Darden Restaurants "Expect Solid Results in Tough Backdrop" (Buy) Geiger

Research evidence excerpt

Darden Restaurants "Expect Solid Results in Tough Backdrop" (Buy) Geiger

(05/26E) 0.9x

attractive for a quality compounder with above-avg top-line resiliency in a tough macro

EPS (UBS, diluted) (USD)

and ability to protect margins and grow earnings despite cost inflation.

05/26E

UBS Cons.

Expect still solid underlying sales momentum at OG despite industry pressures

Q1 1.97 1.97

We model F4Q DRI blended sss of 4.0% (Cons. 4.1%), including 2.9% at OG and 7.2% Q2 2.08 2.08

at LH. While macro and industry headwinds persist, we believe OG maintained still solid Q3 2.95 2.95

underlying multiyear trends, with support from: 1) everyday value & promos, including Q4E 3.64 3.63

Buy One, Take One (3/16 - 5/3), $6 Take Home Entrees and other value offerings; 2) new 05/26E 10.62 10.63

menu initiatives (i.e. “lighter portions” menu) to further improve brand affordability, 3) 05/27E 11.30 11.40

continued gains from the Uber Direct partnership (4.7% sales mix in F3Q), and 4) 05/28E 12.48 12.52

incremental marketing investments. We expect strong results at LH, with solid

Dennis Geiger, CFA

underlying momentum likely to continue into FY27, driven by consistent execution and Analyst

menu innovation. We model 2.4% FY27 DRI sss, including 2.7% at OG and 3.2% at LH. dennis.geiger@ubs.com

+1-212-713 9313

F4Q margins likely improving w/ pricing & beef coverage; Expect gains in FY27

Paul Hao

We model 14.3% F4Q operating margins (in line with Cons.), or +70 bps y/y, reflecting Associate Analyst

benefits from sales leverage, better labor costs given lower turnover rates, favorable paul.hao@ubs.com

restaurant expenses, and pricing in the mid-3% range, w/ 85% beef costs covered for +1-201-352 1091

the quarter. Focus is on FY27 total inflation expectations, with beef cost projections Nikhil Gunderia