DARDEN RESTAURANTS Q4 FY26 earnings call DRI

Management framed Darden as a collection of differentiated full-service brands that reduce reliance on any one brand, consumer segment, region or cuisine. Over the past seven years the mix has shifted: in FY2019 Olive Garden was 50% of sales and 55% of segment profit, versus 42% of sales and 47% of segment profit by FY2026. Roughly half the shift came from LongHorn's consistent growth and half from the rest of the portfolio including acquisitions. Four competitive advantages were cited — power of scale (supply chain and proprietary POS/tech stack), data and insights, rigorous strategic planning, and people. FY2026 marked the fifth consecutive year Olive Garden, LongHorn and Yard House all delivered positive SRS.

FY27 guidance calls for total sales of $13.6B-$13.75B on 2.5%-3.5% SRS, EBITDA of $2.26B-$2.29B and EPS of $11.10-$11.35. A deliberate development step-up — 75-80 gross openings plus 11 Bahama Breeze conversions, roughly 20 more openings YoY — creates ~$15M of incremental profit drag ($0.10 EPS) from preopening and year-1 inefficiencies. Excluding that growth cost, management said EAT margin would expand 10-plus bps rather than being flat-to-positive. Q1 is expected to be the lowest-growth quarter given the highest commodity inflation (~4%) and some one-time^📎 near-term costs.

Beef inflation ran close to 12% in FY26, higher than expected. For FY27, beef is guided to low single digits for the full year — mid-to-high single digit in Q1 (wrapping low prior-year inflation) and slight deflation in Q2. Chicken contracts have kept Darden's costs roughly flat over three years versus ~5% annual market inflation. Seafood is expected high single digit in the front half, normalizing later. Management repeatedly credited scale, its own distribution network and inventory ownership, and direct supplier relationships (supply chain outperforming the market by mid-to-high single-digit points over multiple years) for insulating against volatility.

Olive Garden's new Lighter Portions section — now part of the core menu, not marketed — runs low-to-mid single digit total preference, skewed to weekend lunch where lunch menus had been eliminated years ago. It created an 80 bps check mix headwind in Q4 (expected to peak there, moderating to ~10-15 bps future impact) and ~50 bps of margin investment. Management is also adding more protein (e.g., Calabrian Steak & Shrimp Bucatini, a hot honey chicken appetizer) while holding value scores. Olive Garden made a meaningful speed-of-service improvement in the quarter with rising pace-of-meal scores, and its core guests were the fastest-growing cohort.

LongHorn posted a 9.5% Q4 comp, exceeding the industry SRS benchmark by 810 bps, and has grown SRS more than 20% over three years, lifting AUVs to $5.6M. Drivers cited: a decade of food-quality investment, improving service, highest-ever 'steaks cooked correctly' scores, strong relative value amplified by high retail beef inflation, and a viral social post around the return of LongHorn's Flo's Filet ('land'), which sold out in half the time of the prior year on higher volume. Management sees some trade-in from retail (consumers substituting for expensive grocery beef) and modest trade-down from fine dining.

The Other Business segment (Yard House, Cheddar's, Season 52, Chuy's) posted its best comp performance in a couple of years at 4.6% SRS, with all brands positive and Yard House and Cheddar's leading. Yard House grew total sales $95M for the year on 5.6% SRS, helped by three years of menu work on burgers, pizza and taco platforms that are easier to execute and score higher on satisfaction. Chuy's is on the back end of its integration, focused on recipe consistency. Segment profit margin was 17.9%, up 40 bps. Bahama Breeze (15 permanent closures) is being converted to other brands (11 conversions planned in FY27).

Darden's international growth is franchising. Partners in Spain and India opened first locations during FY26, and a new Canada partner opens its first restaurant the following week. FY27 is expected to be Darden's largest year ever for international openings. Development deals signed in June 2025 — 40 restaurants in India, 40 in Spain, 30 in Canada — are each opening within roughly 12 months of signing, a first for Darden. Management characterized the EAT/EPS contribution as small (single-digit pennies per year) but consistently positive and a durable pipeline.

Darden returned $310M in Q4 ($172M dividends, $138M buybacks) and $1.4B for FY26 ($693M dividends, $675M buybacks). The board approved an 8% dividend increase to $1.62/quarter ($6.48 annualized). Adjusted debt-to-EBITDA ended FY26 at 2.1x, within the 2.0-2.5x target and consistent with investment-grade. FY27 capex of ~$875M splits into ~$25M conversions, ~$350M maintenance/IT, and ~$500M new-unit growth (including pipeline build for the following year). Management said new-restaurant cash-on-cash returns are running ahead of expectations with IRRs exceeding cost of capital by multiple hundreds of bps.