year-ago June, I don’t know that we saw a whole lot from rebate checks because June was also the month where gas prices spiked north of $4, and so I think whatever positive effect stimulus checks may have had, it was offset by that year-ago. And so as we think about the next 12 months, we are looking at what we’ve seen the last three to six, which has basically been, sales at about the same levels really. I mean, there’s a little bit of variation from month-to-month but that hadn’t changed all that much and so that’s what we are looking at as opposed to any deterioration in June. I think when you look at our brands, May, Red Lobster would have continued to outperform at about the level that it’s been outperforming at. Olive Garden, there was a little bit of shrink but a lot of that is just because they had such a strong year-ago May where I think they were up 11% on a same-restaurant, oh, I’m sorry, up 11 percentage points versus Knapp-Track which was fairly significant and it’s comp was about 11%, yeah.
Matthew DiFrisco – Oppenheimer & Co
Okay, and then also can you give us a little detail as far as what are you seeing regionally? There has been some industry commentary that Florida may have rebounded. Are you seeing any of that disproportionately recovering faster than say the rest of the country, or California particular as well?
Clarence Otis |
