Darden’s second quarter saw a positive market reaction as the company delivered robust same-store sales growth and expanded its restaurant footprint. Management credited the success to value-oriented promotions at Olive Garden, such as the return of the "buy one take one" offer and expanded delivery options, which resonated with guests seeking affordability and convenience. CEO Ricardo Cardenas noted that, “consumers are figuring out that casual dining is a great value,” highlighting a broader shift in consumer behavior away from fast food and toward full-service restaurants. The company also pointed to operational execution and targeted marketing efforts as contributors to guest satisfaction and traffic gains across its largest brands.
Is now the time to buy DRI? Find out in our full research report (it’s free).
Darden (DRI) Q2 CY2025 Highlights:
- Revenue: $3.27 billion vs analyst estimates of $3.26 billion (10.6% year-on-year growth, in line)
- EPS (GAAP): $2.58 vs analyst expectations of $2.94 (12.1% miss)
- Adjusted EBITDA: $581.7 million vs analyst estimates of $581 million (17.8% margin, in line)
- EPS (GAAP) guidance for the upcoming financial year 2026 is $10.60 at the midpoint, missing analyst estimates by 1.2%
- Operating Margin: 11.7%, down from 13.4% in the same quarter last year
- Locations: 2,159 at quarter end, up from 2,031 in the same quarter last year
- Same-Store Sales rose 4.6% year on year (0% in the same quarter last year)
- Market Capitalization: $25.78 billion
While we enjoy listening to the management's commentary, our favorite part of earnings calls are the analyst questions. Those are unscripted and can often highlight topics that management teams would rather avoid or topics where the answer is complicated. Here is what has caught our attention.
Our Top 5 Analyst Questions Darden’s Q2 Earnings Call
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Eric Gonzalez (KeyBanc Capital Markets) asked about the drivers behind the current strength in casual dining. CEO Ricardo Cardenas attributed it to value-focused pricing and consumers shifting from fast food toward casual dining for better perceived value.
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Christopher O'Cull (Stifel) inquired about the updated long-term margin framework. CFO Rajesh Vennam explained that the company will emphasize sales growth and reinvestment, potentially resulting in slower restaurant-level EBITDA growth but aiming for sustainable long-term value.
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David Palmer (Evercore ISI) questioned the incremental sales and margin impact of Uber Direct delivery. Vennam clarified that delivery added around 2% incremental sales at Olive Garden in the quarter, with minimal margin dilution due to the fee structure with Uber.
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Sara Senatore (Bank of America) probed the challenges in fine dining and recent portfolio adjustments. Cardenas responded that fine dining softness is driven by macro factors and shifting consumer patterns, not management span of control or recent acquisitions.
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Jake Bartlett (Truist Securities) asked about the rationale behind cautious same-store sales guidance despite strong delivery momentum. Vennam cited macro uncertainty and a strategy to reinvest in long-term initiatives rather than chasing near-term earnings.
Catalysts in Upcoming Quarters
In the coming quarters, our analysts will monitor (1) the trajectory of delivery sales at Olive Garden and Cheddar’s and the potential rollout to additional brands, (2) the effectiveness of new value-focused menu items and promotional campaigns in sustaining traffic gains, and (3) progress on international franchising agreements, particularly in Canada, India, and Spain. Execution on leadership transitions and operational improvements will also be key indicators of management’s ability to drive sustainable growth.
Darden currently trades at $216.84, down from $222.78 just before the earnings. At this price, is it a buy or sell? The answer lies in our full research report (it’s free).
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