TLDR
- Darden Shares Sink 7.7% Despite Strong Q1 Sales and Buybacks
- DRI Q1 Results Show Growth, But Profit Worries Rattle Investors
- Market Punishes Darden After Q1 Despite Solid Revenue and Dividends
- Chuy’s Boosts Sales, But Closures and Costs Hit Darden’s Stock
- Strong Sales, Weak Sentiment: Darden Stock Falls After Q1 Report
On September 18, 2025, Darden Restaurants (DRI) shares dropped sharply by 7.69%, closing at $192.74.
The fall came despite strong Q1 fiscal 2026 results, which included solid revenue growth and shareholder returns. This decline erased over $16 per share in market value in a single trading day.
Strong Sales Growth Offset by Profit Concerns
DRI reported a 10.4% rise in total sales, reaching $3.0 billion for the quarter ending August 24, 2025. This growth came from a 4.7% blended increase in same-restaurant sales and new additions from acquisitions. Despite top-line growth, adjusted earnings per share reached $1.97, slightly impacted by integration and closure-related costs.
While Olive Garden and LongHorn Steakhouse showed robust same-restaurant sales of 5.9% and 5.5% respectively, Fine Dining dropped 0.2%. The Other Business segment, which includes newly acquired Chuy’s Tex-Mex, saw a 3.3% rise in same-store sales. Segment profit increased across most categories, though margin pressure appeared to influence sentiment.
DRI Boosts Dividend and Continues Buybacks
DRI declared a quarterly cash dividend of $1.50 per share, scheduled for payment on November 3, 2025. The company also repurchased $183 million worth of common shares, reducing its outstanding share count by 0.9 million. At the end of the quarter, DRI still had $865 million remaining under its authorized $1 billion buyback plan.
Despite these efforts to reward shareholders, the market appeared unimpressed, focusing instead on mixed segment performance. The closure of 22 underperforming restaurants and associated costs also weighed on earnings. The gain from selling Olive Garden Canada restaurants added complexity to the earnings picture.
Q1 Segment Results Show Uneven Growth
Olive Garden posted $1.3 billion in sales, up from $1.2 billion a year earlier, with a segment profit of $267.6 million. LongHorn Steakhouse followed with $776.4 million in sales and $134.9 million in segment profit, showing consistent operational strength. Fine Dining mainly remained flat in both sales and profit, signaling softness at the high-end.
DRI’s Other Business segment, which absorbed Chuy’s during the quarter, contributed $680.7 million in sales and $109.3 million in profit. Chuy’s results are included but won’t impact same-store figures until Q4 2026 due to integration timing. Segment reporting now excludes pre-opening costs, offering a cleaner look at operations.
Updated Outlook Maintains Confidence in Long-Term Strategy
DRI expects total sales to grow 7.5% to 8.5% in fiscal 2026, including a benefit from an extra week. Same-restaurant sales are forecasted to grow 2.5% to 3.5%, while adjusted EPS is guided between $10.50 and $10.70. Capital spending is projected at $700 to $750 million, including roughly 65 new restaurant openings.
Although the company reiterated its confidence in strategy execution and operational discipline, market reaction suggested concerns about segment volatility. Total inflation expectations range from 3.0% to 3.5%, and the effective tax rate is estimated at 13%. DRI remains focused on margin protection and growth despite short-term market pressure.
