Darden Restaurants(US:DRI)2025-12-30 20:56Financial Performance - Total sales increased by 7.3% to $3.10 billion for the second quarter of fiscal 2026, and by 8.9% to $6.15 billion for the first six months, compared to $2.89 billion and $5.65 billion for the same periods in fiscal 2025[106] - Net earnings from continuing operations were $237.4 million for the second quarter and $495.3 million for the first six months of fiscal 2026, up from $215.7 million and $423.3 million in the same periods of fiscal 2025[106] - Diluted net earnings per share from continuing operations were $2.03 for the second quarter and $4.23 for the first six months of fiscal 2026, compared to $1.82 and $3.57 for the same periods in fiscal 2025[106] Sales Growth Expectations - The company expects sales growth for fiscal 2026 to be between 8.5% and 9.3%, with same-restaurant sales growth projected between 3.5% and 4.3%[107] Restaurant Operations - The company-owned restaurant count increased to 2,182 as of November 23, 2025, from 2,159 at the end of fiscal 2025, reflecting the addition of 103 Chuy's locations[102] - Olive Garden's sales increased by 5.4% to $1.36 billion for the second quarter, driven by a 1.7% increase in same-restaurant guest counts and a 3.0% increase in average check[110] - LongHorn Steakhouse's sales rose by 9.3% to $775.9 million for the second quarter, supported by a 3.8% increase in same-restaurant guest counts[111] - Fine Dining segment sales increased by 3.3% to $316.2 million for the second quarter, primarily due to revenue from new restaurants[112] - Other Business segment sales grew by 11.3% to $647.3 million for the second quarter, largely driven by the addition of Chuy's[113] Capital Expenditures - Capital expenditures for new restaurant openings and technology initiatives are expected to be between $750 million and $775 million for fiscal 2026[107] - Capital expenditures increased to $375.0 million for the first six months of fiscal 2026, up from $314.5 million in the same period of fiscal 2025, reflecting increased spending on new restaurant construction and remodels[138] Cost Management - Food and beverage costs as a percentage of sales increased to 31.1% for the three months ended November 23, 2025, compared to 30.2% for the same period in 2024[117] - Restaurant labor costs as a percentage of sales rose to 32.2% for the three months ended November 23, 2025, from 32.1% in the prior year[117] - General and administrative expenses decreased to 3.8% of sales for the three months ended November 23, 2025, down from 5.0% in the same period of 2024[117] Tax and Discontinued Operations - The effective income tax rate for continuing operations increased to 12.8% for the three months ended November 23, 2025, compared to 12.3% for the same period in 2024[119] - The company reported losses from discontinued operations of $0.2 million for the second quarter of fiscal 2026, down from $0.6 million in the same quarter of fiscal 2025[121] Profit Margins - Olive Garden's segment profit margin increased to 21.8% for the three months ended November 23, 2025, compared to 21.5% in the prior year[124] Credit and Financing - The company entered into a $1.25 billion Revolving Credit Agreement on October 23, 2023, with no outstanding balances as of November 23, 2025[129] - As of November 23, 2025, the company had $812 million of credit available under the Revolving Credit Agreement after considering commercial paper and letters of credit[129] - The company targets an investment-grade bond rating, with current ratings of "Baa2" from Moody's and "BBB" from both Standard & Poor's and Fitch[128] Cash Flow - Net cash flows provided by operating activities from continuing operations increased to $663.2 million for the first six months of fiscal 2026, compared to $661.8 million for the same period in fiscal 2025[136] - Net cash flows used in investing activities from continuing operations were $363.9 million for the first six months of fiscal 2026, a significant decrease from $939.3 million in the first six months of fiscal 2025[138] - Net cash flows used in financing activities from continuing operations were $314.9 million for the first six months of fiscal 2026, compared to net cash provided by financing activities of $298.9 million for the same period in fiscal 2025[139] Share Repurchase - The company authorized a new share repurchase program allowing for the repurchase of up to $1 billion of outstanding common stock, with 2 million shares repurchased in the first six months of fiscal 2026[141] Current Assets and Liabilities - Current assets totaled $1.04 billion as of November 23, 2025, an increase from $937.7 million as of May 25, 2025, primarily due to higher prepaid income taxes and inventories[143] - Current liabilities increased to $2.65 billion as of November 23, 2025, from $2.25 billion as of May 25, 2025, driven by an increase in short-term debt[144] Future Earnings Risks - The potential losses in future net earnings from changes in equity forwards and commodity instruments were approximately $65.2 million over a one-year period as of November 23, 2025[150] - The fair value of long-term fixed-rate debt outstanding averaged $2.18 billion, with a high of $2.20 billion and a low of $2.14 billion during the six months of fiscal 2026[150]