DARDEN RESTAURANTS INC

Darden Restaurants, Inc. operates within the full-service dining segment of the restaurant industry, a highly fragmented sector that includes many independent operators and small chains. The industry is intensely competitive with respect to the type and quality of food, price, service, restaurant location, personnel, brand, attractiveness of facilities, availability of carryout and home delivery, internet and mobile ordering capabilities, and effectiveness of advertising and marketing. The full-service dining sector is affected by changes in international, national, regional, and local economic conditions, seasonal fluctuation of sales volumes, consumer spending patterns, and consumer preferences, including changes in consumer tastes and dietary habits. Darden believes that capable operators of strong multi-unit brands have the opportunity to increase their share of the restaurant industry’s full-service segment.

Darden competes within each market with national and regional chains and locally-owned restaurants for guests, management and hourly personnel and suitable real estate sites. The company believes it has strong brands and that the breadth and depth of its experience and expertise set it apart in the full-service restaurant industry. Darden enables each brand to reach its full potential by leveraging its scale, insights, and experience in a way that protects its uniqueness and competitive advantages. The company's brands can capitalize on data driven insights to deliver customized one-to-one customer relationship marketing. Darden's scale enables it to be a leading advertiser in the full-service dining segment of the restaurant industry.

Darden generates revenue principally from food and beverage sales at its company-owned and operated restaurants. As of May 31, 2026, the company owned and operated 2,202 ¹ restaurants through subsidiaries in the United States under the Olive Garden, LongHorn Steakhouse, Yard House, Ruth’s Chris Steak House, Cheddar’s Scratch Kitchen, The Capital Grille, Chuy’s, Seasons 52, Eddie V’s Prime Seafood, Bahama Breeze, and The Capital Burger trademarks. As of May 31, 2026, Darden also had 167 ² restaurants operated by independent third parties pursuant to area development and franchise agreements, four ³ restaurants operating under contractual agreements, and one ⁴ restaurant that it jointly owns with a third party and operates independently. The company does not rely on any major customers as a source of sales. Darden also receives fees under area development and franchise agreements and royalty income under franchise or license agreements, though the amount of income derived from franchise arrangements is not material to its consolidated financial statements. The company licenses the sales and distribution of several items including Olive Garden salad dressings and salad croutons through various channels, though the amount of income from these licensing arrangements is not material.

Olive Garden is the largest full-service dining Italian restaurant operator in the United States, with 949 ⁵ company-owned and operated restaurants as of May 31, 2026. Most dinner menu entrée prices range from $12.50 to $24.00, and most lunch menu entrée prices range from $10.00 to $12.00. During fiscal 2026, the average check per person was approximately $25.00 ⁶, with alcoholic beverages accounting for 4.1 percent ⁷ of Olive Garden’s sales. LongHorn Steakhouse is a full-service steakhouse restaurant brand with 618 ⁸ company-owned and operated restaurants. Most dinner menu entrée prices range from $14.00 to $42.00, and most lunch menu entrée prices range from $9.50 to $12.00. During fiscal 2026, the average check per person was approximately $28.50 ⁹, with alcoholic beverages accounting for 8.1 percent ¹⁰ of LongHorn Steakhouse’s sales. Yard House operates in metropolitan areas across the United States with 93 ¹¹ company-owned and operated restaurants, known for over 100 draft beer offerings. Most lunch and dinner menu entrée prices range from $11.00 to $57.00. During fiscal 2026, the average check per person was approximately $37.00 ¹², with alcoholic beverages accounting for 28.9 percent ¹³ of Yard House’s sales. Ruth’s Chris is one of the largest fine dining steakhouse restaurant brands in the world, with 83 ¹⁴ company-owned and operated restaurants. Most dinner menu entrée prices range from $40.00 to $92.00, and most lunch menu entrée prices range from $16.00 to $70.00. During fiscal 2026, the average check per person was approximately $104.00 ¹⁵, with alcoholic beverages accounting for 18.7 percent ¹⁶ of Ruth’s Chris’ sales. Cheddar’s Scratch Kitchen operates primarily in Texas and throughout the southern, mid-western, and mid-Atlantic regions, with 184 ¹⁷ company-owned and operated restaurants. Most dinner menu entrée prices range from $10.00 to $24.00, and most lunch menu entrée prices range from $9.00 to $11.00. During fiscal 2026, the average check per person was approximately $19.50 ¹⁸, with alcoholic beverages accounting for 6.4 percent ¹⁹ of Cheddar’s Scratch Kitchen’s sales. The Capital Grille is a fine dining restaurant brand with 74 ²⁰ company-owned and operated restaurants, featuring an award-winning wine list offering over 350 selections. Most dinner menu entrée prices range from $41.00 to $95.00, and most lunch menu entrée prices range from $20.00 to $53.00. During fiscal 2026, the average check per person was approximately $107.00 ²¹, with alcoholic beverages accounting for 25.6 percent ²² of The Capital Grille’s sales. Chuy’s offers authentic, freshly-prepared Mexican and Tex-Mex inspired food, with 110 ²³ company-owned and operated restaurants. Most menu entrée prices range from $11.00 to $22.00. During fiscal 2026, the average check per person was approximately $20.00 ²⁴, with alcoholic beverages accounting for 11.4 percent ²⁵ of Chuy’s sales. Seasons 52 is a full-service restaurant brand with 44 ²⁶ company-owned and operated restaurants, offering a seasonally changing menu with all items under 595 calories. Most lunch and dinner menu entrée prices range from $13.00 to $58.50. During fiscal 2026, the average check per person was approximately $53.00 ²⁷, with alcoholic beverages accounting for 21.3 percent ²⁸ of Seasons 52’s sales. Eddie V’s is a fine dining restaurant brand with 31 ²⁹ company-owned and operated restaurants, featuring seasonal seafood and prime steaks. Most dinner menu entrée prices range from $42.00 to $116.00. During fiscal 2026, the average check per person was approximately $126.00 ³⁰, with alcoholic beverages accounting for 26.4 percent ³¹ of Eddie V’s sales. Bahama Breeze offers Caribbean-inspired food and drinks, with 13 ³² company-owned and operated restaurants as of May 31, 2026. Most lunch and dinner menu entrée prices range from $10.00 to $39.00. During fiscal 2026, the average check per person was approximately $38.00 ³³, with alcoholic beverages accounting for 19.0 percent ³⁴ of Bahama Breeze’s sales. The Capital Burger is a development-stage concept with 3 ³⁵ company-owned and operated restaurants. Most lunch and dinner menu entrée prices range from $18.00 to $36.00. During fiscal 2026, the average check per person was approximately $37.00 ³⁶, with alcoholic beverages accounting for 25.5 percent ³⁷ of The Capital Burger’s sales.

Darden has four reportable segments: Olive Garden, LongHorn Steakhouse, Fine Dining (which includes Ruth’s Chris, The Capital Grille, and Eddie V’s), and Other Business (which includes Yard House, Cheddar’s Scratch Kitchen, Chuy’s, Seasons 52, Bahama Breeze, The Capital Burger, and ongoing royalties and other fees from franchise operations and contractually managed locations). External sales are derived principally from food and beverage sales. There were no material transactions among reportable segments.

On July 14, 2025, Darden closed on the sale of eight ³⁸ Olive Garden restaurants in Canada to Recipe Unlimited Corporation. On February 3, 2026, Darden announced the completion of its strategic review of the Bahama Breeze brand and its decision to permanently close approximately half of the Bahama Breeze restaurants, which was completed on or about April 5, 2026, and its expectation to convert the remaining Bahama Breeze restaurants to other Darden brands over the next 12–18 months. As of the end of fiscal 2026, one conversion had been completed. During fiscal 2026, Darden added 43 ³⁹ net new restaurants in the United States. Darden opened 22 ⁴⁰ new Olive Garden restaurants, 27 ⁴¹ new LongHorn Steakhouse restaurants, 5 ⁴² new Yard House restaurants, 1 ⁴³ new Ruth’s Chris restaurant, 4 ⁴⁴ new Cheddar’s Scratch Kitchen restaurants, 4 ⁴⁵ new The Capital Grille restaurants, 4 ⁴⁶ new Chuy’s restaurants, 2 ⁴⁷ new Seasons 52 restaurants, and 3 ⁴⁸ new Eddie V’s restaurants. Darden sold 8 ⁴⁹ restaurants (the Olive Garden Canada Restaurants) and closed 21 ⁵⁰ restaurants (including 15 ⁵¹ Bahama Breeze restaurants). In fiscal 2026, Darden repurchased 687,020 ⁵² shares of its common stock for $378.7 million ⁵³ during the quarter ended May 31, 2026. On June 24, 2026, Darden’s Board of Directors authorized a new share repurchase program under which the company may repurchase up to $1.5 billion ⁵⁴ of its outstanding common stock.

Total sales from continuing operations for fiscal 2026 were $13,210.9 million ⁵⁵, compared to $12,076.7 million ⁵⁶ in fiscal 2025 and $11,390.0 million ⁵⁷ in fiscal 2024. Net earnings from continuing operations for fiscal 2026 were $1,022.3 million ⁵⁸, compared to $893.5 million ⁵⁹ in fiscal 2025 and $875.6 million ⁶⁰ in fiscal 2024. Diluted net earnings per share from continuing operations for fiscal 2026 were $8.82 ⁶¹, compared to $7.41 ⁶² in fiscal 2025 and $7.15 ⁶³ in fiscal 2024.

For fiscal 2027, Darden projects new restaurant openings of 75-80 ⁶⁴ across its brands. Olive Garden is projected to open 22-26 ⁶⁵ new restaurants with a capital investment range of $4.4 - $6.3 million ⁶⁶ per restaurant. LongHorn Steakhouse is projected to open 26-30 ⁶⁷ new restaurants with a capital investment range of $3.8 - $5.2 million ⁶⁸ per restaurant. Yard House is projected to open 7-10 ⁶⁹ new restaurants with a capital investment range of $7.8 - $9.8 million ⁷⁰ per restaurant. Ruth’s Chris is projected to open 1-2 ⁷¹ new restaurants with a capital investment range of $6.0 - $8.0 million ⁷² per restaurant. Cheddar’s Scratch Kitchen is projected to open 6-8 ⁷³ new restaurants with a capital investment range of $4.3 - $5.4 million ⁷⁴ per restaurant. The Capital Grille is projected to open 2-4 ⁷⁵ new restaurants with a capital investment range of $7.2 - $9.5 million ⁷⁶ per restaurant. Chuy’s is projected to open 4-6 ⁷⁷ new restaurants with a capital investment range of $4.3 - $5.5 million ⁷⁸ per restaurant. Seasons 52 is projected to open 1-2 ⁷⁹ new restaurants with a capital investment range of $6.0 - $7.2 million ⁸⁰ per restaurant. Eddie V’s is projected to open 1-2 ⁸¹ new restaurants with a capital investment range of $8.5 - $10.2 million ⁸² per restaurant.

Darden continues a multi-year effort to implement new technology platforms that allow it to digitally engage with guests and team members and strengthen its marketing and analytics capabilities. The company continues making improvements to its online and mobile ordering and payment systems across all brands. Darden is also working on developing sophisticated customer relationship management programs, data analytics, and data-driven marketing approaches to effectively and efficiently target existing and potential guests across its portfolio of brands. This enables the company to tailor its messaging and offerings depending on guest visit history, preferences, and brand loyalty. Darden continues to utilize sophisticated consumer marketing research to monitor guest satisfaction and evolving trends and marketplace dynamics.

Darden's operating philosophy remains focused on strengthening the core operational fundamentals of the business by providing an outstanding guest experience rooted in culinary innovation, attentive service, and an engaging atmosphere enabled by its people. The company holds itself accountable for operating its restaurants with a sense of urgency to achieve its commitments to all stakeholders. Darden's brands evaluate marketing activities through three filters: marketing activities must elevate brand equity by bringing each brand’s competitive advantages to life; marketing activities must be simple to execute, allowing teams to deliver consistently memorable guest experiences; and the company will not rely on deep discounts and is therefore able to provide great value to guests while driving profitable sales growth.

Darden's supply chain continues to drive automation by collaborating with suppliers, logistics partners, and distributors to improve optimization with information visibility and other technological advances. The company's sourcing staff sources, negotiates, and purchases food and supplies from more than 1,400 ⁸³ suppliers whose products originate in more than 30 ⁸⁴ countries. Darden leverages competitive bids, long-term contracts, and strategic supplier relationships to manage availability and cost of products. The company contributes to its scale advantage by directly sourcing product utilizing its supplier relationships, product expertise, and dedicated distribution network, while prioritizing food safety. Darden has implemented technology-enabled business solutions to improve financial control, cost management, guest service, and employee effectiveness, as well as enable e-commerce. The company's strategy is to fully integrate systems to drive operational efficiencies and enable restaurant teams to focus on restaurant operations excellence. Darden leverages public cloud computing where appropriate to enhance its capabilities and to leverage scale. The company will continue to invest in its digital platforms and applications to enhance the guest experience.

Darden's capital expenditure plans for fiscal 2027 are reflected in the projected new restaurant openings and associated capital investment ranges by brand. The company's share repurchase program was renewed on June 24, 2026, with a new authorization of up to $1.5 billion ⁸⁵ of outstanding common stock. Darden has a history of paying cash dividends, though any future dividend payments remain subject to the discretion of the Board of Directors. The company's information systems projects are prioritized based upon strategic, financial, regulatory, risk and other business advantage criteria.

Darden faces headwinds from cost pressures, including rising costs for commodities, labor, health care, and utilities. The company has experienced and may continue to experience higher than normal inflationary conditions with respect to most or all of these costs during fiscal 2026. Operating margins are subject to changes in the price and availability of food commodities, including beef, pork, chicken, seafood, cheese, butter, and produce. The introduction of, or changes to, tariffs or adverse impacts resulting from restrictive trade policies or trade disputes on imported food products could increase costs and possibly impact supply. Increases in minimum wage, health care, and other benefit costs may have a material adverse effect on labor costs. The market for labor in the United States is competitive and has resulted in pressure on wages and may continue to do so in the future. Many states and localities are passing laws regulating employment practices and working conditions, which could have a material adverse effect on labor costs. Darden's ability to offset the effects of inflation through pricing actions may be constrained by competitive dynamics and consumer demand sensitivity.

Darden faces structural headwinds from general economic conditions, including slow global recovery from economic downturns, geopolitical conditions, and uncertainty about the strength or pace of economic recovery. Economic recession, a protracted economic slowdown, a worsening economy, political instability, increased unemployment, increased inflation, increased energy prices, rising interest rates, a downgrade of the U.S. government’s long-term credit rating, imposition of retaliatory tariffs on important U.S. imports and exports or other industry-wide cost pressures have affected and can continue to affect consumer behavior and spending for restaurant dining occasions. Economic uncertainty has caused and may continue to cause guests to make fewer discretionary purchases. If gasoline, natural gas, electricity, and other energy costs remain at current elevated levels or increase further, and credit card, home mortgage, and other borrowing costs increase with rising interest rates, guests may have lower disposable income and reduce the frequency of their dining occasions, may spend less on each dining occasion or may choose more inexpensive food options.

Darden faces material risks from cost pressures, including rising costs for commodities, labor, health care, and utilities, which could compress margins; the company has experienced higher than normal inflationary conditions during fiscal 2026. The inability to hire, train, reward, and retain restaurant team members, complicated by a competitive labor market, could impact the company's ability to achieve operating, growth, and financial objectives; Darden's consolidated turnover rate for hourly team members during fiscal 2026 was 67 percent ⁸⁶. A failure to maintain food safety throughout the supply chain or food-borne illness concerns could adversely affect the reputation of Darden's brands and have a negative impact on sales. The company relies heavily on information technology systems, and a failure to maintain a continuous and secure cyber network, free from material failure, interruption, or security breach, could harm its ability to effectively operate its business and result in the loss of respected relationships with guests or employees. Darden is subject to changes in consumer preferences that may adversely affect demand for food at its restaurants, and the full-service dining sector is intensely competitive with respect to pricing, service, location, personnel, take-out and delivery options, and type and quality of food.

Management's message emphasizes that Darden's operating philosophy remains focused on strengthening the core operational fundamentals of the business by providing an outstanding guest experience rooted in culinary innovation, attentive service, and an engaging atmosphere enabled by its people. The company enables each brand to reach its full potential by leveraging its scale, insights, and experience in a way that protects its uniqueness and competitive advantages. Management holds the company accountable for operating its restaurants with a sense of urgency to achieve its commitments to all stakeholders. Key strategic priorities for the period ahead include continuing to expand all restaurant brands, with projected new restaurant openings of 75-80 ⁸⁷ for fiscal 2027, and continuing a multi-year effort to implement new technology platforms that allow digital engagement with guests and team members and strengthen marketing and analytics capabilities. Management also emphasizes the importance of integrated marketing to bring brands to life, with Olive Garden leveraging the efficiency of national advertising on both traditional and streaming television, supplemented with targeted digital media investments, while other brands use streaming television and digital marketing to build engagement and loyalty.