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Darden Restaurants Earnings: Strong Q1 Driven by Olive Garden, LongHorn, and Chuy’s

  • Writer: Hardik Shah
    Hardik Shah
  • Sep 18
  • 3 min read
Darden Restaurants Locations
Source: Darden Earnings Presentation.

TLDR


  • Revenue Strength: Total sales rose 10.4% to $3.0B, fueled by 4.7% same-restaurant sales growth and the Chuy’s acquisition.

  • Margin Trends: Segment-level profit margins held above 20% at Olive Garden and 17% at LongHorn despite beef inflation.

  • Forward Outlook: Management raised FY26 sales guidance to 7.5–8.5% growth, maintaining EPS at $10.50–$10.70.


Business Overview


Darden Restaurants (NYSE: DRI) is one of the largest full-service restaurant companies in the U.S., operating over 2,165 company-owned locations across brands including Olive Garden, LongHorn Steakhouse, Cheddar’s Scratch Kitchen, Yard House, Ruth’s Chris, The Capital Grille, Eddie V’s, Seasons 52, Bahama Breeze, and Chuy’s.


  • Olive Garden: ~933 restaurants, Italian casual dining with strong brand equity.

  • LongHorn Steakhouse: ~595 restaurants, value-driven steakhouse concept.

  • Fine Dining: Includes Ruth’s Chris, Capital Grille, Eddie V’s.

  • Other Business: Includes Yard House, Cheddar’s, Seasons 52, Chuy’s, and Bahama Breeze.

  • Global Expansion: Recently sold 8 Olive Gardens in Canada to Recipe Unlimited, with a development agreement for 30 new units over 10 years.


Darden Restaurants Earnings


  • Total Sales: $3.04B, +10.4% YoY.

  • Same-Restaurant Sales: +4.7% consolidated.

    • Olive Garden: +5.9%

    • LongHorn: +5.5%

    • Fine Dining: –0.2%

    • Other Business: +3.3%

  • Net Income: $258M adjusted, up 12.6% YoY.

  • EPS: Adjusted diluted EPS $1.97 vs. $1.75 prior year.

  • Margins: Restaurant-level EBITDA margin at 18.9%, slightly lower due to delivery fees and beef inflation.


“The strength of our results is a testament to the power of our strategy… enabling us to grow sales and market share while making meaningful investments in our business and returning capital to our shareholders.” – Rick Cardenas, CEO

Forward Guidance


  • Sales Growth: 7.5–8.5% for FY26 (includes 53rd week).

  • Same-Restaurant Sales: 2.5–3.5%.

  • EPS: $10.50–$10.70 adjusted, unchanged from prior guidance.

  • Inflation: 3–3.5%, with beef and seafood as key pressures.

  • Unit Openings: ~65 new restaurants.

  • Capital Spending: $700–$750M.


“We expect the lowest EPS growth in Q2 due to beef costs, but remain confident in achieving our full-year outlook.” – Raj Vennam, CFO

Operational Performance


  • Olive Garden: Strong traffic, delivery momentum (delivery mix ~5% of sales, with younger and affluent guests). New lighter portion menu testing well, boosting affordability scores.

  • LongHorn: Industry-leading consistency, #1 in food quality, service, and value per Technomic.

  • Other Business: Yard House expanded taco platform; Cheddar’s introduced Hawaiian sirloin LTO, driving affordability recognition.

  • Fine Dining: Slight negative comps, mitigated by Ruth’s Chris $55 prix-fixe promotion.


Market Insights


  • Casual dining outperformed broader industry trends, aided by restrained pricing relative to fast casual.

  • Consumers are increasingly seeking price certainty and perceived value, even at higher-priced items (e.g., Olive Garden’s Calabrian Steak & Shrimp Bucatini).

  • Darden noted GLP-1 and health-conscious behaviors may shift consumption toward fewer occasions but stronger preference for “value-rich” dining experiences.


Consumer Behavior & Sentiment


  • Guest visits increased across all income groups, with notable growth among higher-income households.

  • Delivery guests show higher frequency and check averages than dine-in customers.

  • Promotions like Never Ending Pasta Bowl continue to drive engagement and highlight value positioning.


Strategic Initiatives


  • Digital & Delivery: Expansion of first-party delivery via Uber Direct at Olive Garden and Cheddar’s, with a third brand joining in Q3.

  • Menu Innovation: Bold flavors (e.g., spicy three-meat sauce, Calabrian pasta) resonating with evolving tastes.

  • Franchising: International expansion via Recipe Unlimited in Canada.

  • New Prototypes: Smaller, cost-efficient formats at Yard House and Cheddar’s delivering strong returns.


Capital Allocation


  • Dividends: Declared $1.50 per share, payable Nov. 3, 2025.

  • Buybacks: Repurchased 0.9M shares for $183M; $865M remains under authorization.

  • Balance Sheet: $211M cash, $2.1B long-term debt.


The Bottom Line


Darden Restaurants posted a robust Q1, with broad-based sales momentum, resilient margins despite beef inflation, and a reaffirmed EPS outlook. Olive Garden and LongHorn continue to anchor growth, while Chuy’s and other brands provide incremental scale.


For investors, the key watchpoints are:

  1. Beef and seafood cost volatility – a near-term drag on margins.

  2. Sustainability of casual dining momentum against tougher comps.

  3. Execution of new unit growth and delivery expansion to fuel long-term top-line growth.


With disciplined pricing, capital returns, and scale advantages, Darden is positioned to maintain market share gains while navigating inflationary pressures.



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