Darden Restaurants Inc Q1 2026 Earnings Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Brian Harbour - Morgan Stanley - Analyst : Yeah, morning guys. Maybe just on that last point first, Raj, could you talk about sort of contracting through the balance of the year and sort of what gives you visibility that you've kind of encompassed the range of food cost outcomes?

Question: Brian Harbour - Morgan Stanley - Analyst : Okay, understood, thanks. Rick, maybe just on the comments about sort of the new portion sizes at Olive Garden. What -- are you seeing sort of a different guest that is asking for that? Do you think this is actually sort of a traffic driver for Olive Garden? Or I guess, on the other hand, do you think this is check-dilutive in some sense? Like how are people actually sort of approaching that? What are you seeing from those items?

Question: Jon Tower - Citi - Analyst : Great, thanks for taking the questions. Maybe kind of in the same vein, that -- the affordability pivot and -- this quarter as well as the Uber Eats amplification or build in the quarter. Can you maybe speak to how that hit on the cost line during the period? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. SEPTEMBER 18, 2025 / 12:30PM, DRI.N - Q1 2026 Darden Restaurants Inc Earnings Call And I noticed that, obviously, the restaurant margin, you didn't lever that as much on a pretty solid comp in the period. So maybe, Raj, if you could speak to those costs during the period and what you're expecting going forward as well.

Question: Jon Tower - Citi - Analyst : Got it. I appreciate that. And then maybe just drilling a little bit more into the delivery business at Olive Garden. Can you talk about -- Rick, you had mentioned that you're pleased with how, obviously, you're seeing younger guests make their way in, more affluent. Can you give us any more information on the frequency of those guests? Are they coming more so than what you're seeing within the store in terms of frequency and how they're using it even, obviously, it hasn't been a year yet, but seasonally, how they're maybe using that channel relative to in-store?

Question: Jon Tower - Citi - Analyst : Got it. Thanks for taking the questions.

Question: David Palmer - Evercore ISI - Analyst : Thanks. Good morning. Aside from the beef cost question, I think there's probably two areas that are major areas of curiosity, and I certainly share them. And one is the strong performance of the casual dining segment, which is becoming increasingly unusual after fast casual has slowed through the year, through the middle of this year. And another, I think, is Olive Garden against more difficult comparisons later in your fiscal year. How will it do and what are you lining up against that? So those are really my two questions. What are your thoughts about why casual dining is doing as well? And do you think that will continue? And then separately, Olive Garden, you're rolling out a pretty large test on small portions, but what are your thoughts? And what are you kind of lining up to keep the momentum going as you get into lapping some of the good stuff you've been doing in the last three or four months? Thanks.

Question: David Palmer - Evercore ISI - Analyst : Thank you.

Question: Eric Gonzalez - KeyBanc Capital Markets Inc - Analyst : Hi, thanks for taking the question. Just a few quarters ago, you talked about some strength among the lower income consumers. Obviously, most of your peers, particularly on the fast food side, are talking about weakness among that cohort of income. So if you maybe you could talk about what you're seeing from an income perspective, and are you gaining share among lower-income consumers? Do you think that part of the equation is actually holding yourselves up relative to your peers? And are you seeing some maybe trade into the category from some of the higher-income folks, particularly on the casual dining side?

Question: Eric Gonzalez - KeyBanc Capital Markets Inc - Analyst : Great. And then on the -- just to close the loop on the commodity discussion. Based on where the commodities are now and what you've locked in, I know you're a little bit lighter on the beef side, what do you think that implies for store-level margins? And what's embedded in the guidance? In the past, you talked about modest margin expansion you still think you can get there based on what you did in the first quarter and where you are locked in.

Question: Eric Gonzalez - KeyBanc Capital Markets Inc - Analyst : Great, thank you.

Question: David Tarantino - Robert W. Baird & Co Inc - Analyst : Hi, good morning. Rick, I had a question about your views on the overall health of the consumer spending environment. Certainly, you had a great quarter. But I guess over the last few months, we've seen a lot of crosscurrents related to the job updates and whatnot. So I'm just maybe wanting to get your thoughts on where we are from the state of consumer spending and whether you think anything's changed recently relative to maybe where you thought it was at the start of the year.

Question: David Tarantino - Robert W. Baird & Co Inc - Analyst : Great, that's helpful. And Raj, one quick clarification. You mentioned the inflation versus pricing gap is expected to narrow as you get into maybe the second half of the year. Is that because of the price components going higher or the inflation components coming down? I guess, could you explain kind of how that might work?

Question: David Tarantino - Robert W. Baird & Co Inc - Analyst : Makes sense, thank you very much.

Question: Sara Senatore - Bank of America - Analyst : Great, thank you. I wanted to ask about the idea of sort of investing and growing top line, more of a top line-driven growth algorithm. You mentioned pricing below inflation and, obviously, affordability is something that your brands are known for in terms of value for the money. But I guess I could also characterize marketing as a way to do that or even perhaps subsidizing delivery fees. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. SEPTEMBER 18, 2025 / 12:30PM, DRI.N - Q1 2026 Darden Restaurants Inc Earnings Call So I was just curious, as you think about the kind of different investments, is marketing something -- I know you said you got some leverage, so marketing dollars were higher though, perhaps a little bit light of what we might have expected. And you talked about delivery fees as perhaps margin pressure. So I wasn't sure if that's because you're not fully covering them with what you charge your customers. But perhaps you could -- and I know it's free delivery this quarter, so perhaps an exception. But maybe you could talk a little bit about as you think about investing behind top line, these other possible ways to do that. And then I do have another quick follow-up.

Question: Sara Senatore - Bank of America - Analyst : Great, thank you. And then just the follow-up was, I think, Rick, you alluded to less snacking or munching. I was curious, is that like a GLP-1 reference in terms of like how people are changing their eating patterns? Or was it more people are prepared to give up some of these sort of convenience or impulse occasions and spend behind really good experiences like they get at Olive Garden or LongHorn or your other brands?

Question: Sara Senatore - Bank of America - Analyst : Very good. Thank you so much.

Question: Jeffrey Bernstein - Barclays - Analyst : Great, thank you very much. Rick, for fiscal '26, you raised your comp guide modestly. But clearly, that's in spite of maybe what many people expected, a slightly tougher macro and concerns on consumer slowdown and we know about the tougher compares. I think you mentioned the first quarter was modestly above your plan. But any color you could share on your confidence in raising that guide? And as we think about the current fiscal 2Q, the compares are definitely much tougher. In the last quarter, you were willing to frame kind of what you expected for the current quarter versus your full year guide. Wondering whether you think the fiscal second quarter will come in above or below kind of that new range. And then I had one follow-up.

Question: Jeffrey Bernstein - Barclays - Analyst : Understood. And then just a follow-up on your Uber partnership. I know it's still early, but it seems like you're having success with Olive Garden and Cheddar's with the 1P. I'm just wondering, first, whether you'd consider a next brand to embrace that 1P Uber delivery and whether there's any updated thoughts on potential for using Uber for the order aggregation part of things, not just delivery. Thank you.

Question: Jeffrey Bernstein - Barclays - Analyst : Thank you.

Question: Jake Bartlett - Truist Securities - Analyst : Great, thanks for taking the question. My first one is on delivery. I'm hoping you can frame the mix that delivery was in the first quarter, but also what the exit rate was after the promotion. Also, whether you expect to promote similar promotions in the -- as we go forward in '26. And then I have a follow-up.

Question: Jake Bartlett - Truist Securities - Analyst : That was the question. And whether you expect to do a similar promotion to the 1 million --

Question: Jake Bartlett - Truist Securities - Analyst : Got it. In terms of the Never Ending Pasta Bowl promotion, I think time is similar to last year. I'm wondering, you made a comment about consumers really grabbing -- taking towards price certainty, some momentum in August. I'm wondering whether you can comment on how you expect Never Ending Pasta Bowl to perform this year versus last and maybe how it is performing, whether it's particularly resonating with consumers right now.

Question: Jake Bartlett - Truist Securities - Analyst : Great. Thank you so much.

Question: Peter Saleh - BTIG LLC - Analyst : Great, thanks for taking the question. Maybe just one question on the beef situation. Can you elaborate a little bit more on maybe what's driving it higher in the near term or more recently? And why do you think this is not sustainable? And then just more specifically, if these prices are sustained or maybe even go higher, would you take a little bit more price at LongHorn in the back end of the year? Just trying to understand the strategy there if beef prices actually go a little higher from here.

Question: Peter Saleh - BTIG LLC - Analyst : Thank you very much.

Question: John Ivankoe - JPMorgan Chase & Co - Analyst : Hi, I want to go a couple of different directions. First, Raj, in your prepared remarks, you did talk about seeing some demand destruction at retail. I wondered if you're actually seeing that, if it's recent. Some of the data that I've seen, I thought it was recent, was actually showing quite high demand at the retail level. So I just hopefully got your facts being better than mine, just to kind of correct me what we're seeing in retail and if we are seeing any material signs and a slowdown in retail because that could certainly help us on the restaurant side from a supply perspective.

Question: John Ivankoe - JPMorgan Chase & Co - Analyst : Okay. And that's maybe just classic growing season being over and people are just shifting to other things. That's helpful. So --

Question: John Ivankoe - JPMorgan Chase & Co - Analyst : Yes, yeah. But it's -- we're speaking the same language, I just said that awkwardly. So it was interesting, hearing things like reduced portion prices of some -- reduced prices in some portions of some core menu items, things like Hawaiian steak. I'm not going to name the brand that it reminds me of 20 years ago, but -- and as well as in the Darden concept, but I've seen this done actually quite unsuccessfully over time. In other words, when consumers kind of expect to see a certain amount of food on the plate, especially at dinner, it's not something that you're necessarily happy with even if they are paying lower prices. So Rick, I'm sure you know exactly what I'm talking about. But was there anything to learn about previous history lessons in casual dining specifically? I think this is probably tried around 2007, 2008 where smaller portions at smaller prices were tried, but weren't successful. And things like Hawaiian steak way back when, which you tried that, a few people like, but really a lot of people different. Where are we on that stage gate process today in 2025 maybe versus some of the lack of success the overall industry had 20 years ago?

Question: John Ivankoe - JPMorgan Chase & Co - Analyst : And maybe our consumers finally evolved that you don't need to have uneaten food on the plate to feel that you've gotten good value. You can just see just the right amount of portion and be happy with it. So that would certainly be a change versus the old America, but that'd obviously be a good direction to go. Okay, thank you. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. SEPTEMBER 18, 2025 / 12:30PM, DRI.N - Q1 2026 Darden Restaurants Inc Earnings Call

Question: Lauren Silberman - Deutsche Bank - Analyst : Hey, thanks. So I just want to go to top line. A lot of questions, obviously, what's going on in the restaurant industry broadly. You talked about strong August. Can you just help unpack sort of what you saw in terms of cadence of comps during the quarter? Any more color on September from that? And then any differences in performance that you're seeing across the regions?

Question: Lauren Silberman - Deutsche Bank - Analyst : Okay. And then just a follow-up on the commodity side. What are you expecting in terms of cadence to get to the 3% to 4% for the year? I understand like there's a commodity price dynamic, but do you expect like 2Q to peak in terms of actual commodity inflation?

Question: Lauren Silberman - Deutsche Bank - Analyst : Okay, alright, thank you.

Question: Danilo Gargiulo - Bernstein - Analyst : Great, thank you. Maybe a year ago or so, you started talking about the relevance and importance of improving the speed of service. And maybe, arguably, with the increased focus on affordability or right portion for the right price, there could be even more of an overlap between consumers who might be choosing casual dining over fast food. And so I'm wondering if you have any early signs or any KPIs that are showing some momentum that you're picking up in the improvement in speed of service so far. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. SEPTEMBER 18, 2025 / 12:30PM, DRI.N - Q1 2026 Darden Restaurants Inc Earnings Call

Question: Danilo Gargiulo - Bernstein - Analyst : Thank you. And then it sounds from Raj's response that there's not a lot of regional differences, maybe with the exception of Texas and maybe pockets in California. So if you're stepping back and analyzing the delta between the top-performing stores within the same brand and the bottom-performing stores within the same brand, what is the one characteristic that is driving the increased performance? And how can you make that more standardized across the rest of the group?

Question: Danilo Gargiulo - Bernstein - Analyst : Thank you.

Question: Dennis Geiger - UBS - Analyst : Great. Thanks guys. Just wanted to ask if anything to note -- else to note on sort of behaviors that Olive Garden, LongHorn or broadly across the portfolio as it relates to performance across daypart or even kind of within the menu side, desserts, alcohol, anything to call out there? Thank you.

Question: Dennis Geiger - UBS - Analyst : Great. Thanks, Rajesh.

Question: Chris O'Cull - Stifel, Nicolaus & Company Inc - Analyst : Yeah, thanks. Rick, the conversation around eliminating the tip wage seems to be ramping up. Do you believe there's a risk that it could be eliminated? And how are you thinking about any potential impact it could have on the business?

Question: Chris O'Cull - Stifel, Nicolaus & Company Inc - Analyst : Great, thanks.

Question: Brian Vaccaro - Raymond James - Analyst : Thank you. Just two quick ones, if I could. First on the housekeeping side. Raj, could you break out the Olive Garden comps between traffic and check? And as we think about check at Olive Garden, I think it's been exceeding pricing for the last several quarters. Is it still reasonable to expect check to exceed price as you think about the next few quarters?

Question: Brian Vaccaro - Raymond James - Analyst : Okay, thank you. And then just as a follow-up, obviously, talking about investing in the guest experience, as you've been doing for a while, but thinking about fiscal '26 specifically as well. When you look at labor in the first quarter, it looks like labor per operating week as we look at it was up 4.5%, maybe closer to 5%. You talked about the higher incentive comp, and obviously you have higher traffic, which takes more labor to service. But I'm curious to what degree that also reflects some reinvestments that you're making in the guest experience. And maybe you could provide a few examples of the specifics on those reinvestments. Thank you.

Question: Brian Vaccaro - Raymond James - Analyst : All right, that's helpful. Thank you.

Question: Jim Sanderson - Northcoast Research - Analyst : Hey, thanks for the question and the time. I just had a few follow-up questions. Going back to the delivery segment, have you discussed what percentage of sales mix was incremental? I think that's been a little bit of a moving target, especially given the promotions. Maybe you could update us on what you expect incrementally out of delivery for both Olive Garden and Cheddar's.

Question: Jim Sanderson - Northcoast Research - Analyst : Okay. So relatively stable with what it has been, let's say?

Question: Jim Sanderson - Northcoast Research - Analyst : And then just a follow-up question on Olive Garden, when we were talking about the breakdown same-store sales, I didn't really detect any negative mix. And I was wondering, does that mean that the smaller portions and the promotions aren't having any meaningful impact on check? Is that the right way to look at that?

Question: Jim Sanderson - Northcoast Research - Analyst : That's it, thank you very much for that.

Question: Zach Ogden - TD Cowen - Analyst : Yeah, thank you. This is Zach Ogden on for Andrew. Could you just elaborate on where the strength is coming from for other businesses? Are there certain brands that are outperforming others and what would be leading to that?

Question: Zach Ogden - TD Cowen - Analyst : Yes. So the other businesses segment, so the 3.3% in 1Q. What was the strength coming from there?

Question: Zach Ogden - TD Cowen - Analyst : All right, got it, thank you. And then could you just comment on what you're seeing from the younger cohort more broadly maybe just beyond delivery? Are you seeing certain or, I guess, relative strength or weakness among Gen Z?

Question: Zach Ogden - TD Cowen - Analyst : All right, thank you.