Q2 2025 Earnings Summary
- Olive Garden's Never Ending Pasta promotion outperformed expectations, with record consumers opting for protein add-ons and record refills, demonstrating strong guest engagement and value perception.
- Darden Restaurants' underlying traffic trends improved across all brands, even after adjusting for holiday shifts and weather impacts, indicating resilience and positive momentum in customer demand.
- The acquisition of Chuy's added approximately 5 units to unit growth guidance, showcasing Darden's strategic expansion opportunities and strengthening their portfolio.
- Fine Dining segment experienced a same-restaurant sales decrease of approximately 3.8%, even after adjusting for the Thanksgiving shift and hurricanes. This indicates ongoing weakness in this segment. Additionally, higher-end brands may be impacted by GLP-1 drugs, potentially affecting future performance.
- General and Administrative (G&A) expenses are expected to increase to approximately $470 million, up from the previously guided $450 million, due to the Chuy's acquisition. This increase may impact overall profitability.
- The company anticipates increased inflation in commodities, particularly beef, chicken, and seafood, in the back half of the fiscal year. These categories are turning inflationary in low single digits, which could pressure margins if not offset by pricing or cost efficiencies.
| Metric | YoY Change | Reason |
|---|---|---|
Total Revenue | +6% | The increase from $2,727.3 million to $2,890.0 million was primarily driven by new restaurant openings and the continued benefit of the Ruth’s Chris Steak House acquisition, coupled with moderate same-restaurant sales growth. Market softness in mid-summer tempered results but improved in later months. |
LongHorn Steakhouse | +10% | Sales grew from $643.0 million to $710.1 million, fueled by same-restaurant sales gains, new menu introductions (e.g., healthier chicken options), and consistently high guest satisfaction. Favorable commodity costs, especially for beef, also helped maintain strong segment profit margins. |
Other Business | +13% | The jump from $514.9 million to $581.4 million was supported by expanded franchise revenue (including Ruth’s Chris locations) and generally positive mix from niche brands. Although industry promotions increased competitive pressures, the segment still saw incremental growth and market share gains. |
SG&A | +25% | The rise from $114.8 million to $144.1 million largely reflects higher incentive compensation, integration costs tied to acquisitions, and stock-based compensation for retirement-eligible employees. These expenses were partially offset by improved cost controls established in prior quarters. |
D&A | +14% | Depreciation and amortization grew from $112.5 million to $127.7 million, driven by new restaurant openings and recently acquired assets, including Ruth’s Chris. Continued capital investments in technology and remodeling also contributed to the higher D&A base. |
| Metric | Period | Previous Guidance | Current Guidance | Change |
|---|---|---|---|---|
Commodity inflation | FY 2025 | Slightly south of 2% | 1% | lowered |
Total Sales | FY 2025 | No prior guidance | ~$12.1B (includes $300M from Chuy's) | no prior guidance |
Same-Restaurant Sales Growth | FY 2025 | No prior guidance | 1.5% | no prior guidance |
New Restaurant Openings | FY 2025 | No prior guidance | 50 to 55 | no prior guidance |
Capital Spending (CapEx) | FY 2025 | No prior guidance | ~$650M | no prior guidance |
Total Inflation | FY 2025 | No prior guidance | ~2.5% (includes 1% commodity inflation) | no prior guidance |
Annual Effective Tax Rate | FY 2025 | No prior guidance | ~12.5% | no prior guidance |
Diluted Average Shares Outstanding | FY 2025 | No prior guidance | ~118 million | no prior guidance |
Adjusted Diluted Net EPS | FY 2025 | No prior guidance | $9.40 to $9.60 (excl. $47M transaction costs) | no prior guidance |
Run-Rate Synergies from Chuy's Acquisition | FY 2025 | No prior guidance | ~$17M, with $2M realized in FY 2025 | no prior guidance |
| Metric | Period | Guidance | Actual | Performance |
|---|---|---|---|---|
Earnings Growth | Q2 2025 | 6% to 8% for the year, with mid- to high single-digit expected | 4% YoY increase (from EPS of 1.77 in Q2 2024To 1.84 in Q2 2025) | Missed |
G&A Expenses (SG&A) | Q2 2025 | 105 to 110 million USD | 144.1 million USD | Missed |
| Topic | Previous Mentions | Current Period | Trend |
|---|---|---|---|
Same-restaurant sales and traffic trends | Discussed in Q1 2025 (negative 1.1% overall) , Q4 2024 (flat but outperformed industry) , Q3 2024 (similarly outperformed benchmarks). | Positive across major brands (+2.4% overall). Fine Dining at -3.8% with holiday/hurricane noise. | Recurring theme with slight improvement in underlying traffic; Fine Dining still lags. |
Cost management, margin stability, and commodity inflation | Consistent focus across Q1 2025 , Q4 2024 , Q3 2024. | Restaurant-level EBITDA margin at 19.5%; commodities slightly deflationary but expected to step up later. | Recurring emphasis on efficiencies and margin protection amid looming commodity headwinds. |
Fine Dining underperformance | Negative results in Q1 2025 , Q4 2024 , Q3 2024 , with consistent underperformance vs. other segments. | -3.8% same-restaurant sales after adjusting for holiday shift; potential GLP-1 impact cited. | Ongoing challenge; now includes GLP-1 as a possible additional headwind. |
LongHorn Steakhouse | Q1 2025 (3.7% same-restaurant sales) , Q4 2024 (4% growth) , Q3 2024 (2.3% growth). | 7.5% same-restaurant sales growth, outperforming industry by 650 basis points. | Consistently strong brand outperformance with positive sales trends. |
Acquisitions (Ruth’s Chris and Chuy’s) | Ruth’s Chris synergy realization in Q4 2024 , Chuy’s pending close in Q1 2025. | Integration of 103 Chuy’s ongoing; expects ~$17M synergies, $2M in FY25. | Key growth driver with synergies shaping future outlook. |
Pullback among lower-income consumers | Mentioned in Q1 2025 , Q4 2024 , Q3 2024. | Lower-income (<$50k) spending continues to decline, middle-income improves, higher-income largely steady. | Consistent pattern dampening Fine Dining; other segments less affected. |
GLP-1 effect | No prior discussion in Q1 2025, Q4 2024, or Q3 2024. | Newly mentioned potential risk for higher-end segments, usage by ~6% of population, no decisive brand impact yet. | New topic possibly affecting Fine Dining demand. |
Technology adoption (AI, machine learning) | Q1 2025 reference to tech roadmap , Q3 2024 mention of AI/ML for labor scheduling. | No specific mention of AI for scheduling; company exploring GenAI pilots. | Ongoing but less detail this quarter; AI remains an operational focus. |
Olive Garden margin pressures | Discussed in Q1 2025 (20.6% margin under pressure) , normalization in Q4 2024 , not noted in Q3 2024. | No explicit mention of margin pressures in Q2 2025. | No longer emphasized after prior quarters’ focus on margin pressure. |
External factors (weather, holiday shifts, macro) | Q1 2025 storms/holiday shifts , Q4 2024 macro mention , Q3 2024 weather/seasonality. | Hurricanes Helene & Milton (-30 bps) plus Thanksgiving shift (+90 bps); some consumer sentiment improvement. | Persistent external disruptions each quarter, influencing top-line performance. |
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Fiscal '25 Comp Guidance
Q: Why tighten comp guidance to 1.5% with two quarters left?
A: Darden tightened its fiscal '25 same-restaurant sales guidance to approximately 1.5% due to increased confidence in sales trends, incorporating underlying multiyear trends and actions planned for the second half. This suggests Olive Garden and LongHorn are expected to be above that level, given the brand mix. -
Total Inflation & Margins
Q: What's the outlook for total inflation and margins in 2025?
A: Total inflation is expected to be approximately 2.5% for fiscal 2025, with food and beverage costs increasing in the back half due to beef, chicken, and seafood turning inflationary. Labor inflation remains in the high 3% range, and margins are expected to be impacted accordingly, particularly in Q4. -
CapEx Increase & Unit Growth
Q: Why did CapEx guidance step up significantly?
A: The CapEx increase is primarily due to the inclusion of Chuy's with five additional openings, and investments to build the pipeline for next fiscal year, aiming for higher unit growth. Maintenance CapEx remains around $300 million annually. -
Labor Efficiencies
Q: How are you addressing rising labor costs and efficiencies?
A: Labor costs have grown less than wage inflation due to significant improvements in turnover, reaching historic low levels. Continuous improvements in service steps and process streamlining are ongoing to drive efficiencies while enhancing guest experience. -
Uber Eats Partnership Impact
Q: Is Uber Eats partnership impacting guidance and sales?
A: The impact from the Uber Eats partnership is currently minimal, with delivery sales at about 1.5% of sales across pilot restaurants. No significant incremental sales from Uber are included in fiscal year guidance. The rollout is expected to complete by the end of Q3, with marketing efforts planned thereafter. -
Beef Inflation Outlook
Q: What's the outlook on beef inflation and supply coverage?
A: Beef prices are up significantly year-over-year due to retailer promotions. Darden expects seasonal dips in early 2025 to provide opportunities for further coverage. Currently, 40% of beef needs are covered at low single-digit inflation, and supply chain strategies have kept costs below market levels. -
Cheddar's Growth Prospects
Q: Is Cheddar's ready for faster unit growth?
A: Cheddar's operational improvements and successful new prototypes have increased confidence in expanding the brand. Plans are underway to build the pipeline for greater unit growth, aiming toward the higher end of Darden's framework. -
Fine Dining & GLP-1 Impact
Q: Are GLP-1 drugs affecting Fine Dining performance?
A: Fine Dining brands have seen softer growth, possibly impacted by GLP-1 usage, which is about 6% of the population. Consumers earning less than $50,000 are pulling back on Fine Dining visits, affecting traffic. -
Olive Garden Marketing Spend
Q: Is reduced advertising spend impacting Olive Garden's sales?
A: Olive Garden's advertising spend is down by 25–30%, not half as previously suggested. The company remains flexible with marketing, increasing spend when appropriate, and plans to adjust advertising strategies based on promotions and competitive dynamics. -
LongHorn's Strong Performance
Q: What's driving LongHorn's continued strong sales?
A: LongHorn's focus on quality and experience, including investments in food quality and operational execution, is driving its strong performance. The brand reported a 7.5% same-restaurant sales increase, with positive traffic and mix contributions. Marketing spend has decreased significantly, relying on brand strength over promotions. -
Never Ending Pasta Bowl Results
Q: How did the Never Ending Pasta Bowl promotion perform?
A: The promotion exceeded expectations with record refills and upsells on protein add-ons. It drove strong weeks when run against no prior promotion and maintained guest interest without wear-out. Positive mix contributed to Olive Garden's same-restaurant sales growth. -
Consumer Trends & Trade-down
Q: Are you seeing consumers trade down among your brands?
A: There is some evidence of consumers trading down from Fine Dining to Casual Dining, possibly benefiting brands like LongHorn. Improvement in visits from guests earning $50,000 to $100,000 indicates a healthier middle-class consumer segment returning to casual dining experiences.