Darden Restaurants(DRI) - 2026 Q1 - Quarterly Results

Executive Summary Darden Restaurants reported strong Q1 2026 results with increased sales and EPS, alongside an updated positive fiscal 2026 outlook Q1 2026 Performance Overview Darden reported a strong Q1 2026, with total sales up 10.4% to $3.0 billion and blended same-restaurant sales increasing by 4.7% | Metric | Q1 2026 Performance | | :-------------------------- | :------------------ | | Total Sales Increase | 10.4% | | Total Sales Value | $3.0 billion | | Blended Same-Restaurant Sales Increase | 4.7% | | Same-Restaurant Sales | Growth Rate | | :-------------------- | :---------- | | Consolidated Darden | 4.7% | | Olive Garden | 5.9% | | LongHorn Steakhouse | 5.5% | | Fine Dining | (0.2)% | | Other Business | 3.3% | - The strength of results is attributed to the company's strategy, focusing on "being brilliant with the basics" and leveraging competitive advantages to position brands for long-term success, enabling sales and market share growth while investing in the business and returning capital to shareholders[3] Segment Performance Segment profit reporting was adjusted to exclude pre-opening costs, with 'Other Business' showing significant sales and profit growth - Segment profit reporting changed to exclude pre-opening costs, with fiscal 2025 figures recast for comparability. Segment profit is defined as sales less costs for food and beverage, restaurant labor, restaurant expenses, and marketing expenses, excluding non-cash real estate related expenses[4] | ($ in millions) | Q1 2026 Sales | Q1 2025 Sales | Q1 2026 Segment Profit | Q1 2025 Segment Profit | | :---------------- | :------------ | :------------ | :--------------------- | :--------------------- | | Consolidated Darden | $3,044.7 | $2,757.0 | | | | Olive Garden | $1,301.1 | $1,209.1 | $267.6 | $250.1 | | LongHorn Steakhouse | $776.4 | $713.5 | $134.9 | $128.4 | | Fine Dining | $286.5 | $278.9 | $38.7 | $38.9 | | Other Business | $680.7 | $555.5 | $109.3 | $84.3 | Earnings Per Share & Shareholder Returns Diluted net EPS reached $2.19, with adjusted EPS up 12.6% to $1.97, alongside a $1.50 quarterly dividend and $183 million in share repurchases | Metric | Value | | :------------------------------------------------ | :---- | | Reported diluted net earnings per share (continuing operations) | $2.19 | | Adjusted diluted net earnings per share (continuing operations) | $1.97 | | Adjusted EPS Increase (YoY) | 12.6% | - The Board of Directors declared a quarterly cash dividend of $1.50 per share, payable on November 3, 2025, to shareholders of record on October 10, 2025[8] - The Company repurchased approximately 0.9 million shares of its common stock for a total of $183 million during the quarter. As of the end of the fiscal first quarter, $865 million remained under the current $1 billion repurchase authorization[6][9] Fiscal 2026 Financial Outlook Darden updated its fiscal 2026 outlook, projecting total sales growth of 7.5-8.5% and adjusted diluted net EPS of $10.50-$10.70 Updated Outlook Details The fiscal 2026 outlook projects total sales growth of 7.5-8.5%, same-restaurant sales growth of 2.5-3.5%, and adjusted diluted net EPS of $10.50-$10.70 | Metric | Fiscal 2026 Outlook | | :------------------------------------------------ | :------------------ | | Total sales growth | 7.5% to 8.5% | | Same-restaurant sales growth | 2.5% to 3.5% | | New restaurant openings | Approximately 65 | | Total capital spending | $700 to $750 million | | Total inflation | 3.0% to 3.5% | | Effective tax rate | Approximately 13% | | Adjusted diluted net earnings per share (continuing operations) | $10.50 to $10.70 | | Weighted average diluted shares outstanding | Approximately 117 million | - The total sales growth outlook includes approximately 2% growth related to the 53rd week. The adjusted diluted net earnings per share outlook includes approximately $0.20 related to the addition of the 53rd week[14] Reconciliation of Adjusted Earnings Outlook A reconciliation details fiscal 2026 adjusted diluted net EPS outlook, accounting for Chuy's transaction costs, closed restaurant costs, and Olive Garden Canada sale gain | Reconciliation Item | 2026 Outlook Range | | :------------------------------------------------ | :----------------- | | Reported diluted net earnings per share from continuing operations | $10.64 to $10.84 | | Chuy's transaction and integration related costs | $0.06 | | Closed restaurants costs | $0.06 | | Gain on Olive Garden Canada sale | $(0.26) | | Adjusted diluted net earnings per share from continuing operations | $10.50 to $10.70 | Company Information Darden Restaurants operates a diverse portfolio of restaurant brands and provides important disclosures regarding forward-looking statements About Darden Restaurants Darden Restaurants is a restaurant company with a diverse portfolio of differentiated brands, including well-known names like Olive Garden, LongHorn Steakhouse, and Ruth's Chris Steak House, among others - Darden's portfolio of differentiated brands includes Olive Garden, LongHorn Steakhouse, Yard House, Ruth's Chris Steak House, Cheddar's Scratch Kitchen, The Capital Grille, Chuy's, Seasons 52, Eddie V's, and Bahama Breeze[12] Information About Forward-Looking Statements Forward-looking statements are subject to risks and uncertainties, detailed in SEC filings, cautioning investors against undue reliance due to potential material differences - Forward-looking statements are made under the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995 and speak only as of their initial date, with no obligation to update[13] - Risks and uncertainties include cost pressures, economic factors impacting the restaurant industry, labor challenges, increased costs, health concerns, cybersecurity risks, integration challenges (Chuy's), regulatory changes, intense competition, changing consumer preferences, climate change, supply chain disruptions, and litigation[13][16] Non-GAAP Financial Measures Darden utilizes non-GAAP financial measures, such as adjusted diluted net EPS, to supplement GAAP results for performance analysis Explanation of Non-GAAP Measures Non-GAAP measures, like adjusted diluted net EPS, offer supplemental performance insights but are not GAAP substitutes and may not be comparable - Non-GAAP measures, like adjusted diluted net earnings per share, are used by management for performance analysis and provide useful supplemental information for understanding operating results[17] - These non-GAAP disclosures should not be viewed as a substitute for GAAP operating results and may not be comparable to non-GAAP measures presented by other companies[17] Q1 Reported to Adjusted Earnings Reconciliation This reconciliation details Q1 2026 and Q1 2025 earnings adjustments, including acquisition costs, closed restaurant costs, and Olive Garden Canada sale gain | $ in millions, except per share amounts | Q1 2026 Reported | Q1 2026 Adjustments | Q1 2026 Adjusted | Q1 2025 Reported | Q1 2025 Adjustments | Q1 2025 Adjusted | | :-------------------------------------- | :--------------- | :------------------ | :--------------- | :--------------- | :------------------ | :--------------- | | Earnings Before Income Tax | $293.8 | $(35.3) | $258.5 | $232.1 | $1.5 | $233.6 | | Income Tax Expense | $35.9 | $(8.8) | $27.1 | $24.5 | $0.3 | $24.8 | | Net Earnings | $257.9 | $(26.5) | $231.4 | $207.6 | $1.2 | $208.8 | | Diluted Net Earnings Per Share | $2.19 | $(0.22) | $1.97 | $1.74 | $0.01 | $1.75 | | % Change vs Prior Year | 25.9% | | 12.6% | | | | | Adjustments Detail: | | | | | | | | Acquisition transaction and integration related costs | | $3.6 (EBIT) / $2.7 (Net) / $0.02 (EPS) | | | $1.5 (EBIT) / $1.2 (Net) / $0.01 (EPS) | | | Closed restaurants | | $3.1 (EBIT) / $2.3 (Net) / $0.02 (EPS) | | | — | | | Gain on Olive Garden Canada sale | | $(42.0) (EBIT) / $(31.5) (Net) / $(0.26) (EPS) | | | — | | Restaurant Portfolio Darden's restaurant portfolio expanded, increasing total company-owned restaurants from 2,040 to 2,165 by August 2025 Number of Company-Owned Restaurants Darden's restaurant portfolio shows an increase in total company-owned restaurants from 2,040 in August 2024 to 2,165 in August 2025, primarily driven by the addition of Chuy's restaurants and growth in Olive Garden and LongHorn Steakhouse | Brand | 8/24/2025 | 8/25/2024 | | :---------------------- | :-------- | :-------- | | Olive Garden | 933 | 923 | | LongHorn Steakhouse | 595 | 577 | | Cheddar's Scratch Kitchen | 182 | 181 | | Chuy's | 108 | — | | Yard House | 89 | 88 | | Ruth's Chris Steak House | 82 | 82 | | The Capital Grille | 73 | 68 | | Seasons 52 | 43 | 44 | | Eddie V's | 29 | 29 | | Bahama Breeze | 28 | 44 | | The Capital Burger | 3 | 4 | | Darden Continuing Operations | 2,165 | 2,040 | Consolidated Financial Statements The consolidated financial statements reflect strong Q1 2026 performance with increased sales, operating income, and cash flow Consolidated Statements of Earnings The consolidated statements of earnings show a significant increase in sales and net earnings for the three months ended August 24, 2025, compared to the prior year. Operating income grew substantially, and diluted net earnings per share from continuing operations rose from $1.74 to $2.19 | (In millions, except per share data) | Three Months Ended 8/24/2025 | Three Months Ended 8/25/2024 | | :----------------------------------- | :--------------------------- | :--------------------------- | | Sales | $3,044.7 | $2,757.0 | | Total operating costs and expenses | $2,705.5 | $2,487.8 | | Operating income | $339.2 | $269.2 | | Earnings before income taxes | $293.8 | $232.1 | | Income tax expense | $35.9 | $24.5 | | Earnings from continuing operations | $257.9 | $207.6 | | Net earnings | $257.8 | $207.2 | | Diluted net earnings per share (continuing operations) | $2.19 | $1.74 | Consolidated Balance Sheets The consolidated balance sheet as of August 24, 2025, shows an increase in total assets to $12,759.6 million from $12,587.0 million at May 25, 2025. Total liabilities also increased, while total stockholders' equity saw a slight decrease | (In millions) | 8/24/2025 (Unaudited) | 5/25/2025 | | :-------------------------------- | :-------------------- | :-------- | | ASSETS | | | | Total current assets | $932.8 | $937.7 | | Land, buildings and equipment, net | $4,826.6 | $4,716.0 | | Operating lease right-of-use assets | $3,608.0 | $3,555.9 | | Goodwill | $1,658.2 | $1,659.4 | | Trademarks | $1,346.4 | $1,346.4 | | Other assets | $387.6 | $371.6 | | Total assets | $12,759.6 | $12,587.0 | | LIABILITIES AND STOCKHOLDERS' EQUITY | | | | Total current liabilities | $2,346.8 | $2,247.5 | | Long-term debt | $2,135.1 | $2,128.9 | | Operating lease liabilities - non-current | $3,878.3 | $3,816.9 | | Other liabilities | $1,840.8 | $1,803.6 | | Total liabilities | $10,534.0 | $10,275.7 | | Total stockholders' equity | $2,225.6 | $2,311.3 | | Total liabilities and stockholders' equity | $12,759.6 | $12,587.0 | Consolidated Statements of Cash Flows The consolidated statements of cash flows indicate that net cash provided by operating activities of continuing operations increased to $342.5 million for the three months ended August 24, 2025. However, net cash used in financing activities also increased significantly, leading to a decrease in cash and cash equivalents | (In millions) | Three Months Ended 8/24/2025 | Three Months Ended 8/25/2024 | | :------------------------------------------------ | :--------------------------- | :--------------------------- | | Net cash provided by operating activities of continuing operations | $342.5 | $273.2 | | Net cash used in investing activities of continuing operations | $(159.3) | $(149.7) | | Net cash used in financing activities of continuing operations | $(212.2) | $(126.7) | | Increase (decrease) in cash, cash equivalents, and restricted cash | $(29.0) | $(3.2) | | Cash, cash equivalents, and restricted cash - end of period | $225.5 | $216.9 |