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Darden Restaurants (DRI +2%) is trading modestly higher after wrapping up FY25 on a decent but not great note with its Q4 (May) report this morning. This operator of several restaurant chains (Olive Garden, LongHorn Steakhouse, Ruth's Chris, Chuy's) reported fairly modest EPS upside. However, given the misses and very small beats in recent quarters, this was a step up from that.

• Unfortunately, the FY26 guidance was not great with a downside outlook for both EPS and revs. We suspect that investors know that DRI tends to be conservative with guidance, especially this early in the fiscal year, so they are not overly concerned about it. Also, its FY26 consolidated same-restaurant sales guidance at +2.0-3.5% was pretty solid and a step up from +2.0% consolidated comps for all of FY25. We actually view the comp guidance as quite bullish.
• Turning to comps, DRI posted Q4 consolidated comps of +4.6% (OG +6.9%, LS +6.7%, Fine Dining -3.3%), a notable improvement from recent quarters: Q3 (Feb) comps were +0.7% (OG +0.6%, LS +2.6%, Fine Dining -0.8%) and Q2 (Nov) came in at +2.4% (OG +2.0%, LS +7.5%, Fine Dining -5.8%).
• Olive Garden was impressive in Q4. DRI cited the return of its Buy One, Take One offer for the first time in five years, combined with continued strength in off-premise. The take home selections leveraged OG's existing $6 take home platform, minimizing operational complexity. OG's recent Uber partnership has been a success with average weekly deliveries nearly doubling late in the quarter. Also, OG's marketing was more targeted.
• LongHorn did well also and continues to increase market share with sales growth exceeding the industry same-restaurant sales benchmark. However, Fine Dining comps were negative as the industry continues to be challenged.

We see a lot of cross-currents in Darden's Q4 report. There were a number of positives. The $0.02 EPS upside was a decent step up from recent quarters, which included some misses and even smaller upside quarters. Probably the biggest positive was the robust comps in Q4, led by its two largest banners, Olive Garden and Longhorn. The was a big improvement from recent quarters. We also think the FY26 comp guidance was a big positive as well.

In addition to all that, DRI announced a 7% dividend increase and a $1 bln share buyback authorization. The main negative was the downside EPS and revenue guidance for FY26. Overall, we think the positives outweigh the negatives. However, the stock has been steadily rising in recent months, which tells us sentiment was running pretty high heading into this report and that may account for the somewhat muted stock reaction.