DRI surges 9% as consumers continue to dine out

Darden Restaurants (DRI) delivered a solid fiscal Q2 performance, posting adjusted EPS of $2.03, slightly above the $2.02 consensus estimate, while revenue grew 6% year-over-year to $2.89 billion, narrowly missing expectations of $2.90 billion. Net income increased to $215.1 million, or $1.82 per share, from $212.1 million a year earlier. The results were driven by stronger-than-expected same-store sales growth, with consolidated same-restaurant sales rising 2.4%, surpassing the 1.5% projected by analysts.

Key metrics highlighted LongHorn Steakhouse as a standout performer, with same-store sales up 7.5%, well ahead of the 4.1% expectation. Olive Garden, accounting for over 40% of quarterly revenue, reported same-store sales growth of 2%, beating estimates of 1.4%. Conversely, the fine-dining segment, which includes The Capital Grille and Ruth’s Chris Steakhouse, experienced a same-store sales decline of 5.8%, more severe than the anticipated 2.8% drop, reflecting consumer sensitivity to higher price points in an inflationary environment.

Drivers of performance included the addition of 103 Chuy’s restaurants and 39 net new locations, which contributed to the 6% sales increase. Darden’s blended same-store sales growth of 2.4% reflects resilience in the casual dining sector, with strong demand at LongHorn Steakhouse and Olive Garden offsetting softness in fine dining. The company also benefited from its operational focus, with CEO Rick Cardenas emphasizing a long-term commitment to execution across its brands.

The broader restaurant industry continues to face challenges, including inflationary pressures and changing consumer behaviors. While casual dining chains like Olive Garden and LongHorn Steakhouse have been able to maintain traffic through value-oriented menus, fine dining has struggled, as higher-income consumers have become more cautious with discretionary spending. Darden’s performance indicates that consumers are still dining out but are prioritizing affordability and value.

Darden provided an updated fiscal 2025 outlook, raising its revenue forecast to $12.1 billion from a prior range of $11.8 billion to $11.9 billion. Same-restaurant sales growth is now expected to be approximately 1.5%, and diluted EPS from continuing operations is projected at $9.40 to $9.60. The company plans to open 50 to 55 new restaurants during the fiscal year, supported by capital expenditures of $650 million, up from an earlier range of $550 million to $600 million.

Shares of Darden surged 9% in premarket trading following the results, as investors reacted positively to the better-than-expected same-store sales growth and the increased fiscal 2025 guidance. The stock’s performance reflects confidence in Darden’s ability to navigate a challenging environment while delivering consistent growth.