Darden Stock Rises 14% in 3 Months: Can the Rally Continue?

Core Insights - Darden Restaurants, Inc. (DRI) shares have increased by 14.2% over the past three months, outperforming the Zacks Retail - Restaurants industry's growth of 7.6% [1] Performance and Growth Factors - The company is enhancing its market position through strong sales performance across its portfolio, driven by robust guest demand, effective pricing strategies, and resilient traffic, particularly at its major brands [2] - Darden's disciplined expansion strategy, partnership with Uber Direct, and ongoing menu innovation are contributing to strong results, highlighting the company's operational resilience and long-term relevance in the competitive restaurant sector [2] - In Q2 of fiscal 2026, Olive Garden sales rose by 5.4% year over year to $1.36 billion, while LongHorn Steakhouse saw a 9.3% increase in sales to $775.9 million, supported by same-restaurant sales growth and new restaurant openings [4] - The Fine Dining segment experienced a 3.3% year-over-year sales increase to $316.4 million, and the Other Business segment grew by 11.3% to $647.3 million, reflecting positive same-restaurant sales growth [5] - Darden plans to open 65-70 new restaurants in FY26, having opened 17 new locations in Q2 of fiscal 2026, indicating confidence in site availability and capital allocation [8] Menu Innovation - Darden prioritizes menu innovation as a growth driver, with successful product launches and limited-time offerings enhancing guest interest and supporting traffic growth [9] - Olive Garden's $13.99 Never Ending Pasta Bowl and the return of popular dishes have driven momentum, while LongHorn Steakhouse has reintroduced favorites that received positive guest feedback [9] Challenges - Darden faces near-term challenges from elevated beef and commodity costs, which have pressured margins despite solid sales performance [3][10] - The company has revised its 2026 EPS estimate downward to $10.58 from $10.61, reflecting these pressures and ongoing macroeconomic uncertainties affecting consumer demand [3]