Can you discuss the relationship between pricing and inflation for Q4 and into FY27, given past meaningful gaps?

For Q4, pricing is expected to catch up to inflation, both in the mid-3s, which will lead to meaningful margin growth. Management notes they have significant flexibility to price due to cumulative underpricing of inflation over several years, allowing them to cover costs without necessarily impacting guests. “As we get to Q4, we expect our pricing to catch up to inflation. We expect inflation to be -- overall inflation to be in the mid-3s and our pricing to be in that mid-3s. And I think you're -- and if you look at our implied guide for Q4, you can see the power of that, right?”

What explains the same-store sales growth gap between LongHorn and Olive Garden, and do you expect it to widen or narrow?

Rick attributes LongHorn's strength to consistent quality, value (underpriced beef), and culinary execution. Raj adds that Olive Garden's decision to run 3 fewer weeks of price-pointed promotions impacted its comps by about 100 basis points. They are not concerned about the gap between brands as long as both grow and outperform the industry, expecting convergence over the long term. “LongHorn has been on a very long path to continue to improve their business, to make sure that the guests get a great quality product every day... They've also significantly underpriced beef costs in the grocery store over time. So the guests are getting an amazing value when they go to LongHorn to eat.”

What is Darden's view on the impact of increasing gas prices on consumer behavior, especially given recent strength?

Rick states that historical data shows a weak correlation between gas prices and restaurant spending, with GDP being a stronger driver. While sudden, significant price increases can cause a brief pullback (a few weeks), Darden is not overly concerned and can react if high prices persist. They saw minimal impact in Q3 despite recent spikes. “the data doesn't show a really strong correlation between gas prices and restaurant spending. I would say historically higher gas prices had more of an impact on durable goods and less of an impact on services.”

DRI

Darden (DRI) Q3 FY26 earnings call: guidance and Q&A

Earnings call· Feb 2026 (Q3 FY26)· Consumer Discretionary· Mar 19, 2026

Source: earnings call transcript

Executive summary

Darden Q3 FY26 — Strong Sales Growth and Widening Industry Outperformance

Darden delivered a robust Q3 FY26, marked by significant sales growth and continued outperformance against industry benchmarks, despite weather headwinds and commodity inflation. The company's strategic focus on operational execution, value offerings like Olive Garden's lighter portion menu, and strong team member retention drove positive momentum across its brand portfolio. Management remains confident in its ability to grow sales, manage costs, and return capital, while planning for continued unit expansion and strategic conversions in FY27.

Highlights

Total sales grew 5.9% to $3.3 billion, driven by 4.2% same-restaurant sales growth.
Same-restaurant sales exceeded the industry benchmark by 540 basis points, with all four largest brands outperforming by over 400 basis points.
Adjusted diluted EPS increased 5.4% to $2.95, in line with expectations.
Returned $300 million to shareholders this quarter through $173 million in dividends and $127 million in share repurchases.
Olive Garden's lighter portion menu rollout is resonating, driving increased frequency and high value/portion size ratings.

Concerns

Winter weather negatively impacted same-restaurant sales by approximately 100 basis points for the quarter.
Food and beverage expenses were 50 basis points higher primarily due to approximately 5% commodities inflation, driven by elevated beef costs.
Restaurant level EBITDA was 21%, 30 basis points lower than last year, as pricing was 40 basis points below inflation.

Guidance & targets

Category	Target	Timeline	Confidence
Total Sales Growth	approximately 9.5% high materiality	FY26	High
Same-Restaurant Sales Growth	approximately 4.5% high materiality	FY26	High
New Restaurant Openings	approximately 70 medium materiality	FY26	High
Commodities Inflation	approximately 4% high materiality	FY26	High
Effective Tax Rate	approximately 12.5% medium materiality	FY26	High
Adjusted Diluted Net Earnings Per Share	$10.57 to $10.67 high materiality	FY26	High
Total Sales Growth	13% to 14.5% high materiality	Q4 · FY26	High
Same-Restaurant Sales Growth	3.5% to 5% high materiality	Q4 · FY26	High
Adjusted Diluted Net Earnings Per Share	$3.59 and $3.69 high materiality	Q4 · FY26	High
New Restaurant Openings	between 75 and 80 medium materiality	FY27	Medium
Capital Expenditure	approximately $850 million medium materiality	FY27	Medium
Effective Tax Rate	approximately 13.5% medium materiality	FY27	Medium
Total Interest Expense	approximately $200 million medium materiality	FY27	Medium
Same-Restaurant Sales Growth	1.5% to 3.5% high materiality	Long-term	High
New Restaurant Growth	3% to 4% high materiality	Long-term	High
EAT Margin	flat to positive 20 basis points high materiality	Long-term	High
Total Shareholder Return	10% to 15% high materiality	Long-term	High

Segment performance

Segment	Revenue	YoY	QoQ	Margin
Olive Garden Total sales increased by 4.7%, driven by strong same-restaurant sales growth and new restaurant additions. Delivered strong segment profit margin despite approximately 40 basis points of margin investment related to the lighter portion menu and delivery fees. Achieved new all-time high guest satisfaction scores for service and overall satisfaction. Same-restaurant sales growth: 3.2%Segment profit margin change YoY: -10 bpsNet new restaurants: 17Same-restaurant sales outperformance vs industry: 440 bps	4.7%	—	—	23%
LongHorn Steakhouse Total sales increased by 11.2%, driven by strong same-restaurant sales growth and new restaurant additions. Sustained sales and traffic outperformance. Delivered strong segment profit margin despite elevated beef costs. Recognized as one of the best places to work by Glassdoor. Same-restaurant sales growth: 7.2%Net new restaurants: 22Same-restaurant sales outperformance vs industry: 840 bpsSame-restaurant traffic outperformance vs industry: 640 bps	11.2%	—	—	18.6%
Fine Dining Total sales increased by 4.3%, driven by positive same-restaurant sales across all three brands. Performance was boosted by strong private dining sales at The Capital Grille and Eddie V's, and the continued success of the 3-course fixed-price menu at Ruth's Chris Steak House. Same-restaurant sales growth: 2.1%Segment profit margin change YoY: -50 bpsNet new restaurants: 2	4.3%	—	—	22%
Other Business Sales increased by 3.2% with positive same-restaurant sales, partially offset by permanent closure of Bahama Breeze restaurants. Strong performance at Yard House and positive same-restaurant sales at Cheddar's Scratch Kitchen and Seasons 52. Same-restaurant sales growth: 3.9%Segment profit margin change YoY: flat	3.2%	—	—	15.6%

DRI operating KPIs by quarter

DRI operating KPIs stated on its earnings calls, by fiscal quarter
KPI	This call Feb 2026 Q3 FY26	May 2026 Q4 FY26	Change vs prior quarter
Employees	200K We've got 200,000 employees in this company and only about 1,000 of them work here. Source: earnings call transcript	200K+ In closing, I want to thank our over 200,000 team members for everything they do. Source: earnings call transcript	—

Operating figures the company stated on at least two of the calls shown, checked against each call's transcript. Click a figure to read the sentence. A dash means it was not stated that quarter.

Product announcements

Product	Type	Timeline
Lighter Portion Section	launch	January 2026
Four-Cheese Manicotti	update	February 2026
Ravioli di Portobello and Braised Beef Tortelloni	update	Q3 FY26
Buy One, Take One	expansion	Q3 FY26

Deals & partnerships

Bahama Breeze Bahama Breeze Conversions 12 to 18 months

14 Bahama Breeze locations will be converted to other Darden brands over the next 12 to 18 months. Team members from conversion locations will be kept with the new brand or other Darden brands.

Bahama Breeze Bahama Breeze Closures

14 Bahama Breeze locations will permanently close. A majority of team members, including more than 70% of managers, impacted by the permanent closures have already been placed in new roles within the Darden portfolio.

Risks & headwinds

Winter Weather Impact Q3 FY26

Approximately 100 basis points negative impact on same-restaurant sales

Mitigation:Restaurant teams did a great job managing the business through the volatility created by weather.

Elevated Beef Costs Q3 FY26

Approximately 5% commodities inflation for the quarter

Mitigation:Measured approach in reacting to elevated beef costs; 85% fixed-price coverage for Q4 FY26.

Gas Price Volatility Short-term

Potential for brief pullback in restaurant spending with sudden and significant price increases

Mitigation:Ability to react as needed if prices remain high; historical data shows weak correlation with restaurant spending, GDP is a bigger driver.

Industry Competition Ongoing

Widening gap between winners and losers in casual dining segment

Mitigation:Continued focus on operational execution, value, and guest satisfaction to maintain outperformance and be beneficiaries if competitors close.

What to watch in Q4 FY26

Q4 Same-Restaurant Sales Growth

Q4 FY26 (results released June 25)

Current 3.5% to 5% (implied guidance)

Target Within or above guided range

Why it matters

Verifies the company's ability to lap tougher comparisons and maintain momentum.

For the fourth quarter specifically, our annual outlook implies total sales growth of 13% to 14.5%, which includes the extra fiscal week. Same-restaurant sales growth of 3.5% to 5% incorporates the strong trends we have seen through the first 3 weeks of March.

Find out whether DRI delivers this. Inve re-checks your case every morning.

Q&A highlights

How is Darden able to guide for strong Q4 same-store sales (3.5%-5%) despite much tougher comparisons, particularly at Olive Garden?

Management attributes the strong guidance to continued initiatives like Buy One, Take One (extended by a week with more media support) and first-party delivery, which were also drivers last year. They build plans based on these initiatives and macro factors, feeling confident in their estimates.

“We build a plan and we build an estimate based on the initiatives we have in place, taking into consideration the macro factors. And I think we feel good about what we're guiding here.”

asked by Brian Bittner · answered by Rajesh Vennam

2 min read 5 chapters

Detailed narrative

Q3 Performance Highlights

Darden's Q3 FY26 saw Olive Garden achieve 3.2% same-restaurant sales (SSS) despite 3 fewer weeks of price-pointed promotions, driven by strong operational execution and record guest satisfaction. The brand successfully rolled out a lighter portion menu, adding 7 dishes under $15, which is resonating with guests and driving increased frequency.

LongHorn Steakhouse delivered 7.2% SSS growth, attributed to its focus on quality, simplicity, and culture, with managers undergoing culinary recertification. The Fine Dining segment grew 2.1% SSS, with all three brands positive, benefiting from strong private dining sales and Ruth's Chris's successful 3-course fixed-price menu.

The Other Business segment, including Yard House and Cheddar's, also contributed with 3.9% SSS growth.

Weather Impact and Sales Momentum

The company experienced strong sales momentum throughout the quarter, further expanding its positive gap to the industry benchmark by 540 basis points. However, winter weather negatively impacted same-restaurant sales by approximately 100 basis points, with over 40% of restaurants temporarily closing in January during winter storm Fern.

Despite this, same-restaurant sales adjusted for weather were greater than 5%, demonstrating robust underlying performance in what is traditionally a high-volume quarter. Management highlighted the teams' effective management of business through this volatility.

Strategic Brand Conversions

Darden announced the completion of its exploration of strategic alternatives for the Bahama Breeze brand. This decision will result in the permanent closure of 14 locations and the conversion of the remaining 14 to other Darden brands over the next 12 to 18 months.

The company believes these conversion locations are valuable sites that will benefit other brands in its portfolio. A key focus during this transition is team member support, with a majority of impacted team members, including over 70% of managers from closed locations, already placed in new roles within Darden.

Labor Productivity and Retention

The company reported historically high team member and manager retention levels across its businesses, which are crucial for consistently delivering exceptional guest experiences. This low turnover contributes to improved labor productivity by reducing the need for new hiring and training.

Management emphasized that this strong employment proposition, offering growth opportunities and life-changing manager jobs, helps maintain a competitive advantage. The company aims to continue improving labor productivity, potentially investing some gains back into the guest experience through service, pricing, or food quality.

AI and Operational Efficiency

Darden is leveraging AI and machine learning to enhance operational efficiency, particularly by providing managers with better forecasts for scheduling and food ordering. This allows managers to spend less time on administrative tasks and more time with guests and team members.

In the support center, AI is being used to accelerate project initiation and code writing, leading to savings and faster tool development for restaurant teams. The company views AI as a tool to amplify the expertise of its people and improve the guest experience, rather than replacing jobs, especially for its 200,000 restaurant employees.

Summary of the company's earnings call; see how call summaries are prepared. Not investment advice.