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Darden Restaurants (DRI) is trading roughly flat after delivering a mostly in-line fiscal Q4 (May) result. However, investors are focusing on a lackluster FY27 outlook, including EPS guidance below consensus and slower expected comparable sales growth. Darden announced a new $1.5 bln share repurchase authorization and raised its dividend by 8%, underscoring confidence in its cash generation and long-term outlook.

• Brand mix: Same-restaurant comps of +4.6% were at the high end of prior guidance of +3.5-5.0% and a bit better than the +4.2% comp in Q3 (Feb). However, Olive Garden comps continued to be a bit weak at +2.4%. LongHorn Steakhouse remained the standout performer with +9.5% same-restaurant sales growth, accelerating from +7.2% in Q3 as investments in food quality and service, combined with favorable relative value amid elevated beef prices, continued to resonate with consumers.
• Consumer spend: Management said consumer spending remains resilient despite cautious sentiment, with casual dining brands generating yr/yr traffic growth across all income groups, including lower-income consumers.
• Cost backdrop: DRI has been dealing with significant macro pressures, including beef inflation that was higher than expected in FY26, up close to 12%. DRI expects Q1 (Aug) beef prices to be higher yr/yr by mid-to-high-single digits but some deflation in Q2 as that is when DRI started to lap significantly higher inflation for beef last year. Beef prices are expected to rise low single digits for the full year in FY27.
• Growth plan: FY27 calls for same-restaurant sales growth of +2.5-3.5%, which we think investors are viewing as a bit lackluster, and 75-80 new restaurant openings.

Briefing.com Analyst Insight

Darden delivered a solid finish to FY26 but offered a FY27 outlook that suggests growth is likely to moderate. The quarter itself was encouraging, highlighted by another exceptional performance from LongHorn. The problem is that investors were looking ahead, and management's initial FY27 guidance was a bit underwhelming. Darden's guidance suggests management sees a more normalized demand environment ahead. The stock's strong performance over the past year reflected investor confidence that Darden could navigate inflation pressures while maintaining healthy traffic trends. Today's reaction indicates expectations had risen alongside the stock, leaving little room for a FY27 outlook that merely met rather than exceeded expectations. While resilient consumer spending, improving traffic trends, and moderating inflation later in FY27 are positives, investors will likely need to see Olive Garden reaccelerate and LongHorn maintain its exceptional momentum before becoming more constructive on the shares.