Executive Summary
Darden’s QQ1 2025 results reflect a resilient operating model delivering industry-leading margins despite a softer top-line trajectory driven by industry-wide traffic softness, particularly in July. Total sales of $2.757 billion were up about 1% year over year, aided by 42 net new restaurants but partially offset by negative same-restaurant sales of 1.1%. The quarter showcased notable strategic momentum: a first-party delivery pilot with Uber Direct at Olive Garden designed to preserve the in-restaurant experience while expanding takeout and delivery options; continued emphasis on menu innovation and value-focused promotions (Never Ending Pasta Bowl extended to 12 weeks with a new garlic herb sauce); and cash-flow durability evidenced by adjusted EBITDA of $392 million and free cash flow of $121.7 million. Management reaffirmed guidance and highlighted the Ruth’s Chris acquisition as expected to be EPS neutral for the year. The balance sheet remains levered (total debt around $5.316 billion; net debt approx. $5.123 billion) but generates robust operating cash flow and a disciplined capital allocation approach (share repurchases of $172 million and $166 million in dividends in the quarter). The near-term outlook emphasizes improving traffic momentum into the remainder of FY25, continued progress on Uber Direct rollout, and selective pricing and promotional tactics to balance guest value with margin discipline.
Key Performance Indicators
QoQ: -34.26% | YoY:-3.34%
QoQ: -32.75% | YoY:-2.31%
QoQ: -32.17% | YoY:-1.13%
Key Insights
Revenue: $2.757B in Q1 FY2025, up 1% YoY; Gross Profit: $562.8M; Gross Margin: 20.4%; Operating Income: $269.2M; Operating Margin: 9.76%; Net Income: $207.2M; Net Margin: 7.52%; Adjusted EBITDA: $391.6M; EBITDA Margin: 14.20%; Adjusted Diluted EPS (continuing ops): $1.75; GAAP EPS: $1.74; Diluted shares: ~119.2M. YoY and QoQ metrics (per provided data): Revenue YoY +1.09%, QoQ -6.77%; Gross Profit YoY +2.29%, QoQ +4.55%; Operating Income YoY -3.34%, QoQ -34.26%; Net Income YoY -2.31%, QoQ -32.75...
Financial Highlights
Revenue: $2.757B in Q1 FY2025, up 1% YoY; Gross Profit: $562.8M; Gross Margin: 20.4%; Operating Income: $269.2M; Operating Margin: 9.76%; Net Income: $207.2M; Net Margin: 7.52%; Adjusted EBITDA: $391.6M; EBITDA Margin: 14.20%; Adjusted Diluted EPS (continuing ops): $1.75; GAAP EPS: $1.74; Diluted shares: ~119.2M. YoY and QoQ metrics (per provided data): Revenue YoY +1.09%, QoQ -6.77%; Gross Profit YoY +2.29%, QoQ +4.55%; Operating Income YoY -3.34%, QoQ -34.26%; Net Income YoY -2.31%, QoQ -32.75%; EPS YoY -1.13%, QoQ -32.17%. Segment performance: Olive Garden -1.5% total sales with -2.9% same-restaurant sales; LongHorn +6.5% total sales with +3.7% same-restaurant sales; Fine Dining +2% total sales; Other -1.8% same-restaurant sales but outperformed industry benchmarks.
Income Statement
| Metric |
Value |
YoY Change |
QoQ Change |
| Revenue |
2.76B |
1.09% |
-6.77% |
| Gross Profit |
562.80M |
2.29% |
4.55% |
| Operating Income |
269.20M |
-3.34% |
-34.26% |
| Net Income |
207.20M |
-2.31% |
-32.75% |
| EPS |
1.75 |
-1.13% |
-32.17% |
Key Financial Ratios
operatingProfitMargin
9.76%
operatingCashFlowPerShare
$2.31
freeCashFlowPerShare
$1.03
dividendPayoutRatio
80.1%
Management Commentary
Key management themes from the earnings call: - Uber Direct partnership at Olive Garden represents a first-party delivery model designed to protect the in-restaurant experience while offering curbside delivery and takeout. It is a two-year exclusive with Uber, with a phased rollout starting in Q2 and completion by year-end, and is not expected to be immediately dilutive to margins. - Management emphasizes a back-to-basics operating model anchored in culinary execution, guest experience, and value-driven marketing. Never Ending Pasta Bowl was moved up to run 12 weeks with a new garlic herb sauce to maintain engagement and value perception. Olive Garden’s pricing has consistently run below industry inflation, with long-term price discipline. - Speed of service and “time well spent” improvements are viewed as a guest needs state, not merely throughput; initiatives aim to capture faster meal occasions without compromising guest perception. - The Ruth’s Chris acquisition (Ruth’s Chris) is expected to be EPS neutral for the year excluding related expenses; the Chuy’s acquisition update confirms on-track close in mid-October, with post-close integration levers learned from Ruth’s Chris. - Commentary on market conditions highlighted July softness followed by August stabilization and September strengthening across most brands; marketing remains selective and value-focused, avoiding deep discounting while expanding price points and limited-time offers where appropriate. - Guidance reaffirmed; management suggests mid-to-high single-digit earnings cadence across upcoming quarters, with Thanksgiving timing providing some seasonal uplift in Q2. - The Uber Direct deal is positioned as an incremental, long-run driver rather than a near-term margin uplift, with a focus on data ownership and guest experience.
This is a first-party delivery, not third-party delivery marketplace. It will take time for us to build sales.
— Rick Cardenas
We reaffirmed our guidance, taking into consideration actual performance year-to-date and the initiatives Rick shared to support the remainder of the fiscal year.
— Raj Vennam
Forward Guidance
Management reaffirmed FY25 guidance as of the QQ1 call, with emphasis on maintaining margins while investing in strategic growth initiatives. Near-term drivers include: - The Olive Garden Uber Direct pilot expanding to 100 locations in the Olive Garden system by year-end, with potential expansion to other brands if the test proves incremental and scalable. The delivery model will be first-party, with transparent delivery fees and tips shared with team members; no incremental margin to Darden from delivery fees themselves. - Continued optimization of the menu and pricing strategy to balance guest value with margin protection, including signaling more price points and limited-time offers that fit marketing filters (simple to execute, not deeply discounted). - Speed-of-service initiatives intended to capture quicker meal occasions without material capital expenditure or staffing surges. - Ongoing share repurchases and a moderate dividend policy complemented by disciplined capital deployment related to acquisitions (Chuy’s) and bolt-on opportunities. Investment considerations for investors include: incremental revenue potential from Uber Direct over time, potential uplift in Olive Garden traffic through improved value messaging and faster service, and the risk of continued macro headwinds (inflation, labor costs, consumer sentiment) impacting guest traffic and mix. Critical monitoring factors include: Olive Garden same-restaurant sales trajectory, impact of Uber Direct on takeout/delivery mix and unit economics, evolving competitive dynamics in the casual dining landscape, and the progress and profitability of acquisitions (Chuy’s) and integration milestones.