Darden Restaurants began fiscal 2027 with higher sales and positive comparable growth across its portfolio, but the quarter did little to lift expectations for the year as slower growth at Olive Garden offset another strong performance from LongHorn Steakhouse. Revenue rose 5.1% to $3.20 billion in the quarter ended Aug. 30, just below the $3.21 billion FactSet consensus, while adjusted earnings of $2.05 per share matched Wall Street’s estimate.
The Olive Garden and LongHorn parent reported 3.2% blended same-restaurant sales growth on a comparable-calendar basis, slightly below the 3.3% FactSet consensus. Darden shares traded lower Thursday, falling roughly 1.5% in early afternoon trading after dropping around 5% before the opening bell, suggesting investors were more focused on the modest sales shortfall and Olive Garden’s performance than on the company’s decision to leave its full-year forecast unchanged.
The earnings comparison also requires some adjustment. Darden reported diluted earnings from continuing operations of $2.05 per share versus $2.19 in the year-earlier quarter, but the earlier period included a gain from the sale of Olive Garden restaurants in Canada that added $0.26 per share, along with smaller acquisition and restaurant-closure costs. After those items, last year’s adjusted earnings were $1.97 per share, making this quarter’s $2.05 result a 4.1% increase on a more comparable basis.
LongHorn Remains Darden’s Main Growth Engine
The largest difference inside Darden’s portfolio remains the performance of its two biggest brands. Olive Garden generated $1.33 billion in quarterly sales but comparable-calendar same-restaurant sales increased just 1.0%. LongHorn Steakhouse, by comparison, produced $860.9 million of sales and delivered a 6.8% comparable-calendar increase, extending a multi-quarter run of stronger traffic and sales growth.
LongHorn’s segment profit increased 14.6% to $154.6 million from $134.9 million even as its sales base continued to expand. Olive Garden’s segment profit rose only modestly to $270.8 million from $267.6 million. Fine Dining comparable sales increased 1.0%, while Darden’s Other Business segment — which includes Cheddar’s Scratch Kitchen, Chuy’s and Yard House — grew 4.5% on a comparable-calendar basis.
Management said Olive Garden’s trends improved as the quarter progressed, while Yard House was a particularly strong performer within the smaller brands, with same-restaurant sales up about 10%. Darden is also trying to generate more Olive Garden traffic through renewed lunch marketing and the return of its Never Ending Pasta Bowl promotion, where early results were running ahead of management’s expectations. The importance of those efforts is straightforward: Olive Garden remains Darden’s largest revenue contributor, so sustained improvement there would have a much larger effect on companywide growth than strong performance at a smaller concept.
Margins, however, did not expand despite the increase in sales. Restaurant-level EBITDA margin remained at 18.8%, with food and beverage costs increasing by about 30 basis points as pricing roughly matched commodity inflation of approximately 3.5%. Labor expense improved by about 30 basis points as a percentage of sales, helped by productivity and brand mix, while marketing expense was flat despite additional promotional activity.
Darden’s reported operating income declined to $319.3 million from $339.2 million, though that comparison is distorted by the prior-year gain on the Canadian Olive Garden transaction. Operating cash flow also softened, falling to $279 million from $342.5 million, while spending on land, buildings and equipment remained roughly flat at $175.3 million. The company returned more than $400 million to shareholders during the quarter through $184.2 million of dividends and approximately $222 million of share repurchases; net short-term borrowings increased by $285.9 million during the period.
Guidance Leaves Little Change to the Fiscal 2027 Story
Darden reaffirmed its entire fiscal 2027 forecast rather than raising or narrowing it. The company continues to expect $13.60 billion to $13.75 billion in sales, same-restaurant sales growth of 2.5% to 3.5%, diluted earnings from continuing operations of $11.10 to $11.35 per share and EBITDA of $2.26 billion to $2.29 billion. It is also planning 75 to 80 restaurant openings, approximately $875 million of capital spending and about 3% total inflation.
That earnings range remains close to current expectations rather than offering a new upside signal. FactSet’s consensus stood around $11.29 per share heading into the report, near the upper half of Darden’s guidance and slightly above the $11.225 midpoint. The first quarter therefore keeps the company on track but does not materially change what investors had already built into fiscal 2027 estimates.
Darden is continuing to deploy capital aggressively alongside its restaurant expansion. It repurchased roughly 1.1 million shares for $222.3 million during the quarter and still had approximately $1.3 billion available under its current $1.5 billion authorization at quarter-end. The board also maintained the quarterly dividend at $1.62 per share, payable Nov. 2 to shareholders of record Oct. 9.
The next few months should provide a clearer test of whether Olive Garden’s improving intra-quarter trends can develop into stronger comparable sales without sacrificing margins. Darden has also warned that the timing of Thanksgiving will shift roughly 1% of sales out of the fiscal second quarter and into the third quarter this year, creating a calendar-related headwind before reversing the following period. Investors will therefore have to separate that timing effect from the more important operating question: whether Olive Garden can move beyond its roughly 1% first-quarter growth rate while LongHorn continues to support Darden’s 2.5% to 3.5% companywide same-restaurant sales target.