DARDEN RESTAURANTS INC (DRI)·Q2 2025 Earnings Summary

Executive Summary

• Q2 FY25 delivered 6.0% sales growth to $2.89B and adjusted diluted EPS of $2.03 (+10.3% YoY), aided by +2.4% blended same-restaurant sales (SRS) and the addition of 103 Chuy’s units; GAAP diluted EPS was $1.82 .
• LongHorn led with +7.5% SRS and 150 bps margin expansion to 18.9%, while Olive Garden posted +2.0% SRS with strong Never Ending Pasta Bowl (NEPB) engagement; Fine Dining comps were -5.8% (holiday shift and hurricanes weighed) .
• Management tightened FY25 SRS to 1.5% and updated outlook to include Chuy’s ($300M sales), maintained adjusted EPS of $9.40–$9.60, raised capex to ~$650M, and lowered the tax rate to ~12.5% .
• Strategic execution catalysts: LongHorn operational excellence, Olive Garden marketing/menu refresh, and Uber Direct delivery pilot (target full OG rollout by end of Q3; currently ~1.5% of sales in pilot stores, larger order sizes, 15% of orders include catering items) .
• Estimate comparison unavailable: S&P Global consensus data could not be retrieved at this time due to rate limits; consequently, vs-estimates comparisons are not shown (see Estimates Context) [GetEstimates error].

What Went Well and What Went Wrong

• What Went Well

  • LongHorn delivered outsized comp growth (+7.5%), with traffic mid-4% and price ~2.8–2.9%, driving segment margin to 18.9% (+150 bps YoY) and continued share gains from quality and execution focus .
  • Olive Garden achieved positive comps (+2.0%) and industry outperformance with extended NEPB; record refill rates and protein buy-ups helped mix; catering contributed ~60 bps to sales mix .
  • Restaurant-level EBITDA margin reached 19.5% (+70 bps YoY) on commodity deflation and productivity, while overall SRS and guest counts outperformed industry by 140 bps .

• What Went Wrong

  • Fine Dining comps fell (-5.8%) as Thanksgiving shift moved out of Q2 and hurricanes created further headwinds; even adjusted for calendar/weather, Fine Dining was still down ~3.8% YoY (though sequentially better vs Q1) .
  • Weather disruptions from Hurricanes Helene and Milton hurt traffic (~-30 bps Q2 SRS), and one Cheddar’s unit remains closed until next fiscal year due to damage .
  • Marketing expense rose ~30 bps YoY given additional NEPB weeks and calendar effects; industry pricing/macro remain mixed, pressuring Fine Dining and requiring disciplined value tactics over deep discounting .

Financial Results

• Consolidated performance vs prior periods (chronological: oldest → newest)

• Segment breakdown (Q2 FY25 vs Q2 FY24)

• Same-restaurant sales by segment/brand (trend across recent quarters; oldest → newest)

• Additional Q2 dynamics (for context, not time-series):
  • Holiday shift added ~90 bps to SRS; hurricanes reduced ~30 bps .
  • Olive Garden pricing ~2.8–2.9%; catering mix added ~60 bps to sales .

Note: Consensus estimate comparisons are not shown due to S&P Global data unavailability at response time (see Estimates Context).

Guidance Changes

Management added that Chuy’s contribution is ~+$300MM to FY25 sales, EPS growth dynamics slower in Q3 vs Q4 due to the holiday shift, and run-rate synergies for Chuy’s are now expected at ~$17MM (≈$2MM in FY25, remainder in FY26) .

Earnings Call Themes & Trends

Management Commentary

• Strategy and portfolio: “I continue to believe in the power of our strategy and our brands’ ability to compete effectively regardless of the environment” (CEO Rick Cardenas) .
• Olive Garden: Extended NEPB “drove a positive sales gap to the industry… highest refill rate ever and higher protein add-ons” . Return of fan favorites and a compelling LTO price point in January; advertising “will look different” in Q3 .
• LongHorn: “Investments in quality have paid off… record steaks grilled correctly score… 7.5% comp for the quarter” .
• Chuy’s integration: “Preserving culture/guest experience and migrating onto Darden platform… timeline a little longer due to next-gen POS rollout” .
• Uber Direct: Pilot “has gone very well… averaging ~1.5% of sales in 100 restaurants… ~15% of orders have a catering item… complete rollout by end of Q3,” not assuming incremental sales in FY25 guidance .
• Margins/costs: Restaurant-level EBITDA margin 19.5%, +70 bps YoY (commodity slightly deflationary; labor +3.7% offset by productivity/leverage) .

Q&A Highlights

• Olive Garden advertising: Spend not “half” pre-COVID; OG down ~25–30% vs prior levels; LongHorn now spends very little, driving most of the mix shift lower; OG marketing could tick up in 2H depending on initiatives .
• LongHorn drivers/mix: Traffic ~4.3–4.4%; price ~2.8–2.9% with slight positive mix; brand focuses on quality/experience over price-point promotions, sustaining outperformance .
• Beef coverage: Selective contracting remains; packers reluctant to quote far out; expect seasonal dip in early 2025 to add coverage; strategy has delivered P&L benefits .
• FY25 outlook shape: Q3 growth rates lower than Q4 due to holiday shift; FY25 adjusted EPS unchanged at $9.40–$9.60; Chuy’s run-rate synergies now ~$17MM (≈$2MM FY25, balance FY26) .
• Capex: Raised to ~$650MM (pipeline building, land purchases, Chuy’s opens); maintenance/IT ~ $300MM run-rate; new units drive variance .

Estimates Context

• Wall Street consensus estimates (S&P Global) were unavailable at response time due to an S&P Global daily request limit. As a result, explicit “vs. consensus” comparisons are not included in this recap. If you’d like, I can refresh once access resets to add the beat/miss analysis from S&P Global.

Key Takeaways for Investors

• LongHorn’s sustained outperformance (+7.5% SRS) and margin expansion remain the portfolio’s key engine; continued mix/traffic health and quality leadership support comp durability .
• Olive Garden is leaning more into news/marketing (fan favorites + compelling LTO) after an effective NEPB; delivery rollout via Uber Direct should broaden off-premise with larger average orders (near-term contribution minimal in guide) .
• Mix of tailwinds/headwinds: modest back-half commodity inflation (beef/chicken/seafood) vs. ongoing productivity and scale benefits; management is executing to protect margins (19.5% restaurant-level EBITDA in Q2) .
• Guidance precision increased: SRS tightened to ~1.5%; capex raised to ~$650MM (pipeline/Chuy’s), tax rate trimmed to ~12.5% — adjusted EPS held at $9.40–$9.60 .
• Fine Dining is stabilizing but still pressured; GLP-1 commentary suggests a possible drag at higher-end concepts — portfolio diversification helps mitigate .
• Integration playbook (Ruth’s, now Chuy’s) and next-gen POS/data capabilities underpin medium-term operating leverage and synergy capture (~$17MM run-rate) .
• Near-term trading lens: Expect Q3 to reflect calendar headwinds vs Q4 rebound; watch OG delivery rollout milestones and OLIVE GARDEN marketing cadence as potential catalysts .

Appendix: Additional Q2-Period Press Releases

• Completion of Chuy’s acquisition (Oct 11, 2024); financed via $400MM 2027 and $350MM 2029 senior notes; ~105+ units join portfolio .
• Board addition (Dec 9, 2024) noted in company press releases list [12 press release index; document list].

Sources

• Q2 FY25 8-K and Exhibit 99.1 (press release, financials, outlook)
• Q2 FY25 earnings call transcript (remarks and Q&A)
• Q1 FY25 8-K and Exhibit 99.1 (trend)
• Q3 FY25 8-K and Exhibit 99.1 (trend)
• Press release: Completion of Chuy’s acquisition (Oct 11, 2024)

Estimates

• S&P Global consensus was unavailable at response time due to an S&P Global daily request limit; no estimate comparisons shown.