Darden Restaurants' 1Q Earnings Hit by Higher Food and Labor Costs -- Update

By Connor Hart

Darden Restaurants said higher food and labor costs weighed on profit in the latest quarter, more than offsetting continued sales growth.

The restaurant operator on Thursday said operating costs in its fiscal first quarter rose 6.5% to $2.88 billion. Chief Financial Officer Raj Vennam said that food expenses rose, because most of the company's sales growth came from its brands with higher-than-average food and beverage costs.

Quarterly sales climbed 5.1% to $3.2 billion, roughly in line with Wall Street estimates.

Despite the higher costs, Darden kept its pricing in line with commodities inflation of 3.5%, Vennam said on a call with analysts. Higher labor costs were partially offset by productivity improvements, he added.

Shares ticked 1.2% lower, to $211.11, in morning trading. Still, the stock is up 13% year to date.

The owner of LongHorn Steakhouse and Olive Garden said earnings for its three months ended Aug. 30 fell to $233.4 million, or $2.04 a share, from $257.8 million, or $2.19 a share, in last year's comparable period.

On an adjusted basis, quarterly earnings came in at $2.05 a share, in line with analyst expectations, according to FactSet.

Chief Executive Rick Cardenas called the quarter a solid start to the fiscal year, noting that each of the company's brands delivered positive same-restaurant sales. Companywide comparable sales were up 3.1%, just below analyst views for a 3.3% increase.

Its LongHorn Steakhouse brand reported a 6.2% gain in comparable sales, while same-restaurant sales across its Olive Garden banner ticked up 1.1%. Traffic trends across both chains took a hit from the World Cup, as neither has restaurants that people flock to for sporting events.

The company's Yard House banner--which serves classic American fare and has over a hundred beers on tap--received a boost in traffic from the World Cup, but the competition overall was a net negative for Darden, Vennam said.

Looking ahead, Darden reaffirmed its full-year outlook, calling for earnings from continuing operations of $11.10 to $11.35 a share. Analysts are looking for $11.29 a share.

Write to Connor Hart at connor.hart@wsj.com

(END) Dow Jones Newswires

September 24, 2026 10:16 ET (14:16 GMT)