Darden Restaurants, Inc. (DRI) Q4 2025 Earnings Call Transcript
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Overview
The earnings call reveals strong financial performance with a 10.6% sales increase and improved margins. The optimistic guidance, increased dividend, and share repurchases are positive indicators. The Q&A highlights strategic growth plans and a positive market outlook, despite some uncertainties around Uber Direct's impact and promotional strategies. Overall, the positive financials and shareholder returns outweigh the risks, suggesting a positive stock price movement.
Key Financial Performance
Total Sales $3.3 billion, 10.6% increase year-over-year driven by same-restaurant sales growth of 4.6%, acquisition of 103 Chuy's restaurants, and addition of 25 net new restaurants.
Adjusted Diluted Net Earnings Per Share $2.98, 12.5% increase year-over-year.
Adjusted EBITDA $582 million.
Dividends Returned to Shareholders $215 million, consisting of $164 million in dividends and $51 million in share repurchases.
Food and Beverage Expenses 60 basis points lower year-over-year due to better-than-expected commodities inflation at approximately 1.5%.
Restaurant Labor Expenses 10 basis points lower year-over-year due to productivity gains offsetting higher performance-based compensation and total labor inflation of approximately 3.5%.
Restaurant Expenses 20 basis points higher year-over-year driven by brand mix and first-party delivery impact at Olive Garden.
Marketing Expenses Flat at 1.3% of sales.
EBITDA Margin 21.6%, improving 50 basis points year-over-year.
Segment Profit Margin for Olive Garden 23.8%, 100 basis points higher than last year.
Segment Profit Margin for LongHorn 20.1%, 80 basis points above last year.
Total Sales for Fine Dining Segment Increased 2.3% year-over-year.
Total Sales for Other Business Segment Increased 22.4% due to Chuy's acquisition and positive same-restaurant sales at Yard House and Cheddar's.
Adjusted Earnings from Continuing Operations $352 million, which was 10.7% of sales.
Same-Restaurant Sales Growth for Fiscal 2025 2%, outperforming the industry by 170 basis points.
Total Sales for Fiscal 2025 Increased 6% to surpass $12 billion for the first time.
Adjusted Diluted Net Earnings Per Share for Fiscal 2025 Increased 7.5% to $9.55.
Adjusted EBITDA for Fiscal 2025 $2 billion.
Restaurant-Level EBITDA Growth 40 basis points year-over-year.
Adjusted Interest Expense Increased 20 basis points due to financing expenses related to Chuy's acquisition.
Adjusted Earnings from Continuing Operations Margin 9.4%, which was 10 basis points below last year.
Adjusted Debt-to-EBITDA Ratio 2.1x, at the low end of the targeted range of 2 to 2.5x.
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Operating Highlights
Olive Garden's Buy One Take One Offer: The return of Olive Garden's buy one take one offer for the first time in 5 years, starting at $14.99, drove impressive sales during the quarter.
Delivery Campaign: Olive Garden launched a campaign promoting delivery with a memorable offer of 1 million free deliveries, partially funded by Uber.
Cheddar's Marketing Strategy: Cheddar's Scratch Kitchen debuted its first 30-second television spot, developed at no cost, to enhance brand visibility.
Chuy's Acquisition: Darden acquired 103 Chuy's restaurants, contributing to total sales growth.
International Expansion: Darden signed an agreement to sell 8 Olive Garden locations in Canada, with plans to open 30 more over the next 10 years.
Franchise Growth: Darden's international franchising team is focused on expanding globally, with new agreements for 40 Olive Garden locations in India and Spain.
Operational Efficiency at Olive Garden: Olive Garden's same-restaurant sales gap versus the industry increased to 450 basis points during the buy one take one promotion.
Labor Cost Management: Restaurant labor costs were 10 basis points lower due to productivity gains.
Guest Satisfaction Scores: Olive Garden achieved an all-time high guest satisfaction score for the quarter.
Bahama Breeze Brand Review: Darden is considering strategic alternatives for Bahama Breeze, including a potential sale of the brand.
Leadership Transition at Olive Garden: Dan Kiernan will retire as President of Olive Garden, with John Wilkerson taking over.
5-Year Strategic Planning: Darden completed a 5-year planning process for each brand to enhance competitive positioning.
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Risk or Challenges
Regulatory Issues: Darden is considering strategic alternatives for the Bahama Breeze brand, including a potential sale, which may involve regulatory scrutiny.
Supply Chain Challenges: The company faced challenges related to restaurant expenses driven by brand mix and the impact of first-party delivery at Olive Garden.
Economic Factors: Total inflation is expected to be between 2.5% to 3%, with commodities inflation at approximately 2.5% and total labor inflation at approximately 3.5%.
Competitive Pressures: The Fine Dining segment continues to be challenged, with negative same-restaurant sales, indicating competitive pressures in that market.
Operational Risks: The permanent closure of 15 underperforming Bahama Breeze restaurants may hinder total sales growth in fiscal 2026.
Acquisition Risks: Financing expenses related to the Chuy's acquisition increased adjusted interest expense, which could impact financial performance.
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Guidance & Outlook
Bahama Breeze Strategic Alternatives: Darden is considering strategic alternatives for the Bahama Breeze brand, including a potential sale or conversion of restaurants to other Darden brands.
Olive Garden Canada Sale: Darden signed an agreement to sell 8 Olive Garden locations in Canada to Recipe Unlimited, with plans to open 30 more Olive Gardens over the next 10 years.
International Franchising Growth: Darden's international franchising team is focused on expanding globally, with new agreements for 40 Olive Garden locations in India and Spain, and 6 Capital Grill locations in Asia.
Leadership Transition at Olive Garden: Dan Kiernan will retire as President of Olive Garden, with John Wilkerson, currently leading Cheddar's, set to take over.
New Leadership Appointments: Mark Cooper will replace John Wilkerson at Cheddar's, and Lorie Kessler will become President of Seasons 52.
Fiscal 2026 Total Sales Growth: Darden expects total sales growth of 7% to 8% for fiscal 2026, including approximately 2% from an additional week.
Fiscal 2026 Same-Restaurant Sales Growth: Same-restaurant sales growth is projected to be between 2% to 3.5%.
Fiscal 2026 Capital Expenditures: Capital spending is anticipated to be between $700 million and $750 million.
Fiscal 2026 EBITDA Guidance: EBITDA is expected to be between $2.16 billion and $2.19 billion.
Fiscal 2026 Diluted Net Earnings Per Share: Diluted net earnings per share are projected to be between $10.50 and $10.70.
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Shareholder Return Plan
Quarterly Dividend: The Board approved a 7% increase to the regular quarterly dividend to $1.50 per share, implying an annual dividend of $6.
Total Dividends Paid: Returned $659 million in dividends to shareholders for fiscal 2025.
Share Repurchases: Returned $418 million to shareholders through share repurchases for fiscal 2025.
Share Repurchase Contribution: Share repurchase contribution to shareholder return was 1%.
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Key Q&A
Q:Why is casual dining having a moment right now?
A:Consumers are realizing that casual dining offers great value, leading to increased patronage.
Q:What is the unit growth outlook for this year?
A:Expecting 60 to 65 units this year, with a ramp-up to 3%+ growth over the next 5 years, primarily from Olive Garden and LongHorn.
Q:Does the new margin expansion target reflect a different view on long-term restaurant margin opportunity?
A:Yes, it indicates a shift towards prioritizing sales growth over restaurant level EBITDA growth.
Q:What was the mix and same-store sales contribution from Uber Direct at Olive Garden?
A:Uber Direct contributed about 3.5% of total sales at Olive Garden, with a mix impact of 40 basis points.
Q:What are the demographics of Uber Direct customers?
A:The delivery customers are younger, slightly higher income, and have minimal overlap with dine-in customers.
Q:What is the pricing outlook for the coming year?
A:Expecting mid-2s for pricing, below total inflation, with a disciplined approach to pricing.
Q:What is the promotional cadence for 2026?
A:Promotional activity will be adjusted based on market conditions, with a focus on maintaining profitability.
Q:What is the outlook for fine dining?
A:Fine dining has faced challenges, but the company believes it has strong leadership and potential for growth.
Q:What is the labor environment like?
A:No significant increase in turnover or labor issues; the company has a strong employment proposition.
Q:What are the international expansion plans?
A:The company is optimistic about international growth, particularly in India and Spain, but will proceed cautiously.
Q:Review of Unclear Management Responses
A:Management avoided giving a direct answer regarding the future impact of Uber Direct on other brands, stating they are still evaluating which brands might adopt it next. Additionally, there was a lack of clarity on the specifics of promotional strategies for 2026, with management only indicating that they would adjust based on market conditions.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
Co
Division Brian
EAT margin
House Cheddar
Inc Research
LLC Research
Research Division
Uber
Yard House
cash
closure restaurant
compensation
contribution shareholder
dividend yield
end debt
framework
guest satisfaction
history
interest
margin expansion
momentum LongHorn
payout ratio
people practice
point basis
point delivery
repurchase
restaurant closure
return dividend
sale expectation
sale week
satisfaction score
share sale
shareholder return
DRI Transcript
Darden Restaurants, Inc. (DRI) Q2 2026 Earnings Call Transcript
Positive12-18
The earnings call summary and Q&A highlight strong sales growth across segments, optimistic future guidance, and strategic initiatives like lighter portions and delivery expansion. Despite some margin pressures and management's reluctance to provide specifics, the overall sentiment is positive with expectations of improvement in labor margins and beef costs. The market is likely to react positively to the strong sales performance and strategic growth plans, especially with the optimistic guidance and new initiatives.
Darden Restaurants, Inc. (DRI) Q1 2026 Earnings Call Transcript
Positive9-18
The earnings call reflects a positive sentiment with strong financial performance, optimistic guidance, and strategic growth initiatives. Despite some concerns about margin pressures and potential wage policy changes, management's confidence in their strategies and investments in marketing and delivery promotions suggest a focus on growth. The positive response to promotions like the Never Ending Pasta Bowl and robust performance in other business segments further support this sentiment. Overall, the company's proactive approach and strong market position indicate a likely positive stock price movement.
Darden Restaurants, Inc. (DRI) Q4 2025 Earnings Call Transcript
Positive6-20
The earnings call reveals strong financial performance with a 10.6% sales increase and improved margins. The optimistic guidance, increased dividend, and share repurchases are positive indicators. The Q&A highlights strategic growth plans and a positive market outlook, despite some uncertainties around Uber Direct's impact and promotional strategies. Overall, the positive financials and shareholder returns outweigh the risks, suggesting a positive stock price movement.
Darden Restaurants, Inc. (DRI) Q3 2025 Earnings Call Transcript
Neutral3-20
DRI Slides
DRI Report
Frequently Asked Questions
Where does this earnings call transcript come from?
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They are generated by a specialized financial-language model trained exclusively on 15+ years of earnings transcripts. The model extracts financial figures, guidance, and tone with 97%+ accuracy and is regularly validated against human analysts. The full raw transcript always remains available for verification.
