Darden Restaurants (NYSE: DRI) shares fell 1.4% to $211.42 on Thursday after the owner of Olive Garden and LongHorn Steakhouse reported lower net earnings for its fiscal first quarter. The company attributed the pressure primarily to higher food, beverage, and labor costs.

Net earnings declined about 9% to $234.3 million, compared with $257.9 million a year earlier. Adjusted earnings were $2.05 per share on revenue of $3.2 billion, with both figures matching analyst estimates. The profit decline came even with revenue in line with expectations, underscoring that rising costs, rather than weakening demand, drove the quarter's results.

Operating costs and expenses increased 7% to $2.88 billion. Darden said higher costs for food, beverages, and labor were the main factors behind the increase.

Chief Executive Officer Rick Cardenas described the quarter as a “solid start” to fiscal 2027 and highlighted positive same-restaurant sales growth across each of Darden’s brands.

Olive Garden Growth Slows

Olive Garden remains Darden’s largest chain, but its comparable-sales growth weakened during the quarter. Same-restaurant sales — a widely used restaurant-industry measure of growth at locations open a year or longer — rose 1.1%, down from 2.4% growth in the fiscal fourth quarter May 31.

The slowdown is significant because of Olive Garden’s contribution to Darden’s overall results: as the largest chain in the portfolio, its performance weighs heavily on companywide figures. LongHorn Steakhouse delivered stronger performance, with comparable sales increasing 6% for the quarter.

Across the company, comparable sales rose 3.1%, slightly below analysts’ projection of 3.3% growth.

Fiscal 2027 Guidance Reaffirmed

Darden reaffirmed its fiscal 2027 outlook and continued to expect earnings per share from continuing operations of $11.10 to $11.35. Management did not increase the forecast following the quarter’s results, leaving investors without the upside of a raised outlook even though the reported figures landed broadly in line.

Analysts cited the unchanged guidance as a possible reason for the stock’s decline, rather than a significant miss in the reported quarterly figures. Revenue and comparable sales were both broadly in line with expectations for the period.

With the full-year forecast intact, upcoming quarterly reports will show whether food and labor cost pressures ease and whether Olive Garden’s comparable-sales growth regains the pace it posted earlier in the year — both of which factor directly into the company’s cost and sales trajectory for fiscal 2027.

Free cash flow remains an important financial strength for Darden, supporting investment in restaurants, dividend payments, and stock buybacks. At the same time, the company carries a relatively high debt load, which could limit its flexibility if ingredient costs, including beef prices, continue to rise or consumer spending patterns change further.

Darden stock is up 18.84% year to date. Average trading volume is approximately 1.29 million shares, and the company has a market capitalization of $24.25 billion.

Source: CoinCentral