Darden Corporation adjusts revenue growth forecast for 2026, projecting an increase of 7.5% to 8.5%, fueled by robust growth in Olive Garden and LongHorn Steakhouse establishments.
Darden Restaurants, Inc. (DRI) had a successful Q1 2026 with same-restaurant sales and earnings growth exceeding expectations. The company reported total sales of $3 billion, a 10% increase from the previous year, driven by strong same-restaurant sales growth, acquisitions, and new restaurant openings.
The company's flagship brand, Olive Garden, saw a significant boost with same-restaurant sales increasing by 5.9%. This growth was attributed to the introduction of new menu items and the growth of first-party delivery. Three out of four segments delivered positive same-restaurant sales and traffic growth.
However, the company faces challenges in beef supply, with only about 25% coverage for the next six months. This was highlighted as a primary risk by CEO Vennam, who also reported a successful test of a lighter portion section at Olive Garden, which saw affordability scores increase by 15 percentage points and high satisfaction with portion size.
LongHorn Steakhouse also performed well, with same-restaurant sales growing by 5.5%. Traffic was up about 3.2%, resulting in a 2.3% increase in check and a 2.5% increase in pricing. Olive Garden delivery accounted for about 5% of sales in the first quarter, which was exited at about 4%.
The company returned $358 million to shareholders through dividends and share repurchases this quarter. Analysts focused on costs, delivery incrementality, and strategic pricing during the call. Some skepticism surfaced regarding beef cost headwinds and promotional strategy.
Darden's guidance for total sales growth increased from 7%-8% to 7.5%-8.5% for fiscal 2026. The same-restaurant sales growth range tightened and edged upward. The company expects the lowest year-over-year EPS growth to be in the second quarter, driven by the significant step-up in beef costs.
Tariffs on shrimp and supply constraints in beef were identified as additional inflationary pressures. Management acknowledged promotional investments and delivery fees could create margin pressure. However, they expressed confidence in market share gains and new initiatives.
The Other Business segment's sales increased by 22.5% with a segment profit margin of 16.1%. Olive Garden delivered a strong segment profit margin of 20.6%, while LongHorn reported a segment profit margin of 17.4%.
The company also announced the finalization of the sale of eight Olive Garden locations in Canada and an agreement to open 30 more Olive Garden restaurants over the next ten years. The specific company that bought the Canadian locations is not explicitly named in the available information.
In conclusion, Darden Restaurants delivered a strong Q1 2026 performance, with growth across multiple segments. However, challenges in beef supply and cost pressures remain concerns for the company moving forward.
The Darden Restaurants, Inc. Q1 2026 earnings call transcript has been released, providing further insights into the company's performance and future strategies.
