Darden's Sales Soar, Net Income Jumps on Strong Restaurant Performance

Ticker: DRI · Form: 10-Q · Filed: 2025-12-30T00:00:00.000Z

Sentiment: bullish

Topics: Restaurant Industry, Earnings Growth, Strategic Acquisitions, Portfolio Optimization, Casual Dining, Shareholder Returns, Financial Performance

Related Tickers: DRI, EAT, BLMN

TL;DR

**Darden's crushing it with sales and profit growth, making smart portfolio moves; buy the dip if you see one.**

AI Summary

Darden Restaurants Inc. (DRI) reported robust financial performance for the three and six months ended November 23, 2025. Sales increased by 7.3% to $3,102.1 million for the three months, up from $2,890.0 million in the prior year, and by 8.8% to $6,146.8 million for the six months, compared to $5,647.0 million. Net earnings for the three months rose to $237.2 million, a 10.3% increase from $215.1 million, while six-month net earnings climbed 17.2% to $495.0 million from $422.3 million. Diluted net earnings per share for the three months were $2.03, up from $1.82, and for the six months were $4.22, an increase from $3.56. The company completed the sale of eight Olive Garden locations in Canada to Recipe Unlimited Corporation on July 14, 2025, and is exploring strategic alternatives for the Bahama Breeze brand, which includes 28 owned and one franchised location. Darden also finalized the purchase price allocation for the October 11, 2024 acquisition of Chuy's Holdings, Inc. for $649.1 million, recognizing $267.2 million in goodwill.

Why It Matters

Darden's strong sales and net income growth demonstrate resilience in the competitive casual dining sector, driven by its diverse portfolio including Olive Garden and LongHorn Steakhouse. This performance signals effective operational strategies and brand management, which could lead to increased investor confidence and potential stock appreciation. The strategic divestiture of Canadian Olive Garden locations and exploration of Bahama Breeze alternatives indicate a focus on optimizing its core U.S. market and streamlining its brand portfolio, potentially enhancing long-term profitability and competitive positioning against rivals like Brinker International or Bloomin' Brands. Employees may see continued job stability and growth opportunities within the core brands, while customers could benefit from a more focused and efficient restaurant experience.

Risk Assessment

Risk Level: low — The risk level is low due to Darden's consistent sales and earnings growth, with sales up 7.3% and net earnings up 10.3% for the three months ended November 23, 2025. The company also reported a significant gain on disposal of assets of $44.9 million for the six months, indicating effective asset management. While there's a slight decrease in cash and cash equivalents from $240.0 million to $224.1 million, the overall financial health and strategic initiatives mitigate significant immediate risks.

Analyst Insight

Investors should consider Darden Restaurants (DRI) as a stable investment with growth potential, given its strong financial performance and strategic portfolio optimization. The company's ability to increase sales and net earnings while actively managing its brand portfolio suggests a well-executed strategy. Monitor the outcome of the Bahama Breeze strategic review for further clarity on future capital allocation.

Financial Highlights

revenue
$3,102.1M
net Income
$237.2M
eps
$2.03
revenue Growth
+7.3%

Revenue Breakdown

SegmentRevenueGrowth
Total Company$3,102.1M+7.3%
Total Company$6,146.8M+8.8%

Key Numbers

Key Players & Entities

FAQ

What were Darden Restaurants' key financial highlights for the quarter ended November 23, 2025?

Darden Restaurants reported sales of $3,102.1 million for the three months ended November 23, 2025, an increase of 7.3% from $2,890.0 million in the prior year. Net earnings for the same period rose 10.3% to $237.2 million from $215.1 million, with diluted net earnings per share at $2.03.

How did Darden's six-month performance compare to the previous year?

For the six months ended November 23, 2025, Darden's sales increased by 8.8% to $6,146.8 million from $5,647.0 million. Net earnings for the six-month period grew 17.2% to $495.0 million, up from $422.3 million, and diluted net earnings per share were $4.22.

What strategic moves did Darden make regarding its brand portfolio?

Darden sold eight Olive Garden locations in Canada to Recipe Unlimited Corporation on July 14, 2025. Additionally, the company announced its decision to explore strategic alternatives for the Bahama Breeze brand, which includes 28 owned and one franchised location, considering a sale or conversion to other Darden brands.

What was the impact of the Chuy's acquisition on Darden's financials?

Darden acquired Chuy's Holdings, Inc. on October 11, 2024, for $649.1 million in total consideration. The purchase price allocation was finalized in the first quarter of fiscal 2026, resulting in $267.2 million of goodwill, reflecting anticipated sales and unit growth opportunities, as well as supply chain and support cost synergies.

What were Darden's cash flow activities for the six months ended November 23, 2025?

Net cash provided by operating activities of continuing operations was $663.2 million. Net cash used in investing activities of continuing operations was $363.9 million, primarily due to $375.0 million in purchases of land, buildings, and equipment. Net cash used in financing activities of continuing operations was $314.9 million, including $349.0 million in dividends paid and $407.1 million in common stock repurchases.

How did Darden's operating costs and expenses change?

Total operating costs and expenses for the three months ended November 23, 2025, increased to $2,781.7 million from $2,597.9 million in the prior year. This includes increases in food and beverage costs to $963.7 million, restaurant labor to $1,000.1 million, and restaurant expenses to $508.3 million.

What is Darden's current risk outlook based on the 10-Q filing?

The risk level is assessed as low. This is supported by consistent sales growth of 7.3% and net earnings growth of 10.3% for the three months ended November 23, 2025. Strategic asset management, evidenced by a $44.9 million gain on disposal of assets, further mitigates risk.

What accounting standards did Darden recently adopt or is planning to adopt?

Darden adopted ASU 2023-07, Segment Reporting, as of May 25, 2025, which did not impact financial results. The company plans to adopt ASU 2023-09, Income Taxes, in the fourth quarter of fiscal 2026, and ASU 2024-03, Income Statement-Reporting Comprehensive Income-Expense Disaggregation Disclosures, and ASU 2025-06, Intangibles—Goodwill and Other—Internal-Use Software Costs, in fiscal 2028.

What is Darden's current common stock outstanding?

As of December 15, 2025, the number of shares of common stock outstanding for Darden Restaurants, Inc. was 115,139,249.

What are Darden's primary restaurant brands?

Darden Restaurants, Inc. owns and operates full-service dining restaurants under the trade names Olive Garden, LongHorn Steakhouse, Cheddar's Scratch Kitchen, Chuy's, Yard House, Ruth's Chris Steak House, The Capital Grille, Seasons 52, Eddie V's Prime Seafood, Bahama Breeze, and The Capital Burger.

Risk Factors

Industry Context

The full-service dining sector, where Darden operates, is characterized by intense competition and evolving consumer preferences. Key trends include a demand for value, convenience, and unique dining experiences. Darden's diversified brand portfolio, ranging from casual (Olive Garden, LongHorn) to upscale (The Capital Grille, Eddie V's), allows it to cater to a broad customer base. However, the industry is also susceptible to economic downturns and shifts in discretionary spending.

Regulatory Implications

Darden operates under stringent food safety and labor regulations. Compliance with these regulations is critical to avoid fines, legal action, and reputational damage. Changes in minimum wage laws, health codes, and reporting requirements can impact operational costs and require ongoing adjustments to business practices.

What Investors Should Do

  1. [object Object]
  2. [object Object]
  3. [object Object]
  4. [object Object]
  5. [object Object]

Key Dates

Glossary

Diluted net earnings per share
A measure of profitability that accounts for all potential dilutive common shares, such as stock options and convertible securities, as if they had been exercised or converted. (Indicates the earnings attributable to each share of common stock outstanding, considering potential dilution, providing a more conservative view of profitability.)
Goodwill
An intangible asset that arises when one company acquires another for a price greater than the fair value of its identifiable net assets. (Represents the premium paid for the acquisition of Chuy's Holdings, Inc. ($267.2M), reflecting expected future economic benefits from unidentifiable intangible assets.)
Impairments and (gain) loss on disposal of assets, net
Reflects the net impact of asset write-downs due to decreased value and gains or losses from the sale of assets. (Shows a net gain of $44.9M for the six months ended November 23, 2025, compared to a $1.0M loss in the prior year, primarily due to the sale of Olive Garden locations in Canada.)
Operating income
Profitability measure calculated by subtracting total operating costs and expenses from total revenue. (Indicates the profitability of Darden's core business operations before considering interest and taxes.)
Continuing operations
Refers to the ongoing business activities of a company, excluding any divested or discontinued operations. (Earnings from continuing operations ($237.4M for three months, $495.3M for six months) represent the performance of Darden's core restaurant brands.)
Discontinued operations
Represents the results of business activities that have been or will be disposed of, reported separately from continuing operations. (Shows a net loss of $0.2M for the three months and $0.3M for the six months ended November 23, 2025, related to the sale of Canadian Olive Garden locations.)
Deferred revenue
Revenue that has been received by a company but not yet earned, typically from gift cards or advance payments. (Deferred gift card revenue was $593.8M as of November 23, 2025, representing future revenue to be recognized as gift cards are redeemed.)
Right-of-use assets
Assets that represent a lessee's right to use an underlying asset for the lease term, recognized under ASC 842 for operating and finance leases. (Total lease assets were $4,933.6M as of November 23, 2025, reflecting Darden's significant investment in leased properties.)

Year-Over-Year Comparison

Darden Restaurants Inc. has demonstrated strong year-over-year growth in its latest reporting period. Sales increased by 7.3% to $3,102.1M for the quarter and 8.8% to $6,146.8M for the six months, indicating robust top-line performance. Net earnings also saw significant increases of 10.3% and 17.2% respectively, driven by effective cost management and strategic acquisitions. The company's effective income tax rate for continuing operations increased slightly to 12.8% for the quarter and 12.5% for the six months, compared to 12.3% and 11.4% in the prior year, respectively. A notable change is the gain on disposal of assets, which shifted from a $1.0M loss in the prior year to a $44.9M gain for the six months ended November 23, 2025, largely due to the sale of Canadian Olive Garden locations.

Filing Stats: 4,719 words · 19 min read · ~16 pages · Grade level 7.3 · Accepted 2025-12-30 15:56:05

Filing Documents

- Financial Information

Part I - Financial Information

Financial Statements (Unaudited)

Item 1. Financial Statements (Unaudited) 4 Consolidated Statements of Earnings 4 Consolidated Statements of Comprehensive Income 5 Consolidated Balance Sheets 6 Consolidated Statements of Changes in Stockholders' Equity 7 Consolidated Statements of Cash Flows 8

Notes to Consolidated Financial Statements

Notes to Consolidated Financial Statements 10

Management's Discussion and Analysis of Financial Condition and Results of Operations

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 24

Quantitative and Qualitative Disclosures About Market Risk

Item 3. Quantitative and Qualitative Disclosures About Market Risk 33

Controls and Procedures

Item 4. Controls and Procedures 33

- Other Information

Part II - Other Information

Legal Proceedings

Item 1. Legal Proceedings 34

Risk Factors

Item 1A. Risk Factors 34

Unregistered Sales of Equity Securities and Use of Proceeds

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 34

Other Information

Item 5. Other Information 34

Exhibits

Item 6. Exhibits 35 Signature 36 2 Table of Contents Cautionary Statement Regarding Forward-Looking Statements Statements set forth in or incorporated into this report that are not historical facts, including without limitation statements with respect to the financial condition, results of operations, plans, objectives, future performance and business of Darden Restaurants, Inc. and its subsidiaries that are preceded by, followed by or that include words such as "may," "will," "expect," "intend," "anticipate," "continue," "could," "estimate," "project," "believe," "plan," "outlook," or similar expressions, are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. This statement is included for purposes of complying with the safe harbor provisions of that Act. Any forward-looking statements speak only as of the date on which such statements are made, and we undertake no obligation to update such statements for any reason to reflect events or circumstances arising after such date. By their nature, forward-looking statements involve risks and uncertainties that could cause actual results to differ materially from those set forth in or implied by such forward-looking statements. The most significant of these uncertainties are described in Darden's Form 10-K, Form 10-Q (including this report) and Form 8-K reports. 3 Table of Contents PART I FINANCIAL INFORMATION

Financial Statements (Unaudited)

Item 1. Financial Statements (Unaudited) DARDEN RESTAURANTS, INC. CONSOLIDATED STATEMENTS OF EARNINGS (In millions, except per share data) (Unaudited) Three Months Ended Six Months Ended November 23, 2025 November 24, 2024 November 23, 2025 November 24, 2024 Sales $ 3,102.1 $ 2,890.0 $ 6,146.8 $ 5,647.0 Costs and expenses: Food and beverage 963.7 872.8 1,892.8 1,719.5 Restaurant labor 1,000.1 926.8 1,988.1 1,816.1 Restaurant expenses 508.3 472.2 1,012.5 925.9 Marketing expenses 48.7 48.8 97.8 93.5 Pre-opening costs 8.1 5.5 14.0 10.0 General and administrative expenses 117.8 144.1 253.9 270.5 Depreciation and amortization 137.9 127.7 273.0 249.2 Impairments and (gain) loss on disposal of assets, net ( 2.9 ) — ( 44.9 ) 1.0 Total operating costs and expenses $ 2,781.7 $ 2,597.9 $ 5,487.2 $ 5,085.7 Operating income 320.4 292.1 659.6 561.3 Interest, net 48.0 46.2 93.4 83.3 Earnings before income taxes 272.4 245.9 566.2 478.0 Income tax expense 35.0 30.2 70.9 54.7 Earnings from continuing operations $ 237.4 $ 215.7 $ 495.3 $ 423.3 Losses from discontinued operations, net of tax benefit of $ 0.1 , $ 0.2 , $ 0.3 and $ 0.6 , respectively ( 0.2 ) ( 0.6 ) ( 0.3 ) ( 1.0 ) Net earnings $ 237.2 $ 215.1 $ 495.0 $ 422.3 Basic net earnings per share: Earnings from continuing operations $ 2.05 $ 1.84 $ 4.26 $ 3.59 Losses from discontinued operations — ( 0.01 ) — ( 0.01 ) Net earnings $ 2.05 $ 1.83 $ 4.26 $ 3.58 Diluted net earnings per share: Earnings from continuing operations $ 2.03 $ 1.82 $ 4.23 $ 3.57 Losses from discontinued operations — — ( 0.01 ) ( 0.01 ) Net earnings $ 2.03 $ 1.82 $ 4.22 $ 3.56 Average number of common shares outstanding: Basic 115.9 117.5 116.3 118.0 Diluted 116.7 118.3 117.2 118.7 See accompanying notes to our unaudited consolidated financial statements. 4 Table of Contents DARDEN RESTAURANTS, INC. CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (In millions) (Unaudited) Three Months Ended Six Month

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) Note 1. Basis of Presentation Darden Restaurants, Inc. (we, our, Darden or the Company) owns and operates full-service dining restaurants in the United States under the trade names Olive Garden , LongHorn Steakhouse , Cheddar's Scratch Kitchen , Chuy's , Yard House , Ruth's Chris Steak House (Ruth's Chris), The Capital Grille , Seasons 52 , Eddie V's Prime Seafood (Eddie V's), Bahama Breeze , and The Capital Burger . As of November 23, 2025, through subsidiaries, we own and operate all of our restaurants in the United States, except for five restaurants we manage through joint venture or other contractual agreements and 86 franchised restaurants. We also have 78 international franchised restaurants in operation located in Canada, Latin America, the Caribbean, Asia, and the Middle East. We have prepared these consolidated financial statements pursuant to the rules and regulations of the Securities and Exchange Commission (SEC). Certain information and footnote disclosures normally presented in annual financial statements prepared in accordance with U.S. generally accepted accounting principles (GAAP) have been condensed or omitted pursuant to such rules and regulations. In the opinion of management, all adjustments considered necessary for a fair presentation have been included and are of a normal recurring nature. We operate on a 52/53-week fiscal year which ends on the last Sunday in May. Our fiscal year ending May 31, 2026 will contain 53 weeks of operation. Operating results for interim periods presented are not necessarily indicative of results that may be expected for the full fiscal year. These statements should be read in conjunction with the consolidated financial statements and related notes to consolidated financial statements included in our Annual Report on Form 10-K for the fiscal year ended May 25, 2025. We prepare our consolidated financial statements in conformity with GAAP. The preparation

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) disclosure of income taxes paid by jurisdiction. The amendments also provide further disclosure comparability. The amendments are effective for fiscal years beginning after December 15, 2024. The amendments should be applied prospectively; however, retrospective application is permitted. Management is currently evaluating this ASU to determine its impact on the Company's disclosures. We plan to adopt in the fourth quarter of fiscal 2026. In November 2024, the FASB issued ASU 2024-03, Income Statement-Reporting Comprehensive Income-Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses, which requires detailed disclosure amounts for purchases of inventory, employee compensation, depreciation, intangible asset amortization, and depreciation, depletion and amortization as part of oil and gas producing activities in each relevant expense caption on the income statement. The ASU requires companies to include amounts already required by GAAP in the same disclosure, provide a qualitative description of remaining amounts not separately disaggregated, and disclose the total selling expenses along with the definition of selling expenses in annual reports. The amendment is effective for fiscal years beginning after December 15, 2026. Early adoption is permitted. The amendment should be applied prospectively; however, retrospective application is permitted. Management is currently evaluating this ASU to determine its impact on the Company's disclosures. We plan to adopt the amendment in fiscal 2028. In September 2025, the FASB issued ASU 2025-06, Intangibles—Goodwill and Other—Internal-Use Software Costs (Subtopic 350-40): Targeted Improvements to the Accounting for Internal-Use Software. This ASU modernizes outdated guidance for internal-use software costs to reflect current development practices, including agile and iterative methods, replacing the previous waterfall-based m

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) Note 3. Additional Financial Information Supplemental Balance Sheet Information The components of lease assets and liabilities on the consolidated balance sheet were as follows: (in millions) Balance Sheet Classification November 23, 2025 May 25, 2025 Operating lease right-of-use assets Operating lease right-of-use assets $ 3,560.7 $ 3,555.9 Finance lease right-of-use assets Land, buildings and equipment, net 1,372.9 1,294.2 Total lease assets, net $ 4,933.6 $ 4,850.1 Operating lease liabilities - current Other current liabilities $ 213.0 $ 220.1 Finance lease liabilities - current Other current liabilities 14.3 23.8 Operating lease liabilities - non-current Operating lease liabilities - non-current 3,829.7 3,816.9 Finance lease liabilities - non-current Other liabilities 1,682.0 1,583.8 Total lease liabilities $ 5,739.0 $ 5,644.6 Supplemental Cash Flow Information Cash paid for interest and income taxes were as follows: Six Months Ended (in millions) November 23, 2025 November 24, 2024 Cash paid for interest and income taxes were as follows: Interest, net of amounts capitalized $ 92.7 $ 79.7 Income taxes, net of refunds 40.7 28.8 Non-cash investing and financing activities were as follows: Increase in land, buildings and equipment through accrued purchases $ 57.7 $ 39.6 Right-of-use assets obtained in exchange for new operating lease liabilities 1 34.9 349.6 Right-of-use assets obtained in exchange for new finance lease liabilities 76.2 85.4 Net change in right-of-use assets mainly due to reclassification between categories upon modification 121.5 50.4 1 Includes $ 337.7 million from the acquisition of Chuy's in the second quarter of fiscal 2025. We had restricted cash of $ 14.5 million as of November 23, 2025 and May 25, 2025, which represents cash held as security for a standby letter of credit. Restricted cash is included in Prepaid Expenses and Other Current Assets on our

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) H.R. 1., also known as the One Big Beautiful Bill Act (OBBBA), was enacted on July 4, 2025. The legislation included several provisions that impact the timing and magnitude of certain tax deductions, including restoring 100% bonus depreciation for qualifying property and the immediate expensing of domestic research and development costs. We have applied the provisions impacting our financial position for the six months ended November 23, 2025, and will continue to assess the potential impacts on our financial position, results of operations and cash flows as additional guidance from the OBBBA is issued. Note 5. Net Earnings per Share Outstanding stock options, restricted stock and equity-settled performance stock units granted by us represent the only dilutive effect reflected in diluted weighted average shares outstanding, none of which impact the numerator of the diluted net earnings per share computation. Stock options, restricted stock and equity-settled performance stock units excluded from the calculation of diluted net earnings per share because the effect would have been anti-dilutive, were as follows: Three Months Ended Six Months Ended (in millions) November 23, 2025 November 24, 2024 November 23, 2025 November 24, 2024 Anti-dilutive stock-based compensation awards 0.2 0.1 0.1 0.2 Note 6. Segment Information We manage our restaurant brands, Olive Garden, LongHorn Steakhouse, Cheddar's Scratch Kitchen, Chuy's, Yard House, Ruth's Chris, The Capital Grille, Seasons 52, Eddie V's, Bahama Breeze, and The Capital Burger in North America as operating segments. The brands operate principally in the U.S. within full-service dining. We aggregate our operating segments into reportable segments based on a combination of the size, economic characteristics and sub-segment of full-service dining within which each brand operates. We have four reportable segments: (1) Olive Garden, (2) LongHorn Steakhouse,

View on Read The Filing