Darden Q1 Earnings Miss
Darden Reports Q1 Earnings Miss as Rising Costs Weigh on Profits
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Key Points
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Net profit fell about 9% year over year, to $234.3 million from $257.9 million, while total operating costs and expenses rose 7% to $2.88 billion.
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Darden bought back about 1.1 million shares for roughly $222.3 million during the quarter.
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Darden ended the quarter with 2,218 company-owned restaurants in continuing operations.
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LongHorn Steakhouse sales rose 10.9% year over year to $860.9 million, while Olive Garden sales increased 2.2% to $1.33 billion.
Darden Restaurants reported fiscal first-quarter 2027 adjusted earnings of $2.05 per share and revenue of $3.20 billion, both slightly below Wall Street's expectations Seeking Alpha. Net profit fell 9.5% year over year to $234.3 million as higher food and labor costs squeezed margins, though same-restaurant sales grew across all segments led by LongHorn Steakhouse's 6.2% jump MarketScreener. The stock dropped up to 5.6% in premarket trading on the estimate misses and slower Olive Garden growth.
CEO Rick Cardenas called it "a solid start to our fiscal year," noting that each segment delivered positive same-restaurant sales Seeking Alpha. Despite the quarterly stumble, Darden reaffirmed full-year adjusted earnings guidance of $11.10 to $11.35 per share and approved a quarterly dividend of $1.62 per share Simply Wall St.
LongHorn Steakhouse Powers Growth While Olive Garden Slows
LongHorn Steakhouse posted the strongest performance, with same-restaurant sales up 6.2% on a fiscal-calendar basis and total sales reaching $860.9 million, up 10.9% year over year Simply Wall St. The steakhouse brand notched its 22nd consecutive quarter of positive same-restaurant sales growth, fueling the chain's outperformance. By contrast, Olive Garden's growth decelerated sharply. The casual-dining flagship posted just 1.1% same-restaurant sales growth with total sales of $1.33 billion, up only 2.2% year over year Seeking Alpha. CEO Cardenas said Olive Garden shifted marketing strategy mid-quarter away from its unlimited soup, salad, and breadsticks promotion due to consumer concern over a lettuce-related cyclospora outbreak, deferring the push into the second quarter.
Fine Dining and Yard House showed solid but modest performance. Fine Dining same-restaurant sales rose 1.6% with total sales of $304.2 million Seeking Alpha. Yard House reached the $1 billion trailing 12-month sales milestone, with plans to open 13 new units in the coming year, including 5 converted from former Bahama Breeze locations Seeking Alpha.
Profit Margins Compress Under Cost Pressures
Operating costs and expenses surged 6.5% year over year to $2.88 billion, outpacing the 5.1% revenue gain and squeezing profitability MarketScreener. Higher beef prices and elevated labor costs were the main culprits. GAAP net profit tumbled 9.5% to $234.3 million from $257.8 million a year earlier, despite the revenue growth, highlighting the margin pressure Simply Wall St. The miss also reflected a calendar shift—fiscal 2027 is a 52-week year versus 53 weeks in fiscal 2026, and the prior-year quarter benefited from a $42 million pre-tax gain on the sale of Olive Garden Canada Seeking Alpha.
Capital Returns and Portfolio Expansion Underway
Darden returned $406 million to shareholders in the first quarter, with CFO Raj Vennam noting the company generated $464 million in EBITDA Seeking Alpha. The company repurchased 1.1 million shares for $222.3 million, leaving $1.3 billion remaining under its authorization, while paying out $184 million in dividends. Darden ended the quarter with 2,218 company-owned restaurants across its Olive Garden, LongHorn Steakhouse, Fine Dining, and Yard House brands Simply Wall St.
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