Darden Restaurants, Inc. — Form 10-Q summary
Reporting period: First quarter of fiscal 2027, the three months ended August 30, 2026; compared with the three months ended August 24, 2025. Financial statements are unaudited. Fiscal 2026 had 53 weeks, versus 52 weeks in fiscal 2027, so the company also provides calendar-aligned sales comparisons.
Business context and results
Darden operates full-service restaurant brands, including Olive Garden, LongHorn Steakhouse, Ruth’s Chris, Cheddar’s and Chuy’s. At quarter-end it had 2,218 company-owned U.S. restaurants, plus 88 U.S. and 86 international franchised restaurants. Sales rose 5.1% to $3.200 billion, attributed to 53 net new restaurants and 3.1% blended same-restaurant sales growth. Calendar-aligned consolidated same-restaurant sales growth was 3.2%.
| Metric | Q1 FY2027 | Q1 FY2026 |
|---|---|---|
| Sales | $3,200.3 million | $3,044.7 million |
| Operating income | $319.3 million | $339.2 million |
| Continuing-operations earnings | $234.3 million | $257.9 million |
| Net earnings | $233.4 million | $257.8 million |
| Diluted net earnings per share | $2.04 | $2.19 |
| Operating margin | 10.0% | 11.1% |
| Continuing-operations earnings margin | 7.3% | 8.5% |
| Net cash from continuing operating activities | $279.0 million | $342.5 million |
| Capital expenditures | $175.3 million | $174.1 million |
Performance drivers and material changes
- Sales increased across all reportable segments. Segment same-restaurant sales growth was 1.1% at Olive Garden, 6.2% at LongHorn Steakhouse, 1.6% in Fine Dining and 3.8% in Other Business on the fiscal-period comparison. LongHorn’s growth included a 1.6% increase in guest counts; Olive Garden, Fine Dining and Other Business reported guest-count declines.
- Food and beverage costs rose to 30.8% of sales from 30.5%, primarily reflecting inflation and brand mix, partly offset by pricing leverage. Labor improved to 32.2% of sales from 32.4%. Marketing and pre-opening costs increased as a share of sales; depreciation also rose as a share of sales.
- Operating income and earnings declined despite higher sales. The prior-year quarter included a $42.0 million gain related to the sale of Olive Garden Canada assets; the current quarter recorded a $3.9 million net gain on asset disposals and other items. Net interest expense rose 10.8% to $50.3 million, primarily due to increased short-term borrowings.
- Segment profit margins were 20.4% for Olive Garden (down 20 basis points), 18.0% for LongHorn (up 60 basis points), 13.0% for Fine Dining (down 50 basis points) and 15.8% for Other Business (down 30 basis points).
- Operating cash flow fell primarily due to working-capital changes. Cash used in investing activities was $171.3 million. Financing cash outflows included $184.2 million of dividends and $220.8 million of share repurchases; net commercial-paper borrowings were $285.9 million.
Liquidity, debt and capital returns
At August 30, 2026, cash and cash equivalents were $220.5 million. Current assets were $953.1 million and current liabilities were $3.199 billion; the increase in current liabilities from May 31 was primarily due to short-term debt. The balance sheet reported $979.7 million of short-term debt and current maturities and $1.636 billion of long-term debt. The company reported $2.14 billion of long-term debt, including current amounts, and $480 million of commercial paper outstanding. It had $770 million of availability under its $1.25 billion revolving credit facility after commercial paper and letters of credit; no revolver balance was outstanding, and the company reported covenant compliance.
A $500 million senior-note maturity due May 2027 is classified as current. Management expects to meet it using available liquidity, potentially including cash, operating cash flow, commercial paper, revolver borrowings or refinancing. Management believes available internal cash generation and financing sources should be sufficient for capital expenditures, debt maturities and other operating needs through fiscal 2027. The board authorized a new $1.5 billion share-repurchase program in June 2026; $1.336 billion remained available at quarter-end. The board declared a subsequent $1.62-per-share dividend, payable November 2, 2026.
Outlook, commentary and risks
- Fiscal 2027 sales from continuing operations are expected to be $13.60 billion to $13.75 billion, with same-restaurant sales growth of 2.5% to 3.5% and 75 to 80 new restaurant openings.
- Management expects an annual effective tax rate of approximately 13.5% and capital expenditures of approximately $875 million. These are forward-looking estimates, not guarantees.
- Darden is converting remaining Bahama Breeze restaurants to other brands over the next 12–18 months; two conversions were complete by quarter-end. Approximately half of the brand’s restaurants were closed by April 5, 2026. The company excludes Bahama Breeze from same-restaurant sales because locations are expected to close or convert by fiscal 2027’s fourth quarter.
- Risks highlighted include commodity, labor, insurance and utility cost pressures; macroeconomic conditions and consumer demand; staffing and retention; food safety and supply interruptions; cybersecurity and privacy; competition; weather and climate events; lease commitments; execution and construction costs; and market, interest-rate and derivative volatility. No material changes to the prior Form 10-K risk factors were reported.
- Ordinary-course lawsuits and claims are disclosed; management does not expect their disposition, individually or in aggregate, to materially adversely affect financial position, results or liquidity. Guarantees include $80.4 million related to assigned leases, with a recorded expected-credit-loss liability of $10.4 million. Management reported effective disclosure controls and no material change in internal control over financial reporting.
Important facts for investors to verify
- Whether same-restaurant sales and guest-count trends—particularly Olive Garden’s guest decline—remain consistent with the full-year outlook.
- How food, labor and other operating-cost inflation affects margins, and whether LongHorn’s margin improvement is sustained.
- Progress against the $13.60–$13.75 billion sales outlook, 75–80 planned openings and $875 million capital-spending estimate.
- Funding plans for the $500 million May 2027 note maturity, commercial-paper levels and available revolving-credit capacity.
- Cash generation after working-capital movements, dividends, repurchases and planned capital spending.
- Execution and costs of Bahama Breeze closures and conversions, and any effects on reported sales or results.