Darden fiscal Q1 2027: sales +5.1% to $3.2B with LongHorn comparable sales up 6.8%; GAAP EPS fell 6.4% to $2.05 on a prior-year one-time gain, adjusted EPS rose 4.1%, full-year outlook reaffirmed.
Revenue
$3.2B
+5.1% YoY
Net income
$234M
-9.2% YoY
Diluted EPS
$2.05
-6.4% YoY
Operating margin
10.0%
Overview
Darden Restaurants, owner of Olive Garden, LongHorn Steakhouse, Cheddar's, Yard House, Ruth's Chris and other full-service restaurant brands, reported fiscal Q1 2027 results (the 13 weeks ended August 30, 2026) on September 24, 2026. Sales rose 5.1% to $3,200.3 million and all four reporting segments posted higher same-restaurant sales. LongHorn Steakhouse did most of the work: its sales grew 10.9% and its segment profit grew 14.6%, while Olive Garden, the largest brand, grew sales only 2.2%.
The headline profit numbers fell. Earnings from continuing operations dropped 9.2% to $234.3 million and GAAP diluted EPS from continuing operations fell 6.4% to $2.05, down from $2.19. That decline comes from last year, not this year: the year-ago quarter included a one-time $42.0 million pre-tax gain on the sale of Olive Garden's Canadian restaurants. Take that out, along with small integration and closure costs, and adjusted EPS rose 4.1% from $1.97. Management reaffirmed its full-year outlook.
This analysis is based on the earnings release (Exhibit 99.1 to the 8-K). The full 10-Q hasn't been filed yet, so management's explanation of why each cost line moved, traffic versus price within same-restaurant sales, and brand-level detail inside the "Other Business" segment aren't available yet.
Key metrics
Metric
Fiscal Q1 2027
Fiscal Q1 2026
YoY Change
Sales
$3,200.3M
$3,044.7M
+5.1%
Operating income
$319.3M
$339.2M
-5.9%
Operating margin
10.0%
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Restaurant-level margin (our calculation, see below)
18.8%
18.9%
-0.1 pts
Company-owned restaurants (period end)
2,218
2,165
+2.4%
Operating margin is operating income as a share of sales: what's left after running the restaurants and head office, before interest and tax. Net income and EPS here are from continuing operations. Total net earnings, including a $0.9M loss from discontinued operations, were $233.4M ($2.04 per diluted share), versus $257.8M ($2.19) a year ago.
Same-restaurant sales: every segment grew, LongHorn led
"Same-restaurant sales" compares sales only at restaurants open in both periods. That shows whether existing locations are busier or charging more, without the effect of new openings. Darden gives two versions. Last fiscal year had 53 weeks and this one has 52, so the fiscal quarters are offset by a week (June 1–August 30, 2026 versus May 26–August 24, 2025). The "comparable calendar" figure lines up the same calendar weeks and is the cleaner comparison.
Segment
Fiscal calendar
Comparable calendar
Q1 sales
Sales growth
Consolidated Darden
+3.1%
+3.2%
$3,200.3M
+5.1%
Olive Garden
+1.1%
+1.0%
$1,329.8M
+2.2%
LongHorn Steakhouse
+6.2%
+6.8%
$860.9M
+10.9%
Fine Dining
+1.6%
+1.0%
$304.2M
+6.2%
Other Business
+3.8%
+4.5%
$705.4M
+3.6%
Same-restaurant figures exclude Bahama Breeze, because all of its locations are expected to be closed or converted to other brands by fiscal Q4 2027. It's down to 10 restaurants from 28 a year ago.
The gap between same-restaurant growth and total sales growth is the contribution from new restaurants. LongHorn added 29 restaurants over the year (595 to 624) on top of its 6.8% comparable gain, which explains how it reached 10.9% total growth. Olive Garden added 20 restaurants (933 to 953) but grew comparable sales only 1.0%. That's the weakest result of the four segments, and it matters most because Olive Garden is 42% of company sales. The release doesn't split same-restaurant sales into guest traffic versus average check (price and menu mix), so it's not yet possible to say whether Olive Garden's 1.0% came from more guests or higher prices.
Segment profit: LongHorn's margin widened, the others slipped slightly
Darden's segment profit is sales minus food, labor, restaurant operating costs and marketing. It excludes non-cash real estate costs and head-office overhead.
Segment
Q1 FY27 segment profit
Q1 FY26 segment profit
Change
Margin FY27
Margin FY26
Olive Garden
$270.8M
$267.6M
+1.2%
20.4%
20.6%
LongHorn Steakhouse
$154.6M
$134.9M
+14.6%
18.0%
17.4%
Fine Dining
$39.6M
$38.7M
+2.3%
13.0%
13.5%
Other Business
$111.5M
$109.3M
+2.0%
15.8%
16.1%
LongHorn's profit grew faster than its sales, adding about 0.6 points of margin. Its $19.7M profit increase was larger than the other three segments' gains combined ($6.3M). At Olive Garden, Fine Dining and Other Business, profit grew more slowly than sales, so margins narrowed by 0.2–0.5 points. Because the 10-Q isn't out yet, the release doesn't say which costs pressured those margins.
Restaurant-level costs
The release doesn't report a restaurant-level margin directly. Subtracting the four restaurant operating cost lines from sales gives $602.9M, or 18.8% of sales, versus $574.3M (18.9%) a year ago. The cost mix changed underneath that flat total:
Cost line (% of sales)
Q1 FY27
Q1 FY26
Change
Food and beverage
30.8%
30.5%
+0.3 pts
Restaurant labor
32.2%
32.5%
-0.3 pts
Restaurant expenses
16.6%
16.6%
flat
Marketing
1.7%
1.6%
+0.1 pts
Food costs grew faster than sales ($984.9M, +6.0%). Labor grew slower ($1,028.9M, +4.1%), which offset the difference. The release doesn't explain either move; that commentary usually comes in the 10-Q.
Why operating income fell even though restaurants held their margins
Operating income fell $19.9M to $319.3M, mostly because of the year-ago gain. The "impairments and (gain) loss on disposal of assets" line was a $42.0M gain last year (the Olive Garden Canada sale) versus a $3.9M gain this quarter. Excluding that line from both years, operating income would have risen from $297.2M to $315.4M, about 6%. Other movements:
Depreciation and amortization rose to $144.2M from $135.1M, as the restaurant base grew by a net 53 locations.
Pre-opening costs rose to $8.5M from $5.9M, consistent with more new openings (the release does not give an opening count for the quarter).
General and administrative expenses fell slightly to $134.8M from $136.1M, dropping to 4.2% of sales from 4.5%.
Net interest rose to $50.3M from $45.4M. Short-term debt and the current portion of long-term debt increased to $979.7M from $693.6M at the end of May.
Effective tax rate was 12.9%, versus 12.2% last year (income tax expense divided by pre-tax earnings).
Share buybacks drive the adjusted EPS gain
Adjusted net earnings from continuing operations grew just 1.3%, from $231.4M to $234.3M. Adjusted EPS grew 4.1% because the diluted share count fell 2.7%, from 117.6M to 114.4M. In the quarter, Darden bought back about 1.1 million shares for $222.3M and has $1.3B left under its $1.5B authorization. It declared a quarterly dividend of $1.62 per share, payable November 2, 2026.
Cash generation didn't cover those payouts this quarter. Operating cash flow from continuing operations fell to $279.0M from $342.5M, mainly because working-capital and other changes used $122.2M versus $33.5M a year ago. After $175.3M of capital spending on land, buildings and equipment, about $104M was left, while dividends ($184.2M) and buybacks ($220.8M in cash) totaled $405.0M. The shortfall was funded with $285.9M of net short-term borrowing. Stockholders' equity fell to $2,068.4M from $2,207.5M at fiscal year-end. One quarter doesn't make a trend, since first-quarter working capital is seasonal, but it's worth watching whether buybacks at this pace continue to rely on short-term debt.
Takeaway: The 6.4% fall in GAAP EPS reflects last year's one-time $42M Canada sale gain, not a weaker business. Underlying earnings grew modestly, and about two-thirds of the 4.1% adjusted EPS gain came from a smaller share count rather than higher profit. LongHorn (+6.8% comparable sales, +14.6% segment profit) is carrying Darden's growth while Olive Garden's comparable sales rose only 1.0%.
Outlook
Darden reaffirmed all parts of its fiscal 2027 outlook, including diluted EPS from continuing operations of $11.10 to $11.35. The release doesn't restate the other components, such as the sales, same-restaurant sales, new-restaurant or capital spending targets. Q1's $2.05 is about 18% of the range midpoint.
Our view: getting there depends mainly on Olive Garden. LongHorn is growing quickly but is about two-thirds Olive Garden's size by sales, and the other segments are growing low single digits with slightly narrower margins. If Olive Garden's comparable sales stay near 1% while food costs keep growing faster than sales, more of the EPS growth will have to come from buybacks and G&A savings, which are harder to repeat. The 10-Q should show whether Olive Garden's traffic rose or fell, what drove the food-cost increase, and how Darden plans to fund buybacks given the rise in short-term debt.