Darden Restaurants (DRI) delivered a fourth quarter that exceeded expectations in a critical area: same-store sales.
The company reported a 4.6% consolidated increase in same-restaurant sales, with Olive Garden and LongHorn Steakhouse doing the heavy lifting. Olive Garden surged by 6.9%, and LongHorn posted a 6.7% gain—both far outperforming the previous quarter’s growth. These figures reflect a significant rebound in customer traffic and average check sizes compared to earlier in the fiscal year.
Olive Garden’s performance was bolstered by the return of its “Buy One, Take One” offer, a popular promotion that had been absent for five years. This program was paired with its existing $6 take-home platform, allowing the restaurant to offer value to price-conscious diners without increasing operational complexity. A partnership with Uber Direct helped drive delivery volumes, nearly doubling weekly deliveries by the end of the quarter. LongHorn Steakhouse also continued to gain market share, as its sales outpaced industry benchmarks.
While Darden’s fine dining segment, which includes Ruth’s Chris, saw a 3.3% decline, management emphasized that the softness was in line with broader trends in the upscale dining sector. Other business segments, which include Chuy’s and new acquisitions, posted modest gains, contributing to overall growth.
Q4 Revenue and EPS Slightly Edged Higher; Share Buyback Bolsters Shareholder Returns
Total revenue for the fourth quarter came in at $3.27 billion, just edging out Wall Street's expectations. That figure represents a 10.6% increase year over year, supported by strong same-store sales and the recent acquisition of 103 Chuy’s Tex-Mex restaurants. Adjusted earnings per share (EPS) reached $2.98, just above the $2.97 analysts had forecast, and 12.5% higher than the previous year’s adjusted figure.
Operating income, however, slipped 3.2% year over year to $382.8 million, missing consensus estimates, which suggests margin pressures are still present, particularly in managing costs across newly acquired restaurants and inflationary challenges.
Nevertheless, Darden doubled down on shareholder returns. In addition to announcing a new $1 billion share repurchase program, the company raised its quarterly dividend by 7.1%, bringing it to $1.50 per share. These shareholder-friendly moves indicate management’s confidence in the company’s long-term cash flow stability, even amid cautious near-term earnings guidance.
FY26 Guidance Conservative, but Same-Store Comps Offer Beacon of Optimism
Darden’s fiscal 2026 guidance struck a cautious tone. The company projects earnings per share between $10.50 and $10.70, slightly below the consensus of $10.75. Revenue growth is expected in the 7% to 8% range, with roughly 2% of that coming from an extra 53rd week. While the earnings guidance disappointed some, the outlook for same-store sales growth—projected at 2% to 3.5%—was stronger than expected, suggesting that underlying demand is expected to remain resilient.
The company plans to open 60 to 65 new locations this fiscal year and anticipates total capital expenditures between $700 million and $750 million. That includes continued investment in remodeling and digital infrastructure to support delivery and off-premise operations. Management’s forecast also assumes inflation in the range of 2.5% to 3%, a relatively moderate outlook that bodes well for maintaining margins.
Historically, Darden has been conservative with early-year forecasts, and some investors may be interpreting the modest guidance as a strategic buffer. This view is supported by the company's track record of outperforming its own estimates over time. CFO Raj Vennam emphasized that the company’s 30-year average of delivering double-digit shareholder returns remains a central goal.
Conclusion
Darden Restaurants wrapped up its fiscal year with a performance that, while not spectacular, reaffirmed its position as a leader in the casual dining space. Robust same-store sales at Olive Garden and LongHorn indicate the company’s promotional strategies and off-premise expansion are working, even as fine dining lags.
Although earnings guidance for fiscal 2026 was conservative, solid same-restaurant sales expectations and continued expansion efforts underscore management’s belief in sustained consumer demand. Combined with a new billion-dollar share buyback program and a dividend increase, Darden’s capital return strategy offers stability in an uncertain consumer environment.
For investors, Darden remains a steady operator with proven brands, effective promotions, and a disciplined growth strategy—a compelling proposition for those seeking reliable exposure to the U.S. dining sector.
Darden Restaurants wrapped up its fiscal year with a performance that, while not spectacular, reaffirmed its position as a leader in the casual dining space. Robust same-store sales at Olive Garden and LongHorn indicate the company’s promotional strategies and off-premise expansion are working, even as fine dining lags.
Although earnings guidance for fiscal 2026 was conservative, solid same-restaurant sales expectations and continued expansion efforts underscore management’s belief in sustained consumer demand. Combined with a new billion-dollar share buyback program and a dividend increase, Darden’s capital return strategy offers stability in an uncertain consumer environment.
For investors, Darden remains a steady operator with proven brands, effective promotions, and a disciplined growth strategy—a compelling proposition for those seeking reliable exposure to the U.S. dining sector.
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