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DARDEN RESTAURANTS INC (DRI)·Q4 2025 Earnings Summary

Executive Summary

  • Q4 FY25 total sales rose 10.6% to $3.27B on blended same-restaurant sales growth of 4.6%; Olive Garden comps +6.9% and LongHorn +6.7%. Reported diluted EPS was $2.58; adjusted diluted EPS was $2.98, a slight beat vs Wall Street consensus ($2.97*) and revenue above consensus ($3.26B*). Restaurant-level EBITDA margin improved 50 bps to 21.6%. The quarter included one-time impairment and closure costs associated with 22 underperforming restaurants .
  • FY26 outlook introduced: total sales growth 7–8% (incl. ~2% from 53rd week), comps +2–3.5%, 60–65 openings, capex $700–$750M, tax rate ~13%, and diluted EPS $10.50–$10.70 (incl. ~$0.20 from 53rd week). Dividend raised 7% to $1.50 and new $1B buyback authorized .
  • Strategic updates: evaluating strategic alternatives for Bahama Breeze; agreement to sell 8 Olive Garden restaurants in Canada to Recipe Unlimited and franchise 30 more over 10 years; Chuy’s integration “on track” (neutral EPS in FY25) .
  • Commercial catalysts: Olive Garden’s “buy-one-take-one” promotion and Uber Direct first‑party delivery (exit rate ~5% of sales during promotion period) drove traffic and off‑premise mix without margin drag; delivery checks ~20% higher than typical to‑go. Management emphasized a long-term plan to reinvest incremental sales into affordability and speed-of-service to sustain share gains .

What Went Well and What Went Wrong

What Went Well

  • Olive Garden momentum and value proposition: “Buy-one-take-one…starting price point of $14.99” plus national delivery, catering and curbside drove takeout sales up nearly 20% YoY. OG’s gap vs industry widened to 450 bps; guest satisfaction hit an all-time high .
  • Margin execution and disciplined pricing: Restaurant-level EBITDA margin improved to 21.6% (+50 bps YoY) as commodities inflation was ~1.5% and labor inflation ~3.5%; productivity gains offset wages while pricing remained below total inflation .
  • Capital returns and confidence: Dividend increased to $1.50 (+7.1% QoQ) and a new $1B buyback was authorized; management reiterated long-term TSR framework targeting 10–15% via EPS growth and dividend yield .

What Went Wrong

  • Fine Dining softness persisted: Q4 same-restaurant sales −3.3% with segment profit margin down YoY; urban traffic still ~82% of pre‑COVID vs suburban ~95%, though sequential stabilization noted .
  • One-time impairments and closures: Non‑cash impairments tied to 22 permanent closures drove $0.30 of adjusted EPS add-backs in Q4; closures (incl. 15 Bahama Breeze) are expected to be slightly positive to FY26 earnings but a headwind to sales growth .
  • Higher interest expense: Financing costs from the Chuy’s acquisition lifted interest expense; adjusted interest expense up ~20 bps YoY on the P&L .

Financial Results

Quarterly Performance vs Prior Periods

MetricQ2 2025Q3 2025Q4 2025
Revenues ($USD Billions)$2.89 $3.16 $3.27
Reported Diluted EPS ($USD)$1.82 $2.74 $2.58
Adjusted Diluted EPS ($USD)$2.03 $2.80 $2.98
Operating Income ($USD Millions)$292.1 $418.2 $382.8
Restaurant-level EBITDA Margin %—21.1% 21.6%

Actual vs Consensus (Q4 2025)

MetricConsensusActualResult
Adjusted EPS ($USD)$2.97*$2.98 Bold beat
Revenue ($USD Billions)$3.26*$3.27 Bold beat
EBITDA ($USD Millions)$581.0*$547.7*Bold miss

Values marked with * retrieved from S&P Global.

Same-Restaurant Sales by Segment

SegmentQ2 2025Q3 2025Q4 2025
Consolidated Darden+2.4% +0.7% +4.6%
Olive Garden+2.0% +0.6% +6.9%
LongHorn Steakhouse+7.5% +2.6% +6.7%
Fine Dining−5.8% −0.8% −3.3%
Other Business+0.7% −0.4% +1.2%

Segment Sales and Profit (Q4 2025)

SegmentSales ($USD Millions)Segment Profit ($USD Millions)
Olive Garden$1,381.0 $328.4
LongHorn Steakhouse$833.8 $167.8
Fine Dining$334.6 $62.9
Other Business$722.3 $126.3
Consolidated Darden$3,271.7 —

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Total Sales GrowthFY 2026N/A7%–8% (incl. ~2% from 53rd week) New
Same-Restaurant Sales GrowthFY 2026N/A+2%–+3.5% New
New RestaurantsFY 2026N/A60–65 New
Capital SpendingFY 2026N/A$700–$750M New
Total InflationFY 2026N/A2.5%–3.0% New
Effective Tax RateFY 2026N/A~13% New
Diluted EPS (cont. ops)FY 2026N/A$10.50–$10.70 (incl. ~$0.20 53rd week) New
Diluted SharesFY 2026N/A~117M New
Quarterly DividendCurrent$1.40 $1.50 (+7.1%) Raised
Share Repurchase AuthorizationCurrentPrior programNew $1B program (no expiration) Increased/Reset

Earnings Call Themes & Trends

TopicQ2 2025 (prev)Q3 2025 (prev)Q4 2025 (current)Trend
First‑party delivery (Uber Direct)Not discussed in Q2 PR Olive Garden fully rolled out; pilot at Cheddar’s; delivery ~2.5% of sales in pilot, checks ~20% higher; incrementality 40–50% Olive Garden exit rate ~5% during “free delivery” promo; ~3.5% of sales; fees passed to Uber; margin neutral Expanding across brands; mix increasing
Promotions/Value—OG Fan Favorites drove traffic; “buy-one-take-one” return signaled OG “buy-one-take-one” at $14.99, widened industry gap; no margin drag Value cadence working
Fine Dining—Negative comps; holiday helped; margin +50 bps Soft comps; urban ~82% vs suburban ~95% of pre‑COVID; stabilization Gradual stabilization
Inflation/Pricing—Q4 set to see higher overall inflation vs 1H; pricing below inflation Q4 commodities ~1.5%, labor ~3.5%; FY26 food ~2.5%, labor ~3.5%; pricing mid‑2% Disciplined pricing continues
Portfolio actions—Chuy’s integration neutral EPS FY25 Strategic alternatives for Bahama Breeze; Canada OG franchise agreement Portfolio optimization
Technology—Smaller prototypes tested (Yard House, Cheddar’s) New POS piloted at OG; Chuy’s next Modernization underway
Tariffs/Macro—Tariff exposure limited; ~80% domestic sourcing Casual dining holding up; higher-income cohorts driving growth Monitoring; mitigants in place

Management Commentary

  • “We had a strong quarter with same-restaurant sales and earnings growth that exceeded our expectations… anchored in our four competitive advantages and being brilliant with the basics” — Rick Cardenas .
  • “Restaurant-level EBITDA…improving 50 basis points to 21.6%…commodities inflation ~1.5%, labor ~3.5%…pricing below total inflation” — Raj Vennam .
  • “Consequently, we will be considering strategic alternatives for Bahama Breeze…including a potential sale…or converting restaurants to other Darden brands” — Rick Cardenas .
  • “Olive Garden…delivery available nationwide…the offer: one million free deliveries, partially funded by Uber…average weekly deliveries per restaurant nearly doubling during the last two weeks of the quarter” — Rick Cardenas .

Q&A Highlights

  • Delivery and margin neutrality: Uber Direct mix ~3.5% of OG sales in Q4; exit rate ~5% during TV campaign; fees passed to Uber; minimal margin impact. Delivery checks ~20% higher than typical to‑go and ~12% of delivery is large-party catering .
  • Reinvestment vs margin: FY26 algorithm emphasizes top-line growth; pricing mid‑2%; selective reinvestment in affordability and speed-of-service (10–20 bps) while keeping EAT margin flat to slightly up .
  • Fine Dining/consumer mix: Weakness concentrated in below $150k incomes and urban units; stabilization emerging; across casual dining, growth skewed to >$100k–$150k households .
  • G&A/tax and mark-to-market: 2026 G&A $500M including 53rd week ($490M on 52-week basis), with MTM largely offset in tax; highlights shift to EAT focus in long-term framework .
  • Development pipeline: 60–65 FY26 openings; improved access to quality sites; smaller box prototypes lower build costs ~15% and expand site pool .

Estimates Context

  • Q4 FY25: Adjusted EPS $2.98 vs consensus $2.97* (beat); Revenue $3.27B vs $3.26B* (beat); EBITDA actual (S&P) $547.7M vs $581.0M* consensus (miss); note management reported adjusted EBITDA $582M (definitions differ) .
  • FY26: Guidance EPS $10.50–$10.70 vs consensus $10.62* midpoint aligned; consensus revenue $13.07B* vs implied guidance (7–8% over $12.08B FY25) broadly consistent .
    Values marked with * retrieved from S&P Global.

Key Takeaways for Investors

  • OG and LongHorn execution remain the core EPS drivers; Q4 comps and margin expansion reinforce share gains under disciplined pricing and promotional cadence .
  • Near-term stock catalysts: dividend hike to $1.50 and $1B buyback, plus an FY26 EPS guide (~$10.60 midpoint) that aligns with consensus and includes ~$0.20 from the 53rd week .
  • Watch delivery trajectory: Uber Direct ramp (mix and incrementality) is accretive to sales with minimal margin impact; broader rollouts at Cheddar’s and potentially other brands can extend off‑premise leverage .
  • Portfolio optimization: Bahama Breeze strategic alternatives and Canada franchising may unlock capital efficiency and focus, though Fine Dining recovery remains a monitored headwind .
  • FY26 setup: Expect comps +2–3.5%, pricing mid‑2%, inflation 2.5–3% (food ~2.5%, labor ~3.5%), and continued reinvestment (10–20 bps) into affordability and speed to sustain traffic momentum .
  • Capex and growth: 60–65 openings and $700–$750M capex (with smaller box prototypes) support multi‑year unit growth acceleration within a 2–4% long-term target range .
  • Risk monitor: interest expense from acquisitions; Fine Dining urban softness; tariff uncertainty mitigated by ~80% domestic sourcing and flexible procurement .