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Darden Restaurants (DRI +13%) is making a strong move following its Q2 (Nov) earnings report this morning. This operator of several restaurant chains (Olive Garden, LongHorn Steakhouse, Ruth's Chris, Chuy's) reported only a modest beat on EPS with slight revenue upside. DRI reaffirmed FY25 EPS at $9.40-9.60, but it raised FY25 revenue guidance to $12.1 bln from $11.8-11.9 bln, primarily adding in the impact of the Chuy's acquisition. The comps seem to be propelling the stock.

• Turning to comps, DRI posted Q2 consolidated comps of +2.4% (OG +2.0%, LS +7.5%, Fine Dining -5.8%), a notable improvement from Q1's -1.1% comp (OG -2.9%, LS +3.7%, Fine Dining -6.0%). As a housekeeping matter, consolidated comps do not include Chuy's, which was just acquired in October. Chuy's will be added to comps after a 16-month period (4QFY26). Another recent acquisition, Ruth's Chris, is finally starting to show in comps but only for November in Q2.
• Importantly, the late Thanksgiving this year meant that the holiday was part of Q3 and not Q2. That caused a sales benefit for the Casual Dining brands in Q2, and a headwind for its Fine Dining brands. However, even when adjusting for the benefit of the Thanksgiving holiday shift at its four largest brands, comps were still positive. Excluding the noise from weather and the shift of Thanksgiving, underlying basic traffic trends improved in Q2 relative to the prior two quarters across all brands.
• It was good to see Olive Garden return to positive comps after three consecutive negative comps. Olive Garden has been working on several initiatives to appeal to core guests as well as value seekers. Its Never Ending Pasta Bowl starting at $13.99 was a hit with customers. Also, OG debuted an updated menu that launched two weeks ago, featuring two fan favorites, Steak Gorgonzola and Stuffed Chicken Marsala.
• Also, recall that last quarter DRI announced a partnership with Uber (UBER) last quarter for tis OG brand. In October, Olive Garden launched its Uber Direct pilot in approximately 100 restaurants. The pilot has gone very well despite not actively promoting the service just yet. It's on track to begin rolling it out to the rest of the system after the holidays, with potential completion by the end of Q3 (Feb). That is earlier than the May 2025 target disclosed on its last call, so that is a good sign.

Overall, this was a very solid quarter for Darden. The headline numbers showed slight upside, however, following EPS misses in two of the past three quarters, we will take it. Also, what really stood out was the comp metric, a marked improvement from recent quarters. Olive Garden and especially Longhorn were impressive. The Never Ending Pasta offering appeals to value consumers. Also, the Uber partnership is off to a good start and we like that Darden moved up the national rollout date.

Finally, given the pullback in the share price in recent weeks, we think there was a good bit of negativity priced in, which also helps explain today's outsized move. We think this report bodes well for other casual dining restaurants set to report when earnings season kicks off next month, including BJRI, BLMN, CAKE, EAT, TXRH.