Darden Restaurants Serves Up Inflation Warning

Casual dining player Darden Restaurants ($DRI) filed its latest earnings release today — and if you looked closely at the data, you could see the risk of inflation peeping out through the numbers. 

For starters, in the earnings release that Darden filed for its quarter that ended Aug. 25, the company flat-out said it expects inflation for the coming fiscal year to be 3 to 3.5 percent. That was the only actual mention of the word in the earnings release, but with a few quick keystrokes we found a more complete picture.

First, we used our Disclosures and Footnotes Query page to pull up the precise guidance Darden included in its earnings release for this quarter, its fiscal Q1 2026. That guidance, published on Sept. 18, said Darden expects inflation in the range of 3.0 to 3.5 percent for the coming fiscal year. 

Then we punched the Previous Period tab to compare this quarter’s guidance to what Darden said in its prior quarter. Turns out that just three months ago, Darden was expecting inflation of 2.5 to 3.0 percent for its coming fiscal year. See Figure 1, below. The prior quarter disclosures are on the right, and the relevant inflation estimate is highlighted blue.

 

But also notice that Darden now expects total sales growth of 7.5 to 8.5 percent in fiscal 2026, up from last quarter’s estimate of 7 to 8 percent. Estimated same-restaurant sales growth also went from 2 to 3.5 percent last quarter to 2.5 to 3.5 percent today. 

Translation: Darden will be passing along some portion of its higher costs (exactly how much, we don’t know) to customers. 

To get a better sense of the picture here, we then looked at Darden’s financials in our Company-in-Detail Page. Specifically, we compared this quarter’s numbers to the year-earlier period, and that quarter’s numbers to its own year-earlier period as well. The result is Figure 2, below.

Look at the cost increases from Darden’s fiscal Q1 2024 to Q1 2025, and then the cost increase from Q1 2025 to Q1 2026 (the quarter that just ended). Food supply and restaurant labor costs spiked this quarter compared to what Darden had been paying the prior year.

For example, from Q1 2024 to Q1 2025, food and beverage costs actually declined for Darden by 0.51 percent; but this time around, they jumped 9.7 percent. Likewise, labor costs rose 1.6 percent from Q1 2024 to Q1 2025, but jumped 11.1 percent from Q1 2025 to Q1 2026.

Indeed, the only cost line that moderated its increase was marketing — no surprise, because that’s an easy cost item to tighten. Growth in every other cost line accelerated from Q1 2025 to Q1 2026 compared to growth in those same lines one year earlier.

That’s what you’d expect to see from a company laboring under inflationary pressures, and Darden plainly said so by raising its inflation expectations as part of its latest guidance. 

Food for thought next time you’re at the Olive Garden, Capital Grille, Bahama Breeze, or any of Darden’s other restaurant brands.