Does Rising Costs and Modest Guidance Shift the Margin Outlook for Darden Restaurants (DRI)?

• Earlier this week, Darden Restaurants reported first quarter 2026 adjusted earnings per share of US$1.97, falling short of Wall Street expectations due to an 8.8% increase in operating costs, largely from higher ingredient and marketing expenses, while sales aligned with forecasts.
• Although management raised its annual sales growth guidance to a range of 7.5% to 8.5%, the midpoint remains just below the average analyst forecast, highlighting continued caution around near-term performance.
• We’ll consider how Darden’s increasing operating expenses may reshape its outlook for margin improvement and future growth.

Find companies with promising cash flow potential yet trading below their fair value.

Darden Restaurants Investment Narrative Recap

To be a Darden Restaurants shareholder, you need confidence in the company's ability to defend its market leadership in US casual dining and consistently grow earnings, even as costs fluctuate. The recent uptick in ingredient and marketing expenses makes near-term margin improvement a tougher catalyst, but does not materially change the most pressing risk: slowing guest counts and changes in consumer dining patterns could hinder revenue momentum.

Of Darden’s recent announcements, the update on raising its annual sales growth guidance to 7.5% to 8.5% stands out. While this signals some underlying business strength, the muted midpoint, below analyst expectations, illustrates the challenge of offsetting increased costs and maintaining profitability as the operating environment grows more complex for restaurant chains.

But despite Darden’s reputation for resilience, investors should keep in mind the risk that rising ingredient costs and operational complexities may put pressure on...

Read the full narrative on Darden Restaurants (it's free!)

Darden Restaurants' narrative projects $14.3 billion revenue and $1.4 billion earnings by 2028. This requires 5.7% yearly revenue growth and a $0.3 billion earnings increase from $1.1 billion today.

Uncover how Darden Restaurants' forecasts yield a $221.50 fair value, a 26% upside to its current price.

Exploring Other Perspectives

Five retail investors from the Simply Wall St Community assigned Darden fair values ranging from US$135.95 to US$249.58 per share. With recent cost increases affecting margins, the range of opinions underscores how differently you and other investors might view the outlook for future profitability.

Explore 5 other fair value estimates on Darden Restaurants - why the stock might be worth 23% less than the current price!

Build Your Own Darden Restaurants Narrative

Disagree with existing narratives? Create your own in under 3 minutes - extraordinary investment returns rarely come from following the herd.

• A great starting point for your Darden Restaurants research is our analysis highlighting 5 key rewards and 3 important warning signs that could impact your investment decision.
• Our free Darden Restaurants research report provides a comprehensive fundamental analysis summarized in a single visual - the Snowflake - making it easy to evaluate Darden Restaurants' overall financial health at a glance.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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