Darden Restaurants (NYSE: DRI) reported fiscal first-quarter earnings of $2.05 per share on September 24, narrowly missing the $2.06 analysts expected, as same-store sales growth at Olive Garden slowed to 1.1 percent while LongHorn Steakhouse posted its 22nd consecutive quarter of gains. Shares fell about 3 percent on the report.
The setup
Total sales rose 5.1 percent to $3.20 billion, just shy of the $3.21 billion consensus. Blended same-restaurant sales grew 3.1 percent on a fiscal calendar basis, with every operating segment delivering positive results.
Chief Executive Rick Cardenas called the quarter a solid start to the fiscal year, pointing to the strength of running a portfolio of distinctive brands. The company reaffirmed its full-year outlook for diluted earnings of $11.10 to $11.35 per share from continuing operations.
Key numbers
| Metric | Result |
|---|---|
| Adjusted diluted EPS | $2.05 vs. $2.06 expected |
| Prior-year adjusted EPS | $1.97 (up 4.1 percent) |
| Total sales | $3.20 billion vs. $3.21 billion expected |
| Blended same-restaurant sales | +3.1 percent |
| Olive Garden same-restaurant sales | +1.1 percent |
| LongHorn same-restaurant sales | +6.2 percent |
| Net new restaurants | 53 |
| Fiscal 2027 EPS outlook | $11.10 to $11.35, reaffirmed |
LongHorn carries the portfolio
LongHorn Steakhouse delivered the standout performance. Segment sales climbed 10.9 percent to $860.9 million, same-restaurant sales rose 6.2 percent, and segment profit reached $154.6 million at an 18 percent margin. The brand has now grown same-restaurant sales for 22 straight quarters.
Olive Garden remains the largest brand at $1.33 billion in quarterly sales, but its growth stalled. Management said World Cup coverage and consumer concerns about lettuce trimmed guest counts by 150 to 200 basis points. Traffic improved as the quarter progressed, and executives said the trend accelerated further into September.
Elsewhere in the portfolio, Yard House same-restaurant sales rose 10 percent, and the brand crossed $1 billion in trailing 12-month sales for the first time. Fine dining grew 1.6 percent.
Capital returns hold steady
The board declared a quarterly dividend of $1.62 per share, payable November 2 to shareholders of record on October 9. Darden repurchased $222.3 million of stock during the quarter and returned $406 million to shareholders in total. Roughly $1.3 billion remains under the current $1.5 billion repurchase authorization.
For income investors, the dividend and buyback continue regardless of the headline miss. Darden generated $464 million in EBITDA during the quarter, funding both payouts from operating results.
What to watch
- Olive Garden traffic into the fall: Management said September trends accelerated, but the market wants proof the flagship is not stalling.
- Bahama Breeze wind-down: Closure and conversion costs weighed on segment margins and continue through fiscal 2027.
- Operating cash flow: Cash from operations fell to $279.0 million from $342.5 million a year ago, so working capital deserves attention.
- The calendar shift: Thanksgiving moves from the fiscal third quarter into the second this year, so quarterly comparisons will swing.
Bottom line
Darden grew sales in every segment and held its full-year guidance, yet the stock sold off because Olive Garden’s slowdown spooked investors. LongHorn is carrying the growth load, the dividend is secure at $1.62 per quarter, and the valuation question now turns on whether the flagship brand reaccelerates.
Income investors get paid while they wait for that answer.
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