Darden rises 1% on Q3 beat, FY2026 guidance hike
Restaurant chain reports same-restaurant sales growth of 4.2% with LongHorn Steakhouse leading at 7.2%
Darden Restaurants shares rose about 1% on Thursday after the casual dining operator beat revenue expectations and lifted its full-year guidance, demonstrating resilience amid ongoing consumer uncertainty. The parent of Olive Garden and LongHorn Steakhouse reported fiscal third-quarter adjusted earnings per share of $2.95, matching analyst estimates, while revenue of $3.35 billion topped the consensus forecast of $3.33 billion.
Total sales for the quarter increased 5.9% to $3.345 billion, driven by a blended same-restaurant sales increase of 4.2% and the addition of 31 net new restaurants. LongHorn Steakhouse emerged as the standout performer with same-restaurant sales growth of 7.2%, followed by Olive Garden at 3.2%. Fine dining concepts posted a 2.1% increase, while other business segments grew 3.9%.
The Orlando-based company raised its fiscal 2026 outlook, now projecting adjusted diluted earnings per share of $10.57 to $10.67, up from previous guidance. Management expects total sales growth of approximately 9.5%, which includes about 2 percentage points from a 53rd week in the fiscal year. The guidance update assumes same-restaurant sales growth of roughly 4.5% and the opening of approximately 70 new restaurants.
"Our strong third-quarter results reflect the resilience of our brands and the execution of our strategy," the company said in its earnings announcement. Darden also demonstrated its commitment to shareholder returns, declaring a quarterly dividend of $1.50 per share, payable May 1, and completing $127 million in stock repurchases during the quarter.
The stock opened at $202.58, up from Wednesday's close of $200.71, and traded between an intraday low of $199.34 and high of $204.00. Analysts have maintained a bullish outlook on the shares, with Bank of America keeping a buy rating and a $262 price target, while Citigroup also rates the stock a buy with a $235 target. Mizuho upgraded Darden to outperform in January with a $235 target.
Darden's performance contrasts with broader challenges in the restaurant sector, where many casual dining chains have struggled with inflation pressures and shifting consumer preferences. The company's ability to drive traffic across its portfolio, particularly at LongHorn, suggests its value proposition remains attractive to consumers despite economic headwinds.
Looking ahead, management said it expects total inflation of approximately 3.5% for fiscal 2026 and plans capital spending of $750 million to $775 million. The company's effective tax rate is projected at around 12.5%. Darden will host its investor conference call at 8:30 am ET Thursday to discuss the results in detail.