DRI

Cyclical

Darden Restaurants

Price Chart

Market Data

Financials

XBRL · SEC EDGAR

2008–2025(18yr)

Revenue

Net Income

Free CF

Metric	FY 2008	FY 2009	FY 2010	FY 2011	FY 2012	FY 2013	FY 2014	FY 2015	FY 2016	FY 2017	FY 2018	FY 2019	FY 2020	FY 2021	FY 2022	FY 2023	FY 2024	FY 2025Latest	YoY
Revenue	$6.6B	$7.2B	$7.1B	$7.5B	$8.0B	$8.6B	$6.3B	$6.8B	$6.9B	$7.2B	$8.1B	$8.5B	$7.8B	$7.2B	$9.6B	$10.5B	$11.4B	$12.1B	+6.0%
Gross Profit	$1.5B	$1.6B	$1.6B	$1.8B	$1.8B	$1.1B	$1.0B	$1.2B	$1.3B	$1.3B	$1.5B	$1.6B	$1.2B	$1.4B	$1.9B	$2.0B	$2.3B	$2.5B	+9.1%
Gross Margin	22.5%	21.9%	22.9%	24.0%	22.9%	12.4%	16.6%	17.4%	18.8%	18.5%	18.5%	18.7%	15.0%	19.5%	19.7%	18.7%	19.9%	20.5%	+0.6pp
Operating Income	—	—	—	—	—	$400.0M	$308.9M	$367.6M	$622.2M	$677.5M	$766.8M	$832.5M	$47.9M	$648.7M	$1.2B	$1.2B	$1.3B	$1.4B	+3.7%
Operating Margin	—	—	—	—	—	4.7%	4.9%	5.4%	9.0%	9.4%	9.5%	9.8%	0.6%	9.0%	12.1%	11.5%	11.5%	11.3%	-0.3pp
Net Income	$377.2M	$372.2M	$404.5M	$476.3M	$475.5M	$411.9M	$286.2M	$709.5M	$375.0M	$479.1M	$596.0M	$713.4M	-$52.4M	$629.3M	$952.8M	$981.9M	$1.0B	$1.0B	+2.1%
Net Margin	5.7%	5.2%	5.7%	6.4%	5.9%	4.8%	4.6%	10.5%	5.4%	6.7%	7.4%	8.4%	-0.7%	8.7%	9.9%	9.4%	9.0%	8.7%	-0.3pp
EPS (Diluted)	$2.60	$2.65	$2.84	$3.39	$3.57	$3.13	$2.15	$5.47	$2.90	$3.80	$4.73	$5.69	$-0.43	$4.77	$7.39	$7.99	$8.51	$8.86	+4.1%

Total Debt$2.1B

Cash & Equiv.$240.0M

Net Debt$1.9B

3 min read

1. THE BIG PICTURE

Darden Restaurants is effectively a scale-driven logistics and data business disguised as a collection of restaurant brands. By utilizing its "Darden Direct" distribution network and centralized data insights, Darden Restaurants is systematically increasing its share of a fragmented industry where independent operators lack the financial muscle to compete on advertising or supply chain efficiency.

2. WHERE THE RISKS HIT HARDEST

Darden Restaurants’s primary competitive advantage—its "scale advantage" in sourcing products—is currently being tested by persistent inflationary pressures in beef, poultry, and dairy (10-K Item 1, Risks). While scale allows for direct supplier relationships, it does not immunize Darden Restaurants against market-wide commodity spikes; if these costs outpace menu price adjustments, the very brands Darden Restaurants seeks to protect will see margin compression. Furthermore, Darden Restaurants’s reliance on leased properties for 2,065 of its 2,159 locations creates a rigid cost structure (Risks). This fixed-cost burden threatens the "operational excellence" management cites as a strength, as underperforming sites cannot be easily shuttered without significant financial penalty, potentially dragging down overall profitability during economic downturns.

3. WHAT THE NUMBERS SAY TOGETHER

While Darden Restaurants reported a healthy 7.3% sales increase in the most recent quarter, a look at the peer group reveals a structural efficiency gap. Darden Restaurants maintains the lowest gross margin (19.6%) and the lowest FCFFCFFree Cash Flow — cash left after paying for operations and capital investments; what the company can actually spend, save, or return to shareholders margin (5.2%) among its peers, trailing significantly behind competitors like Yum! Brands (20.9% FCFFCFFree Cash Flow — cash left after paying for operations and capital investments; what the company can actually spend, save, or return to shareholders margin) and Chipotle (12.9% FCFFCFFree Cash Flow — cash left after paying for operations and capital investments; what the company can actually spend, save, or return to shareholders margin) (XBRL). This suggests that Darden Restaurants’s scale is being used primarily to maintain "value for guests" and defend market share rather than to drive elite profitability (8-K).

The recent sales acceleration to 7.3% from a 6.0% TTMTTMTrailing Twelve Months — the most recent full year of financial data, updated on a rolling basis each quarter average is largely structural, driven by the acquisition of Chuy’s, which pushed "Other Business" sales up by 11.3% (10-Q). However, with short interest sitting at 6.6% of the float, a segment of the market remains skeptical that these acquisitions can offset the "commodity headwinds" management highlighted in recent commentary (8-K, Yahoo Finance).

4. IS IT WORTH IT AT THIS PRICE?

At a forward P/EP/EPrice-to-Earnings ratio — share price divided by annual earnings per share; how much investors pay per dollar of profit. Higher P/E = higher growth expectations of 17.9x, Darden Restaurants trades at a modest discount to the peer median of 21.4x (XBRL). This valuation implies a long-term growth rate of just 2.2% (CAPM analysis). Given that Darden Restaurants is guiding for total sales growth of 8.5% to 9.3% for fiscal 2026 and recently delivered same-restaurant sales growth of 4.7% at Olive Garden, the market’s expectations appear beatable (8-K, 10-Q). The discount to peers is likely a reflection of Darden Restaurants’s lower FCFFCFFree Cash Flow — cash left after paying for operations and capital investments; what the company can actually spend, save, or return to shareholders margin (5.2%) and the execution risk associated with the Chuy’s integration. However, for investors seeking yield, Darden Restaurants offers a 3.0% dividend—the highest in its peer group—supported by a consistent buyback program that retires roughly 2.5% of shares annually (XBRL).

5. WHAT WOULD CHANGE THIS VIEW?

Cautious if FCFFCFFree Cash Flow — cash left after paying for operations and capital investments; what the company can actually spend, save, or return to shareholders margins (5.2%) continue to compress relative to peers, suggesting that the "scale advantage" is failing to offset rising labor and commodity costs.
Constructive if same-restaurant sales in the Fine Dining segment (currently lagging at 0.8% growth) accelerate, signaling a recovery in high-margin discretionary spending (10-Q).

6. BOTTOM LINE

Structural Advantage: A proprietary, scale-driven distribution network (Darden Direct) combined with centralized data-driven marketing.

Bottom Line: Darden Restaurants is a disciplined consolidator trading at a reasonable price, though its thin margins leave little room for error if inflation persists.

Source: Synthesis · LLM Analysis

4 min read

1. Top 5 Material Risks

Inflationary Cost Pressures: Darden Restaurants faces persistent inflation in food commodities (beef, pork, chicken, seafood, cheese, butter, and produce), labor, health care, utilities, and fuel. Failure to offset these costs through purchasing economies of scale or menu price adjustments directly threatens operating margins.
Labor Market Competition: The competitive U.S. labor market forces Darden Restaurants to provide higher wages and benefits. Increases in minimum wage laws and market pressure for non-minimum wage positions can materially increase labor costs, which may not be fully recoverable through menu pricing.
Integration of Chuy’s: The acquisition of Chuy’s involves complex, costly, and time-consuming integration of management, information systems, and corporate support. There is no assurance that Darden Restaurants will achieve the expected synergies or growth prospects from this transaction.
Macroeconomic Sensitivity: Darden Restaurants is vulnerable to general economic downturns, rising interest rates, and high energy costs, which reduce guest disposable income. Such conditions lead to fewer dining occasions, lower average checks, or shifts toward cheaper food options, negatively impacting sales and earnings.
Information Technology and Cybersecurity: Darden Restaurants relies heavily on information systems for supply chain management, point-of-sale processing, and e-commerce. A failure to maintain secure networks or a successful cyber-attack could result in loss of revenue, theft of sensitive data, and significant remediation costs.

2. Company-Specific Risks

Lease Obligations: With 2,065 of 2,159 restaurants in leased locations as of May 25, 2025, Darden Restaurants is committed to long-term, non-cancellable rent payments. This limits the ability to close underperforming units without incurring ongoing costs.
Centralized Corporate Operations: Most corporate support and systems are centralized at a single Florida location. A failure to execute business continuity plans following a natural disaster at this site could cause a breakdown in field operations and reporting.
Franchise and Licensee Performance: Darden Restaurants relies on third-party partners for international locations and certain domestic sites. Poor operational execution or food safety issues by these partners can damage the reputation of the Darden Restaurants brands.
Equity Hedge Volatility: Darden Restaurants uses derivatives to hedge equity-based compensation awards. Market volatility can require unpredictable quarterly cash payments to settle these hedges, impacting cash flow.

3. Regulatory/Legal Risks

Employment Law Compliance: Darden Restaurants must navigate a "myriad" of state and local laws regarding wage and hour practices, paid leave, and unionization. Non-compliance or ineffective responses to these regulations can increase labor costs and lead to litigation.
Data Privacy Regulations: Evolving global data privacy laws impose significant compliance costs. Failure to protect customer or employee information can lead to government enforcement actions, private litigation, and penalties.
Environmental Regulation: Increasing focus on climate change and greenhouse gas emissions may lead to new regulations that increase the cost of raw materials, transportation, and utilities.
Litigation Exposure: Darden Restaurants faces risks from class-action lawsuits and regulatory proceedings involving allegations of employment discrimination, wage and hour violations, "dram shop" liability, and food safety issues.

4. Financial Impact Map

Inflationary Cost Pressures → Operating Margins → Compression of margins due to rising costs for food, labor, and utilities. Labor Market Competition → Labor Costs → Increases in minimum wage and market pressure for higher wages directly impact the cost structure. Integration of Chuy’s → Sales Growth and Synergies → Failure to integrate could limit expected growth and efficiency gains in purchasing and distribution. Macroeconomic Sensitivity → Sales and Earnings → Economic downturns lead to reduced guest traffic and lower average profit per transaction. Information Technology and Cybersecurity → Capital Expenditures and Operating Expenses → Significant capital investments required for remediation and compliance with evolving cyber-security laws.

Source: 10-K Item 1A · LLM Analysis