Darden Restaurants, Inc. - 10-Q Filing Summary
Business Context and Reporting Period
This filing covers the quarterly period ended February 22, 2026 (Fiscal Q3 2026) and the nine months ended that date. Darden Restaurants, Inc. operates full-service dining brands including Olive Garden, LongHorn Steakhouse, Ruth's Chris, and The Capital Grille. As of the period end, the company owned and operated 2,196 restaurants in the U.S. The fiscal year 2026 is a 53-week year.
Key Financial Metrics
| Metric (in millions) | Q3 2026 | Q3 2025 | 9M 2026 | 9M 2025 |
|---|---|---|---|---|
| Sales | $3,345.3 | $3,158.0 | $9,492.1 | $8,805.0 |
| Operating Income | $406.4 | $418.2 | $1,066.0 | $979.5 |
| Net Earnings | $306.8 | $323.4 | $801.8 | $745.8 |
| Diluted EPS (Continuing Ops) | $2.68 | $2.74 | $6.91 | $6.30 |
| Operating Cash Flow (9M) | $1,281.0 (2026) vs $1,250.0 (2025) | |||
| Capital Expenditures (9M) | $540.9 (2026) vs $472.6 (2025) | |||
| Long-Term Debt | $2,141.0 (Feb 2026) vs $2,128.9 (May 2025) | |||
| Cash & Equivalents | $240.4 (Feb 2026) vs $240.0 (May 2025) |
Margins (9M 2026): Operating margin was 11.2% compared to 11.1% in the prior year. Net earnings margin from continuing operations was 8.5%.
Material Changes vs. Prior Period
- Sales Growth: Sales increased 5.9% in Q3 and 7.8% for the nine months, driven by the acquisition of Chuy's (103 units), 31 net new restaurants, and blended same-restaurant sales increases of 4.2% (Q3) and 4.4% (9M).
- Profitability: Q3 operating income decreased 2.8% primarily due to a $25.1 million impairment charge related to Bahama Breeze closures. However, nine-month operating income increased 8.8%.
- Cost Pressures: Food and beverage costs increased as a percent of sales due to inflation (1.5% impact in Q3) and menu mix, partially offset by pricing leverage. Restaurant labor costs decreased as a percent of sales in Q3 due to pricing leverage.
- Asset Dispositions: The company sold eight Olive Garden Canada restaurants in July 2025, resulting in a net gain on disposal of $45.0 million included in the nine-month results.
Guidance, Outlook, and Risks
- Fiscal 2026 Outlook: Management expects total sales growth of approximately 9.5%, driven by the 53rd week, ~4.5% same-restaurant sales growth, and ~70 new restaurant openings.
- Capital Expenditures: Expected to be between $750 million and $775 million for fiscal 2026.
- Bahama Breeze Restructuring: The company announced the permanent closure of approximately 14 Bahama Breeze restaurants and the conversion of the remaining 14 to other Darden brands over the next 12-18 months. This resulted in a $22.4 million impairment charge in Q3.
- Shareholder Returns: The company repurchased $534.4 million of stock in the first nine months of 2026. A quarterly dividend of $1.50 per share was declared on March 18, 2026.
- Risks: Key risks include inflationary pressures on food and labor, integration challenges with the Chuy's acquisition, and the execution of the Bahama Breeze brand exit strategy.
Investor Verification Checklist
- Bahama Breeze Execution: Verify the timeline and cost implications of closing 14 locations and converting 14 others, and monitor for additional impairment charges.
- Chuy's Integration: Assess the realization of synergies and the impact of Chuy's on same-restaurant sales metrics once the 16-month hold period expires in Q4 2026.
- Labor and Food Costs: Monitor the ability to maintain pricing leverage against continued inflation in food commodities and labor rates.
- Capital Allocation: Review the balance between the $1 billion share repurchase authorization, dividend payments, and the $750-$775 million capital expenditure plan.
- Debt Covenants: Confirm continued compliance with the new leverage ratio covenant (max 3.50 to 1.00) under the amended Revolving Credit Agreement.