Restaurant company Darden (NYSE: DRI) met Wall Street’s revenue expectations in Q2 CY2025, with sales up 10.6% year on year to $3.27 billion. Its GAAP profit of $2.58 per share was 12.1% below analysts’ consensus estimates.

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StockStory’s Take

Darden’s second quarter saw a positive market reaction as the company delivered robust same-store sales growth and expanded its restaurant footprint. Management credited the success to value-oriented promotions at Olive Garden, such as the return of the "buy one take one" offer and expanded delivery options, which resonated with guests seeking affordability and convenience. CEO Ricardo Cardenas noted that, “consumers are figuring out that casual dining is a great value,” highlighting a broader shift in consumer behavior away from fast food and toward full-service restaurants. The company also pointed to operational execution and targeted marketing efforts as contributors to guest satisfaction and traffic gains across its largest brands.

Looking ahead, Darden’s outlook is shaped by a strategy of disciplined pricing, continued investment in affordability, and measured expansion. Management emphasized intentions to keep menu price increases below inflation and to reinvest incremental sales into enhancing guest value and operational efficiency. CFO Rajesh Vennam stated, “We are going to focus a little bit more on top line growth and on just grabbing margin,” signaling a shift toward driving sales through new menu items, delivery channels, and marketing, even if it results in flatter margins. The company is also monitoring macroeconomic uncertainty and evolving consumer preferences, particularly as it ramps up new restaurant openings and pursues international franchising agreements.

Key Insights from Management’s Remarks

Management identified value-driven promotions, delivery expansion, and operational discipline as the main drivers of quarterly performance, while also outlining portfolio changes and leadership transitions to position the company for future growth.

• Olive Garden promotions boost traffic: The return of the "buy one take one" offer at Olive Garden and a new free delivery campaign led to higher guest volumes and nearly doubled weekly delivery orders in the final weeks of the quarter. Management reported that these initiatives attracted both new and lapsed customers, with many delivery users being younger and higher income than typical dine-in guests.

• Delivery channel expansion: The rollout of Uber Direct delivery at Olive Garden and Cheddar’s Scratch Kitchen contributed incremental sales, with delivery now accounting for an increasing share of transactions. Management indicated that delivery customers tend to have higher frequency and larger checks, and the incremental sales from delivery are not eroding restaurant margins due to careful deal structuring with Uber.

• LongHorn Steakhouse quality investments: LongHorn continued to outperform the industry by focusing on quality, simplicity, and training, including ongoing investments in product quality and service. Management highlighted that investments made during the pandemic, such as increasing steak sizes and limiting price increases, continue to support strong performance and guest satisfaction.

• Portfolio streamlining and international expansion: Darden is exploring strategic alternatives for its Bahama Breeze brand, including a potential sale, while expanding Olive Garden’s international reach through a franchising agreement in Canada and new development deals in India and Spain. These moves reflect a focus on brands with the highest growth potential and localized market expertise.

• Leadership transitions and succession planning: The company announced several C-level changes, including the retirement of Olive Garden President Dan Kiernan and a series of internal promotions to support the next phase of growth. Management stressed the importance of a deep leadership bench and careful succession planning, especially as it integrates acquisitions and expands its brand portfolio.

Drivers of Future Performance

Management expects disciplined pricing, targeted reinvestment, and expanded delivery to shape results in the upcoming quarters, while macroeconomic uncertainty and consumer preferences remain key variables.

• Disciplined pricing and affordability: Darden plans to keep price increases below food and labor inflation, prioritizing affordability to maintain value leadership in casual dining. Management indicated that future investments may include additional lower-priced menu items and selective promotional activity, especially at Olive Garden, to attract cost-conscious customers.

• Delivery growth and digital engagement: The success of Uber Direct at Olive Garden and Cheddar’s has prompted ongoing evaluation of delivery expansion across its other brands. Management is cautious but optimistic, noting that delivery can drive incremental sales from younger, higher-income, and lapsed customers, while maintaining profit margins.

• Strategic reinvestment and operational improvements: Extra profits from higher-than-expected sales will be reinvested in operational efficiency, menu innovation, and marketing. The company aims to balance growth and margin stability, recognizing that investments in speed of service and enhanced guest experience are necessary to sustain long-term competitiveness.

Catalysts in Upcoming Quarters

In the coming quarters, our analysts will monitor (1) the trajectory of delivery sales at Olive Garden and Cheddar’s and the potential rollout to additional brands, (2) the effectiveness of new value-focused menu items and promotional campaigns in sustaining traffic gains, and (3) progress on international franchising agreements, particularly in Canada, India, and Spain. Execution on leadership transitions and operational improvements will also be key indicators of management’s ability to drive sustainable growth.

Darden currently trades at $227.34, up from $222.78 just before the earnings. At this price, is it a buy or sell? See for yourself in our full research report (it’s free).

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