Darden Restaurants beats quarterly estimates on strong sales growth at Olive Garden, LongHorn Steakhouse

Darden Restaurants (DRI) reported fiscal Q4 revenue of $3.27 billion, a 10.6% increase year-over-year and slightly above estimates, driven by a 4.6% increase in same-store sales, particularly strong performances at Olive Garden and LongHorn Steakhouse. Adjusted EPS rose 12.5% to $2.98, exceeding expectations. The company projects fiscal 2026 sales growth of 7% to 8% and announced a $1 billion share repurchase program and a 7.1% increase in its quarterly dividend, leading to a 2.1% increase in its share price.

Analysis

Darden Restaurants (DRI) delivered a strong fiscal fourth-quarter performance, exceeding analyst expectations for both revenue and earnings. Revenue climbed 10.6% year-over-year to $3.27 billion, slightly ahead of the $3.26 billion consensus, propelled by a robust 4.6% increase in same-store sales—which surpassed the anticipated 3.5%—and contributions from the acquisition of 103 Chuy’s Tex Mex restaurants alongside 25 net new organic openings. Notably, Olive Garden and LongHorn Steakhouse posted impressive same-store sales growth of 6.9% and 6.7%, respectively. Adjusted earnings per share rose 12.5% to $2.98, beating the $2.96 consensus estimate, even after factoring in $0.40 per share in acquisition-related and other non-recurring expenses. Management's outlook for fiscal 2026 projects continued momentum, with total sales growth anticipated at 7% to 8%, same-store sales growth between 2% and 3.5%, and earnings per share targeted in the $10.50 to $10.70 range. This financial outperformance is complemented by enhanced shareholder return initiatives, including a new $1 billion share repurchase program and a 7.1% increase in the quarterly dividend to $1.50 per share, underpinning the company's stated goal of achieving 10% to 14% total shareholder return over time. The positive results and outlook spurred a 2.1% rise in Darden's shares.

Key Decisions for Investors

• The better-than-expected Q4 results, driven by significant same-store sales growth at key brands and a positive fiscal 2026 outlook, reinforce a constructive view on Darden's operational execution and market positioning.
• Investors should favorably view the new $1 billion share repurchase authorization and the 7.1% dividend increase as strong signals of management's confidence in sustained profitability and commitment to delivering shareholder value.
• Monitor the integration and performance of the newly acquired Chuy’s Tex Mex restaurants and note that the fiscal 2026 same-store sales growth guidance of 2% to 3.5% implies a moderation from the strong 4.6% achieved in the reported quarter.