DRIDarden RestaurantsFY2026Earnings Analysis

Sales growth reflected comparable sales, unit expansion, and an extra week

Total sales increased 9.4% to $13.21B, driven by a 4.5% blended same-restaurant sales increase, 43 net new restaurants, and a 2.1% sales contribution from the 53rd week in FY2026. The extra week contributed $0.25 to diluted EPS from continuing operations.

Source: 10-K Item 7 MD&A, p.30-31

LongHorn delivered the strongest comparable-sales growth

LongHorn Steakhouse sales rose 13.1% to $3.42B and same-restaurant sales increased 7.2%, supported by a 3.4% increase in average check and a 3.7% increase in guest counts. Olive Garden sales increased 7.3% to $5.59B, with 4.0% same-restaurant sales growth.

Source: 10-K Item 7 MD&A, p.31-32

Operating-margin expansion was aided by lower G&A and asset-disposal gains

Operating income increased 16.2% to $1.58B and operating margin rose to 12.0% from 11.3%. General and administrative expense fell to 3.9% of sales from 4.3%, while impairments and disposal of assets improved to a $10.7M net gain from a $49.2M expense, primarily reflecting the sale of Olive Garden Canada restaurants, partly offset by Bahama Breeze closure costs.

Source: 10-K Item 7 MD&A, p.31-33

Chuy's was fully integrated, while Bahama Breeze is being exited or converted

Darden completed the $613.7M net-cash acquisition of Chuy's in FY2025 and finalized its purchase-price allocation in FY2026, recognizing $267.2M of goodwill; all Chuy's operations were fully integrated as of May 31, 2026. Darden permanently closed approximately half of the remaining Bahama Breeze restaurants by early April 2026 and expects to convert the remaining locations to other Darden brands over the next 12-18 months.

Source: 10-K Item 7 MD&A, p.30

FY2027 outlook calls for continued sales and unit growth

Management expects FY2027 continuing-operations sales of $13.60B-$13.75B, including same-restaurant sales growth of 2.5%-3.5% and 75-80 new restaurant openings. Expected FY2027 capital expenditures are approximately $875M, with an annual effective tax rate of about 13.5%.

Source: 10-K Item 7 MD&A, p.30

Darden faces cost volatility in food commodities, labor, health care, utilities, fuel, and other restaurant inputs. The company may not be able to fully offset these pressures through purchasing efficiencies or menu pricing without hurting guest traffic; in FY2026, food and beverage inflation increased costs while pricing only partially offset it.

Source: 10-K Item 1A, p.15; 10-K Item 7 MD&A, p.33

Darden depends on hiring, training, and retaining qualified hourly restaurant employees and managers in a competitive U.S. labor market. Labor shortages, turnover, wage pressure, immigration-related constraints, or inadequate staffing could impair guest experience, delay new openings, increase labor costs, and limit sales growth.

Source: 10-K Item 1A, p.15-16

Darden has decided to close approximately half of the remaining Bahama Breeze locations and convert the remainder to other Darden brands over the next 12-18 months. The restructuring may involve closure costs, asset-disposal effects, and uncertainty around the operational and financial success of conversions.

Source: 10-K Item 7 MD&A, p.30, p.33

Darden relies on technology for restaurant point-of-sale systems, e-commerce, marketing, employee engagement, and supply-chain management, including systems operated by third parties. A cyberattack, system failure, or privacy breach could cause operating disruption, loss of sensitive data, litigation, regulatory penalties, remediation costs, and brand damage.

Source: 10-K Item 1A, p.17-18

The company competes with national and local restaurants, grocery prepared-food offerings, and delivery aggregators on price, service, convenience, food quality, and digital engagement. Economic pressure or changing consumer preferences could reduce discretionary dining traffic or prevent Darden from raising prices enough to cover costs.

Source: 10-K Item 1A, p.15, p.18-19