Darden Restaurants has reported impressive sales growth for its second quarter, driven particularly by robust performance at its flagship brands, Olive Garden and LongHorn Steakhouse. The company’s results reflect a strategic response to the current economic climate, where diners are increasingly seeking value dining options. This has allowed Darden to raise its full-year revenue growth outlook for the second consecutive quarter, although it maintained its earnings projections.
In a statement, CEO Rick Cardenas expressed satisfaction with the results, noting, “The second quarter exceeded our top-line expectations as every segment delivered positive same-restaurant sales.” Following the announcement, Darden’s shares saw a nearly 3% uptick in morning trading.
Analyzing the figures, Darden’s adjusted earnings per share came in at $2.08, slightly below Wall Street’s expectations of $2.10. However, total revenue rose to $3.1 billion, surpassing projections of $3.07 billion. The company reported a net income of $237.2 million, or $2.03 per share, marking an increase from the previous year’s $215.1 million, or $1.82 per share. Despite the favorable sales growth, CFO Raj Vennam noted that rising ingredient costs, particularly for beef, have impacted restaurant-level margins.
Total net sales were up by 7.3%, with same-store sales climbing by 4.3%, surpassing estimates of 3%. Darden has managed to attract diners amid a sluggish growth trend in the broader restaurant industry by increasing menu prices at a slower rate than inflation while introducing value-oriented promotions.
In terms of demographics, Cardenas indicated a shift in consumer behavior, noting that high-income diners have been trading down to casual dining experiences, while there was a slight decline in traffic from those earning under $50,000. Interestingly, there was an increase in customer visits from patrons aged 55 and older.
Olive Garden, which constitutes about 44% of Darden’s sales, reported a 4.7% growth in same-store sales. The Italian restaurant’s success was attributed to the popularity of its $13.99 Never Ending Pasta Bowl promotion, along with a growing delivery service. To cater to cost-sensitive consumers, Olive Garden also introduced smaller portion sizes at lower price points for certain dishes. By the end of the quarter, 40% of locations offered these lighter portions, with an additional 20% set to add them in the early part of the next fiscal quarter.
LongHorn Steakhouse experienced even stronger growth, with same-store sales up by 5.9%. Despite its higher average check price, the steakhouse attracted a significant number of diners earning less than $50,000, as competitive beef prices made dining out appealing compared to grocery shopping. Meanwhile, the company’s other segments recorded a 3.1% increase in same-store sales, driven by strong performance at Yard House.
Darden’s fine-dining establishments, including Ruth’s Chris and The Capital Grille, achieved a modest same-store sales growth of 0.8%, a rare highlight amid struggles in the fine dining sector. The company responded to this trend by reinstating an appealing $55 three-course meal deal at Ruth’s Chris, a promotional strategy that Cardenas described as both attractive for diners and profitable for the business.
Looking ahead, Darden has revised its total sales growth projection for fiscal 2026 to a range of 8.5% to 9.3%, an increase from the previous estimate of 7.5% to 8.5%. This adjustment accounts for an additional week in the fiscal year, which is expected to contribute approximately 2% to the sales growth. The company has also adjusted its inflation expectations to a higher end of 3.5%, which might pressure margins, leading it to reaffirm its adjusted earnings forecast of between $10.50 to $10.70 per share.
