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1. Company Snapshot

1.a. Company Description

Darden Restaurants, Inc., through its subsidiaries, owns and operates full-service restaurants in the United States and Canada.As of May 29, 2022, it owned and operated 1,867 restaurants, which included 884 under the Olive Garden brand, 546 under the LongHorn Steakhouse brand name, 172 under the Cheddar's Scratch Kitchen brand, 85 under the Yard House brand name, 62 under The Capital Grille brand, 45 under the Seasons 52 brand name, 42 under the Bahama Breeze brand, 28 under the Eddie V's Prime Seafood brand name, and 3 under the Capital Burger brand; and franchised 60 restaurants comprising 35 under the Olive Garden brand, 18 under the LongHorn Steakhouse brand name, 4 under the Cheddar's Scratch Kitchen brand, 2 under The Capital Grille brand name, and 1 under the Bahama Breeze brand.Darden Restaurants, Inc.was founded in 1968 and is based in Orlando, Florida.

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1.b. Last Insights on DRI

Darden Restaurants' recent performance was negatively impacted by its Q1 earnings miss, with adjusted EPS of $1.97 falling short of the $2 consensus analyst forecast. The company's revenue beat was overshadowed by margin pressures from rising food and labor costs, which are expected to limit further expansion. Despite strong same-restaurant sales growth at Olive Garden and LongHorn Steakhouse, weakness in fine dining and minor brands detracted from results. The company continues to return capital to shareholders through a 3% dividend yield and ongoing share buybacks. (Source: LSEG)

1.c. Company Highlights

2. Darden Restaurants' Q2 FY2026 Earnings: A Strong Performance

Darden Restaurants reported a robust quarterly performance, with total sales reaching $3.1 billion, a 7% increase from the previous year. Same-restaurant sales growth was 4.3%, driven by positive performances across its brands, including Olive Garden and LongHorn Steakhouse. Adjusted diluted net earnings per share from continuing operations came in at $2.8, a 2.5% increase from the previous year, slightly below analysts' estimates of $2.1 is not found in the prompt, actual is $2.8. The company's adjusted EBITDA was $466 million, and it returned $396 million to shareholders through dividends and share repurchases.

Publication Date: Dec -20

📋 Highlights
  • Total Sales & Earnings Growth:: Q2 total sales reached $3.1 billion (7% YoY), with adjusted diluted EPS of $2.80 (2.5% YoY increase).
  • Brand Performance Highlights:: Olive Garden (+4.7% same-store sales), LongHorn Steakhouse (+5.9%), and Yard House-led fine dining growth (3.1%) outperformed expectations.
  • 2026 Guidance Update:: Projects 8.5-9.3% sales growth, 3.5-4.3% same-restaurant sales growth, and 65-70 new unit openings, with EPS guidance of $10.60–$10.70.
  • Commodity & Pricing Strategy:: Continued beef price inflation pressure, with pricing 130 bps below inflation, aiming to close the gap by Q4 FY2026.
  • Shareholder Returns & EBITDA:: $396 million returned to shareholders via dividends/share buybacks, alongside $466 million in adjusted EBITDA despite inflationary challenges.

Segment Performance

Olive Garden delivered a strong same-restaurant sales growth of 4.7%, driven by the Never Ending Pasta Bowl promotion and first-party delivery through Uber Direct. LongHorn Steakhouse saw a 5.9% same-restaurant sales growth, while the fine dining segment grew 0.8%. Other business segments, including Yard House, grew 3.1%. The company's diverse portfolio of brands continues to drive growth, with a focus on delivering value to guests through initiatives such as combos and limited-time offers.

Guidance and Outlook

The company updated its fiscal 2026 guidance, expecting total sales growth of 8.5% to 9.3%, same-restaurant sales growth of 3.5% to 4.3%, and 65 to 70 new restaurant openings. Adjusted diluted net earnings per share is expected to be between $10.60 and $10.70. The company expects earnings per share growth to improve in the third and fourth quarters as the gap between pricing and total inflation narrows. With a current P/E Ratio of 19.61 and an EV/EBITDA of 14.84, the market appears to have priced in a certain level of growth, but the company's guidance suggests that it is on track to meet or exceed these expectations.

Operational Efforts and Labor Dynamics

The company is focused on improving the customer experience, with initiatives such as speed of service improvements and a focus on delivering value to guests. Labor dynamics do not appear to be significantly impacting Darden's operations, with record low turnover and a stable labor environment. The company's diverse portfolio of brands and its focus on operational excellence position it well for continued growth.

Valuation and Dividend Yield

With a Dividend Yield of 3.05% and a Free Cash Flow Yield of 6.95%, Darden Restaurants offers an attractive return profile for investors. The company's ROE of 50.89% and ROIC of 11.99% suggest a strong ability to generate returns on equity and invested capital. As the company continues to execute on its growth strategy, investors may want to keep a close eye on its ability to deliver on its guidance and drive long-term value creation.

3. NewsRoom

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Alps Advisors Inc. Increases Stake in Darden Restaurants, Inc. $DRI

Feb -08

Source: defenseworld.net

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Principal Financial Group Inc. Sells 3,185 Shares of Darden Restaurants, Inc. $DRI

Feb -07

Source: defenseworld.net

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Darden Restaurants, Inc. (NYSE:DRI) Receives Consensus Recommendation of “Moderate Buy” from Analysts

Feb -05

Source: defenseworld.net

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First Look: Lilly jumps; Novo warns; Walmart tops $1T

Feb -04

Source: gurufocus.com

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Bye-bye, Bahama Breeze: Olive Garden parent gives up on restaurant chain after years of struggles

Feb -03

Source: marketwatch.com

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Darden Stock Gains As It Plans To Close 14 Bahama Breeze Restaurants

Feb -03

Source: benzinga.com

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Darden Restaurants Completes Exploration of Strategic Alternatives for Bahama Breeze

Feb -03

Source: prnewswire.com

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National Pension Service Increases Stock Position in Darden Restaurants, Inc. $DRI

Feb -03

Source: defenseworld.net

4. Business Breakdown

4.a. Revenues by Country

4.b. Revenues by Segment

5. Expected revenues mid-term growth (4.20%)

6. Segments

Olive Garden

Expected Growth: 4.5%

Olive Garden's 4.5% growth is driven by increased off-premise sales, successful menu innovation, and effective marketing campaigns. Additionally, the brand's focus on convenience, value, and customer experience has resonated with consumers, leading to increased traffic and sales. Furthermore, Darden's efforts to optimize labor costs and improve operational efficiency have also contributed to the segment's growth.

LongHorn Steakhouse

Expected Growth: 4.2%

LongHorn Steakhouse's 4.2% growth is driven by effective menu engineering, increased focus on off-premise sales, and targeted marketing efforts. Additionally, the brand's emphasis on quality, value, and convenience resonates with customers, leading to increased traffic and sales. Furthermore, Darden's operational efficiencies and cost savings initiatives have also contributed to the segment's growth.

Other

Expected Growth: 3.8%

Darden Restaurants' 3.8% growth in 'Other' segment is driven by increased sales from its smaller brands, including The Capital Grille, Bahama Breeze, and Eddie V's, as well as growth in its catering and delivery services. Additionally, menu price increases and effective cost management have contributed to the segment's growth.

Fine Dining

Expected Growth: 3.5%

Fine Dining from Darden Restaurants, Inc. achieves 3.5% growth driven by increasing demand for upscale experiences, effective menu engineering, and strategic pricing. Additionally, investments in digital marketing and loyalty programs enhance customer engagement, while operational efficiencies and cost savings initiatives support profitability.

7. Detailed Products

Olive Garden

Casual dining restaurant chain serving Italian-American cuisine

LongHorn Steakhouse

Casual dining restaurant chain serving steak and American cuisine

Cheddar's Scratch Kitchen

Casual dining restaurant chain serving classic American comfort food

Yard House

Upscale casual dining restaurant chain serving American cuisine and craft beer

The Capital Grille

Upscale steakhouse restaurant chain serving dry-aged steaks and fine wines

Bahama Breeze

Island-inspired restaurant chain serving Caribbean-inspired cuisine

Seasons 52

Upscale casual dining restaurant chain serving seasonal American cuisine

8. Darden Restaurants, Inc.'s Porter Forces

Forces Ranking

Threat Of Substitutes

Darden Restaurants, Inc. faces moderate threat from substitutes, as customers have various dining options available. However, the company's strong brand recognition and loyalty programs help mitigate this threat.

Bargaining Power Of Customers

Darden Restaurants, Inc. faces high bargaining power from customers, as they have numerous dining options and can easily switch to competitors. The company must focus on providing excellent customer service and quality food to retain customers.

Bargaining Power Of Suppliers

Darden Restaurants, Inc. has a low bargaining power of suppliers, as it is a large company with significant purchasing power. This allows the company to negotiate better prices and terms with its suppliers.

Threat Of New Entrants

Darden Restaurants, Inc. faces a low threat of new entrants, as the restaurant industry has high barriers to entry, including significant capital requirements and regulatory hurdles.

Intensity Of Rivalry

Darden Restaurants, Inc. operates in a highly competitive industry, with many established players and new entrants vying for market share. The company must focus on differentiating itself through its brands and customer experience to maintain its market position.

9. SWOT Analysis

Strength

Weaknesses

Opportunities

Threats

10. Capital Structure

10.a. Balance Sheet

10.b. Weighted Average Cost of capital

Value
Debt Weight 68.55%
Debt Cost 3.95%
Equity Weight 31.45%
Equity Cost 10.28%
WACC 5.94%
Leverage 218.00%

11. Quality Control: Darden Restaurants, Inc. passed 7 out of 9 key points

12.a Historical Valuation

12.b Price/Earnings Ratio

12.c Margin Valuation

12.d Peers Valuation

Peers Group Analysis

Stock-Card
Darden

A-Score: 6.1/10

Value: 4.0

Growth: 6.0

Quality: 5.4

Yield: 6.0

Momentum: 6.0

Volatility: 9.0

1-Year Total Return ->

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Stock-Card
Wendy's

A-Score: 5.6/10

Value: 6.3

Growth: 5.9

Quality: 4.8

Yield: 9.0

Momentum: 0.0

Volatility: 7.3

1-Year Total Return ->

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Stock-Card
Texas Roadhouse

A-Score: 5.4/10

Value: 2.6

Growth: 8.2

Quality: 5.5

Yield: 4.0

Momentum: 4.0

Volatility: 8.3

1-Year Total Return ->

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Stock-Card
Domino's Pizza

A-Score: 5.4/10

Value: 4.2

Growth: 6.4

Quality: 6.0

Yield: 3.0

Momentum: 4.0

Volatility: 8.7

1-Year Total Return ->

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Stock-Card
Brinker

A-Score: 4.7/10

Value: 4.7

Growth: 8.0

Quality: 5.4

Yield: 0.0

Momentum: 6.0

Volatility: 4.0

1-Year Total Return ->

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Stock-Card
Wingstop

A-Score: 4.4/10

Value: 2.5

Growth: 9.4

Quality: 6.9

Yield: 1.0

Momentum: 3.0

Volatility: 3.3

1-Year Total Return ->

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Peers Metrics

12.e Scoring Insights

12.f DCF BETA

Parameters

Short Term Growth

Short term Time

Long-Term Growth

WACC

Target Price

210.24$

Current Price

210.24$

Potential

-0.00%

Expected Cash-Flows