Darden Stock Rises as Strong Sales Outweigh Minor Profit Miss
Olive Garden parent beats revenue expectations on robust consumer demand, easing investor concerns over a slight earnings shortfall and cost pressures.
Shares of Darden Restaurants (NYSE: DRI) gained ground on Thursday after the company reported fiscal second-quarter results that showed resilient consumer demand at its flagship restaurant chains, helping investors look past a minor miss on profitability.
The stock climbed more than 3% in trading after the Orlando-based restaurant operator announced that strong sales at LongHorn Steakhouse and Olive Garden fueled a revenue beat. For the quarter ending in November, Darden posted total sales of $3.1 billion, a 7.3% increase from the prior year and ahead of analyst estimates of $3.07 billion. This performance was driven by a consolidated same-restaurant sales increase of 4.3%.
Despite the top-line success, adjusted earnings per share came in at $2.08, a 2.5% increase year-over-year but just shy of the consensus estimate of $2.09. The slight miss was attributed to persistent inflation and strategic investments.
However, the market's positive reaction was buoyed by management's confident tone. "The second quarter exceeded our top-line expectations as every segment delivered positive same-restaurant sales," said Darden President & CEO Rick Cardenas in the company's earnings announcement. "Our restaurant teams did a great job of being brilliant with the basics, driving record, or near-record, guest satisfaction scores across all our brands."
Leading the portfolio, LongHorn Steakhouse continued its impressive run with a same-restaurant sales surge of 5.9%. Olive Garden, Darden’s largest brand, also demonstrated its staying power with a sales increase of 4.7%, indicating that consumers are still prioritizing the casual dining experience despite broader economic pressures. The company’s Fine Dining segment also saw growth, with sales up 2.4%.
Cardenas addressed the challenging cost environment directly. "Despite facing significant commodity headwinds, we leveraged our four competitive advantages to provide strong value for our guests and we made appropriate investments in the business to ensure long-term success," he stated. The company is forecasting total inflation of 3% to 3.5% for the fiscal year, with particular pressure from beef and labor costs.
Looking ahead, Darden updated its fiscal 2026 outlook. It now anticipates total sales of approximately $12.8 billion and adjusted earnings per share in the range of $10.50 to $10.70. This guidance appears to have reassured investors of the company's stable footing. The analyst consensus price target stood near $220 prior to the report, suggesting confidence in the company's long-term value.
With a market capitalization over $21 billion and a forward P/E ratio of approximately 17.5, Darden remains a bellwether for the casual dining industry. The company's ability to drive traffic and maintain customer loyalty, even while implementing modest price increases, is being closely watched as a key indicator of consumer health. The positive stock movement suggests investors believe Darden's powerful brands and operational efficiency are enough to navigate the uncertain economic climate ahead.