Darden Restaurants 4Q Sales Rise, Earnings Decline Slightly

Darden Restaurants reported Q4 sales of $3.27 billion, slightly above the $3.26 billion expected, driven by same-restaurant sales growth, the Chuy's acquisition, and new restaurant openings; however, earnings declined marginally to $2.58 per share, though adjusted earnings of $2.98 beat estimates of $2.96. The company projects fiscal 2026 sales growth of 7% to 8% and same-restaurant sales growth of 2% to 3.5%, with earnings per share from continuing operations between $10.50 and $10.70, while analysts were expecting $10.77.

Analysis

Darden Restaurants (DRI) reported fourth-quarter fiscal 2024 results showcasing a slight outperformance in sales alongside a modest beat on adjusted earnings per share. Revenue rose to $3.27 billion, marginally exceeding the $3.26 billion FactSet consensus, attributed to a combination of same-restaurant sales growth, the impact of acquiring 103 Chuy's Tex Mex restaurants, and the opening of 25 net new Darden-branded restaurants. While reported earnings per share declined slightly to $2.58 from $2.57 year-over-year, adjusted earnings of $2.98 per share surpassed the anticipated $2.96. For fiscal 2026, Darden has guided for sales growth between 7% and 8% and same-restaurant sales growth in the range of 2% to 3.5%. However, its earnings per share forecast from continuing operations, set between $10.50 and $10.70, falls slightly short of the analyst consensus of $10.77, suggesting a more cautious outlook from management compared to market expectations. The overall moderately positive sentiment reflects this mixed picture of solid current execution against a slightly tempered forward guidance.

Key Decisions for Investors

• Investors should closely monitor the integration progress of the Chuy's Tex Mex acquisition and its contribution to achieving the projected 7% to 8% sales growth for fiscal 2026.
• Consider the implications of Darden's fiscal 2026 earnings per share guidance ($10.50-$10.70), which is slightly below the analyst consensus of $10.77, when evaluating the company's current valuation.
• Assess the forecast for 2% to 3.5% same-restaurant sales growth in the context of prevailing consumer discretionary spending trends and the competitive landscape in the casual dining sector.