Darden Restaurants, Inc.

The filings show a company growing its top line faster than its earnings in the most recent quarter. Full-year fiscal 2025 revenue was $12.08 billion, up about 6.1% from $11.39 billion, and operating income was $1.36 billion, up about 3.8% from $1.31 billion. That means operating margin slipped from roughly 11.5% to roughly 11.3%, a pattern that continued into the current year's third quarter. Management's narrative centers on guest traffic and pricing. Olive Garden's third-quarter U.S. same-restaurant sales rose 3.6% on average check, while guest counts fell 0.4%. LongHorn Steakhouse produced the strongest same-restaurant performance, with guest counts up 3.3% in the quarter. Fine Dining grew more slowly, with same-restaurant sales up 2.1% in the quarter. The Bahama Breeze count fell from 43 restaurants in February 2025 to 27 in February 2026, and the total company-owned count rose to 2,196 from 2,165. Management's fiscal 2026 outlook of about 9.5% sales growth is well above the 7.8% nine-month figure, and it includes roughly 2.0% from the fifty-third week. Readers may want to look at how the Chuy's contribution and the Bahama Breeze closures change same-restaurant comparisons, since both are excluded from those metrics. They may also want to compare future operating margin trends with the nine-month figure of about 11.2%, which the impairment gain partly supports.

Catalyst.Growth is coming mainly from the October 2024 Chuy's acquisition, 31 net new restaurants, and same-restaurant sales. In the third quarter of fiscal 2026 (ended February 22, 2026), sales rose 5.9% to $3.35 billion, and blended same-restaurant sales increased 4.2%. For the first nine months, sales reached $9.49 billion, up 7.8%, with LongHorn Steakhouse up 9.8% and Other Business up 11.8%. Management expects fiscal 2026 sales growth of about 9.5%, same-restaurant sales growth of about 4.5%, roughly 70 new restaurants, and capital expenditures of $750 to $775 million. Bahama Breeze is being closed or converted, and the Olive Garden Canada restaurants were sold in July 2025.

Hidden risk.The most easily missed tension is margin. Third-quarter total costs rose 7.3% against 5.9% sales growth, and food and beverage costs grew 7.7%. Operating income fell to $406.4 million from $418.2 million, which lowered operating margin to about 12.1% from about 13.2%. Net earnings fell 5.1% to $306.8 million, and diluted EPS from continuing operations was $2.68 versus $2.74. Impairments and losses on disposal were $25.1 million in the quarter versus $0.1 million a year earlier, tied to the 14 Bahama Breeze restaurants being closed. Net interest rose 9.0% in the quarter, reflecting the senior notes issued to help fund the Chuy's acquisition. The nine-month operating income increase of 8.8% is helped by a net gain of $19.8 million in the impairment line.