Darden Restaurants, Inc. (DRI) Earnings & Analysis

Latest quarter

Darden reported Q1 FY2027 revenue of $3.2 billion, up 5.11% from Q1 FY2026. The company’s revenue of $3.2 billion was 0.14% below the consensus of $3.2 billion, as the consensus measures it. Darden reported adjusted EPS of $2.05, which was 0.49% below the consensus of $2.06; reported diluted EPS was $2.04, down 6.85% from $2.19 a year earlier.

The filing said sales rose 5.1% to $3.20 billion, driven by 53 net new restaurants and a blended same-restaurant sales increase of 3.1%. Darden reported company comparable-calendar same-restaurant sales growth of 3.20%. The filing attributed Olive Garden’s sales growth to same-restaurant sales and new restaurants, while LongHorn Steakhouse, Fine Dining and Other Business also recorded sales increases.

Darden reported gross margin of 20.5%, unchanged from a year earlier, while operating margin was 9.98%, compared with 11.1%. The company reported free cash flow of $107.7 million, compared with $183.2 million in Q1 FY2026. The filing said operating cash flow declined primarily because of changes in working capital.

Adjusted EPS is the figure the consensus estimates, not the GAAP EPS above.

What management said on the call

Chief Executive Officer Rick Cardenas said every segment delivered positive same-restaurant sales in Q1 and described restaurant teams as focused on operating fundamentals and guest satisfaction. Chief Financial Officer Raj Vennam said comparable-calendar same-restaurant sales grew 3.2%, while 53 net new restaurants also contributed to sales growth.

On demand, Vennam said the World Cup lifted Yard House same-restaurant sales by approximately 180 basis points but produced a net negative impact of approximately 80 basis points on company same-restaurant sales. He said the effect was concentrated earlier in the quarter, with traffic improving sequentially and accelerating into September. Cardenas said the company had not seen much change in its consumer during the quarter, despite external consumer-sentiment data, and said Darden would focus on guest experience and value.

Analysts asked about Olive Garden’s pricing and its Never Ending Pasta Bowl. Vennam said Darden had kept the protein buy-up price unchanged while adding to the offer, and Cardenas said early-quarter results for the promotion were better than the company expected. Cardenas also said lighter-portion offerings were intended to provide the right portion size at the right price, rather than simply lower prices.

Vennam said first-quarter pricing was 3.7% and projected it would moderate through the year, reaching the low-to-mid-2% range by Q4. He said fiscal-year commodity inflation was still expected to be 3%, with Q2 commodity inflation expected at 2.5% to 3%. On margins, Vennam said restaurant-level EBITDA was 18.8%, flat from a year earlier, as lower restaurant labor costs and flat restaurant expenses offset higher food and beverage expenses and pre-opening costs.

On investment and unit growth, Cardenas said Yard House planned 13 openings in fiscal 2027, including five Bahama Breeze conversions, and that the smaller Yard House prototype would lower construction costs and expand potential sites. He also said Darden was seeing some restaurant brands struggle or close units while stronger brands continued opening locations. Vennam said Fine Dining traffic remained below pre-COVID levels, though declines were easing, and that business spending remained low and was declining slightly year over year.

Guidance

Darden reaffirmed all aspects of its fiscal 2027 financial outlook. The company continues to expect FY2027 GAAP EPS of $11.10–$11.35. The filing continues to expect fiscal 2027 sales from continuing operations of $13.60 billion to $13.75 billion, same-restaurant sales growth of 2.5 percent to 3.5 percent, and 75 to 80 new restaurant openings. Vennam said the Thanksgiving calendar shift is expected to create an approximately 1% headwind to Q2 sales, offset by a benefit in Q3.