- Total Sales & Earnings Growth: Darden reported 10% YoY total sales growth to $3 billion and 12.6% increase in adjusted diluted EPS to $1.97.
- Olive Garden Performance: Same-restaurant sales rose 5.9%, driven by new menu items and 40 bps contribution from delivery fees, with traffic up 3.6%.
- LongHorn Steakhouse Resilience: Achieved 5.5% same-restaurant sales growth, maintaining top-quartile industry performance for 13 consecutive quarters.
- Unit Expansion Plans: Aims to open 65 new restaurants in fiscal 2026, primarily Olive Garden and LongHorn, raising total sales growth guidance to 7.5-8.5%.
- Delivery & Inflation Strategy: First-party delivery grew beyond pre-campaign levels at Olive Garden, while commodities inflation is expected to peak at 3-4% in Q2.
Segment Performance
Olive Garden led the growth with a 5.9% same-restaurant sales increase, driven by compelling food offerings and affordability initiatives. LongHorn Steakhouse achieved a 5.5% same-restaurant sales growth, maintaining its top quartile industry performance. The "Other Businesses" segment, including Yard House, Cheddar's Scratch Kitchen, and Seasons52, also saw a 3.3% same-restaurant sales increase.
Guidance and Outlook
Darden raised its total sales growth guidance to 7.5% to 8.5% for fiscal 2026, reflecting first-quarter outperformance and ongoing new unit growth. The company expects to open approximately 65 new restaurants, primarily driven by Olive Garden and LongHorn Steakhouse. Despite concerns about consumer spending, Darden remains optimistic, citing strong August retail sales and a shift towards more purposeful dining experiences.
Valuation and Metrics
With a P/E Ratio of 19.6, P/S Ratio of 1.75, and EV/EBITDA of 14.37, Darden's valuation appears reasonable. The company's ROE of 49.94% and ROIC of 11.97% indicate strong profitability. Analysts estimate next year's revenue growth at 8.5%, suggesting a positive outlook. The actual EPS of $1.97 was slightly below estimates, but the company's guidance and outlook suggest a continued strong performance.
Operational Highlights
Darden's first-party delivery strategy continues to be successful, with Olive Garden and Cheddar's experiencing growth. The company is exploring expanding this to another brand in Q3. Labor costs increased 4.5% in the first quarter, driven by inflation and higher traffic, but productivity improved year-over-year due to investments in labor.
Future Prospects
Darden anticipates modest margin expansion for the full year, prioritizing investments in marketing and guest experience over aggressive price increases. The company expects commodity inflation to peak in Q2 and gradually decline through the year, contributing to a 3% to 4% overall increase for the year.