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1. Company Snapshot

1.a. Company Description

Darden Restaurants, Inc., through its subsidiaries, owns and operates full-service restaurants in the United States and Canada.As of May 29, 2022, it owned and operated 1,867 restaurants, which included 884 under the Olive Garden brand, 546 under the LongHorn Steakhouse brand name, 172 under the Cheddar's Scratch Kitchen brand, 85 under the Yard House brand name, 62 under The Capital Grille brand, 45 under the Seasons 52 brand name, 42 under the Bahama Breeze brand, 28 under the Eddie V's Prime Seafood brand name, and 3 under the Capital Burger brand; and franchised 60 restaurants comprising 35 under the Olive Garden brand, 18 under the LongHorn Steakhouse brand name, 4 under the Cheddar's Scratch Kitchen brand, 2 under The Capital Grille brand name, and 1 under the Bahama Breeze brand.Darden Restaurants, Inc.was founded in 1968 and is based in Orlando, Florida.

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1.b. Last Insights on DRI

Darden Restaurants' recent performance was negatively impacted by its Q1 earnings miss, with adjusted EPS of $1.97 falling short of the $2 consensus analyst forecast. The company's revenue beat was overshadowed by margin pressures from rising food and labor costs, which are expected to limit further expansion. Despite strong same-restaurant sales growth at Olive Garden and LongHorn Steakhouse, weakness in fine dining and minor brands detracted from results. The company continues to return capital to shareholders through a 3% dividend yield and ongoing share buybacks. (Source: LSEG)

1.c. Company Highlights

2. Darden Restaurants' Strong Q1 FY2026 Earnings Exceed Expectations

Darden Restaurants reported a robust first quarter, with total sales reaching $3 billion, a 10% jump from the previous year. Adjusted diluted net earnings per share rose to $1.97, a 12.6% increase year-over-year, slightly below the estimated $2. The company's financial performance was driven by a 4.7% same-restaurant sales growth, fueled by solid performances across all four segments.

Publication Date: Sep -20

📋 Highlights
  • Total Sales & Earnings Growth:: Darden reported 10% YoY total sales growth to $3 billion and 12.6% increase in adjusted diluted EPS to $1.97.
  • Olive Garden Performance:: Same-restaurant sales rose 5.9%, driven by new menu items and 40 bps contribution from delivery fees, with traffic up 3.6%.
  • LongHorn Steakhouse Resilience:: Achieved 5.5% same-restaurant sales growth, maintaining top-quartile industry performance for 13 consecutive quarters.
  • Unit Expansion Plans:: Aims to open 65 new restaurants in fiscal 2026, primarily Olive Garden and LongHorn, raising total sales growth guidance to 7.5-8.5%.
  • Delivery & Inflation Strategy:: First-party delivery grew beyond pre-campaign levels at Olive Garden, while commodities inflation is expected to peak at 3-4% in Q2.

Segment Performance

Olive Garden led the growth with a 5.9% same-restaurant sales increase, driven by compelling food offerings and affordability initiatives. LongHorn Steakhouse achieved a 5.5% same-restaurant sales growth, maintaining its top quartile industry performance. The "Other Businesses" segment, including Yard House, Cheddar's Scratch Kitchen, and Seasons52, also saw a 3.3% same-restaurant sales increase.

Guidance and Outlook

Darden raised its total sales growth guidance to 7.5% to 8.5% for fiscal 2026, reflecting first-quarter outperformance and ongoing new unit growth. The company expects to open approximately 65 new restaurants, primarily driven by Olive Garden and LongHorn Steakhouse. Despite concerns about consumer spending, Darden remains optimistic, citing strong August retail sales and a shift towards more purposeful dining experiences.

Valuation and Metrics

With a P/E Ratio of 19.6, P/S Ratio of 1.75, and EV/EBITDA of 14.37, Darden's valuation appears reasonable. The company's ROE of 49.94% and ROIC of 11.97% indicate strong profitability. Analysts estimate next year's revenue growth at 8.5%, suggesting a positive outlook. The actual EPS of $1.97 was slightly below estimates, but the company's guidance and outlook suggest a continued strong performance.

Operational Highlights

Darden's first-party delivery strategy continues to be successful, with Olive Garden and Cheddar's experiencing growth. The company is exploring expanding this to another brand in Q3. Labor costs increased 4.5% in the first quarter, driven by inflation and higher traffic, but productivity improved year-over-year due to investments in labor.

Future Prospects

Darden anticipates modest margin expansion for the full year, prioritizing investments in marketing and guest experience over aggressive price increases. The company expects commodity inflation to peak in Q2 and gradually decline through the year, contributing to a 3% to 4% overall increase for the year.

3. NewsRoom

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American Century Companies Inc. Sells 3,017 Shares of Darden Restaurants, Inc. $DRI

Dec -03

Source: defenseworld.net

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Berry Wealth Group LP Acquires 287 Shares of Darden Restaurants, Inc. $DRI

Nov -29

Source: defenseworld.net

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Darden Restaurants to Host Fiscal 2026 Second Quarter Conference Call on December 18

Nov -20

Source: prnewswire.com

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Yum Triples Darden's Margins by Franchising While Darden Buys More Restaurants

Nov -20

Source: 247wallst.com

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There are fast food companies insulated from the weakening consumer: Guggenheim's Greg Francfort

Nov -05

Source: youtube.com

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2 Restaurant Stocks Struggling After Chipotle's Dismal Results

Oct -30

Source: schaeffersresearch.com

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Darden Restaurants, Inc. $DRI Shares Sold by Allspring Global Investments Holdings LLC

Oct -23

Source: defenseworld.net

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Darden Restaurants: Growth Should Start To Reaccelerate (Rating Upgrade)

Oct -22

Source: seekingalpha.com

4. Business Breakdown

4.a. Revenues by Country

4.b. Revenues by Segment

5. Expected revenues mid-term growth (4.20%)

6. Segments

Olive Garden

Expected Growth: 4.5%

Olive Garden's 4.5% growth is driven by increased off-premise sales, successful menu innovation, and effective marketing campaigns. Additionally, the brand's focus on convenience, value, and customer experience has resonated with consumers, leading to increased traffic and sales. Furthermore, Darden's efforts to optimize labor costs and improve operational efficiency have also contributed to the segment's growth.

LongHorn Steakhouse

Expected Growth: 4.2%

LongHorn Steakhouse's 4.2% growth is driven by effective menu engineering, increased focus on off-premise sales, and targeted marketing efforts. Additionally, the brand's emphasis on quality, value, and convenience resonates with customers, leading to increased traffic and sales. Furthermore, Darden's operational efficiencies and cost savings initiatives have also contributed to the segment's growth.

Other

Expected Growth: 3.8%

Darden Restaurants' 3.8% growth in 'Other' segment is driven by increased sales from its smaller brands, including The Capital Grille, Bahama Breeze, and Eddie V's, as well as growth in its catering and delivery services. Additionally, menu price increases and effective cost management have contributed to the segment's growth.

Fine Dining

Expected Growth: 3.5%

Fine Dining from Darden Restaurants, Inc. achieves 3.5% growth driven by increasing demand for upscale experiences, effective menu engineering, and strategic pricing. Additionally, investments in digital marketing and loyalty programs enhance customer engagement, while operational efficiencies and cost savings initiatives support profitability.

7. Detailed Products

Olive Garden

Casual dining restaurant chain serving Italian-American cuisine

LongHorn Steakhouse

Casual dining restaurant chain serving steak and American cuisine

Cheddar's Scratch Kitchen

Casual dining restaurant chain serving classic American comfort food

Yard House

Upscale casual dining restaurant chain serving American cuisine and craft beer

The Capital Grille

Upscale steakhouse restaurant chain serving dry-aged steaks and fine wines

Bahama Breeze

Island-inspired restaurant chain serving Caribbean-inspired cuisine

Seasons 52

Upscale casual dining restaurant chain serving seasonal American cuisine

8. Darden Restaurants, Inc.'s Porter Forces

Forces Ranking

Threat Of Substitutes

Darden Restaurants, Inc. faces moderate threat from substitutes, as customers have various dining options available. However, the company's strong brand recognition and loyalty programs help mitigate this threat.

Bargaining Power Of Customers

Darden Restaurants, Inc. faces high bargaining power from customers, as they have numerous dining options and can easily switch to competitors. The company must focus on providing excellent customer service and quality food to retain customers.

Bargaining Power Of Suppliers

Darden Restaurants, Inc. has a low bargaining power of suppliers, as it is a large company with significant purchasing power. This allows the company to negotiate better prices and terms with its suppliers.

Threat Of New Entrants

Darden Restaurants, Inc. faces a low threat of new entrants, as the restaurant industry has high barriers to entry, including significant capital requirements and regulatory hurdles.

Intensity Of Rivalry

Darden Restaurants, Inc. operates in a highly competitive industry, with many established players and new entrants vying for market share. The company must focus on differentiating itself through its brands and customer experience to maintain its market position.

9. SWOT Analysis

Strength

Weaknesses

Opportunities

Threats

10. Capital Structure

10.a. Balance Sheet

10.b. Weighted Average Cost of capital

Value
Debt Weight 68.55%
Debt Cost 3.95%
Equity Weight 31.45%
Equity Cost 10.28%
WACC 5.94%
Leverage 218.00%

11. Quality Control: Darden Restaurants, Inc. passed 7 out of 9 key points

12.a Historical Valuation

12.b Price/Earnings Ratio

12.c Margin Valuation

12.d Peers Valuation

Peers Group Analysis

Stock-Card
Darden

A-Score: 6.3/10

Value: 3.9

Growth: 6.0

Quality: 5.2

Yield: 6.0

Momentum: 8.0

Volatility: 8.7

1-Year Total Return ->

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Stock-Card
Wendy's

A-Score: 5.6/10

Value: 6.3

Growth: 5.9

Quality: 4.8

Yield: 9.0

Momentum: 0.0

Volatility: 7.3

1-Year Total Return ->

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Domino's Pizza

A-Score: 5.5/10

Value: 4.4

Growth: 6.3

Quality: 6.0

Yield: 3.0

Momentum: 5.0

Volatility: 8.3

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Texas Roadhouse

A-Score: 5.5/10

Value: 2.6

Growth: 8.2

Quality: 5.7

Yield: 4.0

Momentum: 4.0

Volatility: 8.3

1-Year Total Return ->

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Stock-Card
Brinker

A-Score: 5.3/10

Value: 5.8

Growth: 8.0

Quality: 5.4

Yield: 0.0

Momentum: 8.5

Volatility: 4.3

1-Year Total Return ->

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Stock-Card
Wingstop

A-Score: 4.2/10

Value: 2.5

Growth: 9.4

Quality: 6.3

Yield: 2.0

Momentum: 1.5

Volatility: 3.3

1-Year Total Return ->

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Peers Metrics

12.e Scoring Insights

12.f DCF BETA

Parameters

Short Term Growth

Short term Time

Long-Term Growth

WACC

Target Price

176.26$

Current Price

176.26$

Potential

-0.00%

Expected Cash-Flows