DARDEN RESTAURANTS INC (DRI)

Item 2.Management’s Discussion and Analysis of Financial Condition and Results of Operations

The discussion and analysis below for the Company, which contains forward-looking statements, should be read in conjunction with the unaudited consolidated financial statements and the notes to such financial statements included elsewhere in this quarterly report on Form 10-Q (Form 10-Q) and the audited consolidated financial statements and the notes thereto included in our Form 10-K for the fiscal year ended May 25, 2025 (Form 10-K). In addition to historical consolidated financial information, this discussion contains forward-looking statements that reflect our plans, estimates, and beliefs and involve numerous risks and uncertainties, including but not limited to those described in the “Item 1A. Risk Factors” section of the Form 10-K. Actual results may differ materially from those contained in any forward-looking statements. You should carefully read “Forward-Looking Statements” included below in this Form 10-Q.

To facilitate the review of our discussion and analysis, the following table sets forth our financial results for the periods indicated. All information is derived from the unaudited consolidated statements of earnings for the three and nine months ended February 22, 2026 and February 23, 2025, respectively.

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The following table details the number of company-owned restaurants currently reported in continuing operations that were open at the end of the third quarter of fiscal 2026, compared with the number of company-owned restaurants open at the end of fiscal 2025 and at the end of the third quarter of fiscal 2025.

1 During the first quarter of fiscal 2026, we sold all of the Olive Garden Canada Restaurants.

2 Includes 103 Chuy’s restaurants acquired during the second quarter of fiscal 2025.

OVERVIEW OF OPERATIONS

Our business operates in the full-service dining segment of the restaurant industry. At February 22, 2026, through subsidiaries, we owned and operated 2,196 restaurants in the United States under the Olive Garden®, LongHorn Steakhouse®, Cheddar’s Scratch Kitchen®, Chuy’s®, Yard House®, Ruth’s Chris Steak House® (Ruth’s Chris), The Capital Grille®, Seasons 52®, Eddie V’s Prime Seafood® (Eddie V’s), Bahama Breeze®, and The Capital Burger® trademarks. We own and operate all of our restaurants in the United States, except for five restaurants we manage through joint venture or other contractual agreements and 87 franchised restaurants. We also have 77 international franchised restaurants in operation located in Canada, Latin America, the Caribbean, Asia, Europe and the Middle East.

On our June 2025 earnings call, we announced the decision to explore strategic alternatives for the Bahama Breeze brand, which includes 28 company‑owned restaurants and one franchised restaurant. As part of this review, we evaluated a potential sale of the brand as well as the conversion of certain restaurants to other Darden concepts. On February 3, 2026, we announced the completion of this process and our expectation that we will permanently close approximately 14 Bahama Breeze restaurants on or about April 5, 2026, and convert the remaining approximately 14 restaurants to other Darden brands over the next 12–18 months. As a result of the expected closures, we impaired some of the assets related to the 14 Bahama Breeze restaurants to be closed. See Note 7 to our unaudited consolidated financial statements in Part I, Item 1 of this Form 10-Q for additional information.

On July 14, 2025, we closed on the sale of the Olive Garden Canada Restaurants to Recipe. All gains and losses on disposition have been aggregated in impairments and (gain) loss on disposal of assets, net on our consolidated statement of earnings. See Note 7 to our unaudited consolidated financial statements in Part I, Item 1 of this Form 10-Q for additional information. At closing, Darden and Recipe entered into an area development agreement and franchise agreements, pursuant to which Recipe will operate current and any new restaurants contemplated thereunder under the Olive Garden trade name and will pay royalties for use of the trade name.

Financial Highlights - Consolidated

•Total sales increased 5.9 percent and 7.8 percent to $3.35 billion and $9.49 billion for the third quarter and first nine months of fiscal 2026, respectively, compared to $3.16 billion and $8.81 billion for the third quarter and first nine months of fiscal 2025, respectively, driven by sales from the acquisition of 103 Chuy’s restaurants during the second quarter of fiscal 2025 and 31 net new restaurants and a blended same-restaurant sales increase of 4.2 percent1 and 4.4 percent.1

•Our net earnings from continuing operations were $310.6 million and $805.9 million for the third quarter and first nine months of fiscal 2026, respectively, compared to $323.7 million and $747.0 million for the third quarter and first nine months of fiscal 2025, respectively.

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•Reported diluted net earnings per share from continuing operations were $2.68 and $6.91 for the third quarter and first nine months of fiscal 2026, respectively, compared to $2.74 and $6.30 for the third quarter and first nine months of fiscal 2025, respectively.

Outlook

We expect sales growth for fiscal 2026 to be approximately 9.5 percent, driven by growth of approximately 2.0 percent related to the fifty-third week in fiscal 2026; same-restaurant sales growth to be approximately 4.5 percent2; and new restaurant openings to be approximately 70. Additionally, we expect capital expenditures incurred to build new restaurants, remodel and maintain existing restaurants and for technology initiatives to be between $750 and $775 million. These amounts all include the addition of Chuy’s and our expectations for Chuy’s results from the date of acquisition forward.

1 Will not include Chuy’s until they have been owned and operated by Darden for a 16-month period (the fourth quarter of fiscal 2026), and does not include Bahama Breeze as all restaurants are expected to be closed or converted to other brands (between the third quarter of fiscal 2026 and the fourth quarter of fiscal 2027).

2 Annual same-restaurant sales is a 52-week metric and excludes the impact of Chuy’s, which will not have been owned and operated by Darden for a 16-month period prior to the beginning of fiscal 2026, as well as Bahama Breeze as all restaurants are expected to be closed or converted to other brands (between the third quarter of fiscal 2026 and the fourth quarter of fiscal 2027).

SALES

The following table presents our sales by segment for the periods indicated.

(1)Same-restaurant sales is a year-over-year comparison of each period’s sales volumes for a 52-week year and is limited to restaurants that have been open, and operated by Darden, for at least 16 months. Accordingly, Chuy’s results will not be included in this calculation until the fourth quarter of fiscal 2026. Additionally, results from Bahama Breeze are excluded as all restaurants are expected to be closed or converted to other brands (between the third quarter of fiscal 2026 and the fourth quarter of fiscal 2027).

Olive Garden’s sales increase for the third quarter of fiscal 2026 was primarily driven by same-restaurant sales increases, as well as revenue from new restaurants. The increase in U.S. same-restaurant sales for the third quarter of fiscal 2026 resulted from a 3.6 percent increase in average check, which includes a 1.3 percent increase in off-premise catering sales, offset by a 0.4 percent decrease in same-restaurant guest counts. Olive Garden’s sales increase for the nine months of fiscal 2026 was primarily driven by same-restaurant sales increases, as well as revenue from new restaurants, partially offset by the sale of the Olive Garden Cana

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Item 7.MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following Management’s Discussion and Analysis should be read in conjunction with our consolidated financial statements and related financial statement notes included in Part II of this report under the caption “Item 8 - Financial Statements and Supplementary Data.” We operate on a 52/53-week fiscal year, which ends on the last Sunday in May. Fiscal 2026, which ended May 31, 2026, consisted of 53 weeks; fiscal 2025, which ended May 25, 2025, consisted of 52 weeks; and fiscal 2027, which ends on May 30, 2027, will consist of 52 weeks.

OVERVIEW OF OPERATIONS

Our business operates in the full-service dining segment of the restaurant industry. At May 31, 2026, we owned and operated 2,202 restaurants through subsidiaries in the United States under the Olive Garden®, LongHorn Steakhouse®, Yard House®, Ruth’s Chris Steak House®, Cheddar’s Scratch Kitchen®, The Capital Grille®, Chuy’s®, Seasons 52®, Eddie V’s Prime Seafood®, Bahama Breeze®, and The Capital Burger® trademarks. We own and operate all of our restaurants in the United States, except for four restaurants operating under contractual agreements, one restaurant that we jointly own with a third party and operate independently, and 87 franchised restaurants. We also have 80 franchised restaurants in operation located in Canada, Latin America, the Caribbean, Asia, the Middle East, and Europe. All intercompany balances and transactions have been eliminated in consolidation.

On July 14, 2025, we closed on the sale of the Olive Garden Canada Restaurants to Recipe. All gains and losses on disposition have been aggregated in impairments and disposal of assets, net on our consolidated statement of earnings. See Note 4 for additional information. At the closing, Darden and Recipe entered into an area development agreement and franchise agreements, pursuant to which Recipe will operate current and any new restaurants contemplated thereunder under the Olive Garden trade name and will pay royalties for use of the trade name.

On our June 2025 earnings call, we announced the decision to explore strategic alternatives for the Bahama Breeze brand, which, at that time, included 28 company-owned restaurants and one franchised restaurant. As part of this review, we evaluated a potential sale of the brand as well as the conversion of certain restaurants to other Darden brands. On February 3, 2026, we announced the completion of this process and our decision to permanently close approximately half of the remaining Bahama Breeze restaurants, which we completed on or about April 5, 2026, and our expectation to convert the remaining restaurants to other Darden brands over the next 12–18 months. As of the end of fiscal 2026, we have completed one conversion. See Note 4 for additional information.

On October 11, 2024, we acquired 100 percent of the equity interest of Chuy’s Holdings Inc. (“Chuy’s”) in an all-cash transaction of $649.1 million in total consideration, $613.7 million in net cash consideration, inclusive of $35.4 million of cash on Chuy’s balance sheet at closing. As a result of the acquisition and related integration efforts, we incurred expenses of $9.5 million ($7.1 million, net of tax) during fiscal 2026 and $44.6 million ($36.7 million, net of tax) during fiscal 2025, which are primarily included in general and administrative expenses in our consolidated statements of earnings. We finalized the purchase price allocation related to the Chuy’s acquisition in the first quarter of fiscal 2026, which resulted in $267.2 million of goodwill, representing sales and unit growth opportunities, in addition to supply chain and support cost synergies. As of May 31, 2026, all Chuy’s operations have been fully integrated into Darden’s operations.

Fiscal 2026 Financial Highlights

•Total sales increased 9.4 percent to $13.21 billion in fiscal 2026 from $12.08 billion in fiscal 2025, driven by a 2.1 percent increase in sales from an extra week of operations in fiscal 2026, a blended same-restaurant sales increase of 4.5 percent, and sales from the addition of 43 net new restaurants.

•Diluted net earnings per share from continuing operations increased to $10.44 in fiscal 2026 from $8.88 in fiscal 2025, a 17.6 percent increase. The extra week of operations in fiscal 2026 contributed $0.25 to diluted net earnings per share from continuing operations.

•Net earnings from continuing operations increased to $1.21 billion in fiscal 2026 from $1.05 billion in fiscal 2025, a 15.5 percent increase.

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•Net loss from discontinued operations increased to $7.0 million ($0.06 per diluted share) in fiscal 2026, from $1.4 million ($0.02 per diluted share) in fiscal 2025. When combined with results from continuing operations, our diluted net earnings per share was $10.38 for fiscal 2026 and $8.86 for fiscal 2025.

Outlook

We expect fiscal 2027 sales from continuing operations to be $13.60 billion to $13.75 billion, driven by same-restaurant sales growth (1) of 2.5 percent to 3.5 percent and sales from 75 to 80 new restaurant openings. In fiscal 2027, we expect our annual effective tax rate to be approximately 13.5 percent, and we expect capital expenditures incurred to build new restaurants, remodel, and maintain existing restaurants and technology initiatives to be approximately $875 million.

(1) Annual same-restaurant sales is a 52-week metric and excludes the impact of Bahama Breeze as all locations are expected to be closed or converted to other Darden brands (between Q3 fiscal 2026 and Q4 fiscal 2027).

RESULTS OF OPERATIONS FOR FISCAL 2026 AND 2025

To facilitate review of our results of operations, the following table sets forth our financial results for the periods indicated. All information is derived from the consolidated statements of earnings for the fiscal years ended May 31, 2026 and May 25, 2025:

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The following table details the number of company-owned restaurants reported in continuing operations at the end of fiscal 2026, compared to the number open at the end of fiscal 2025:

SALES

The following table presents our company-owned restaurant sales, U.S. same-restaurant sales (“SRS”), and average annual sales per restaurant by segment for the periods indicated:

(1)Same-restaurant sales is a year-over-year comparison of each period’s sales volumes for a 52-week year, and is limited to restaurants that have been open and operated by Darden for at least 16 months, and excludes the impact of Chuy’s, as they were not owned and operated by Darden for a 16-month period prior to the beginning of fiscal 2026, as well as Bahama Breeze as all locations are expected to be closed or converted to other brands (between Q3 fiscal 2026 and Q4 fiscal 2027).

(2)Average annual sales are calculated as sales divided by total restaurant operating weeks multiplied by 52 weeks; excludes franchise locations.

Olive Garden’s sales increase for fiscal 2026 was primarily driven by additional sales from an extra week of operations, a U.S. same-restaurant sales increase, and revenue from new restaurants. The increase in U.S. same-restaurant sales in fiscal 2026 resulted from a 2.9 percent increase in average check, which included a 0.9 percent increase in off-premise catering sales, and a 1.0 percent increase in same-restaurant guest counts.

LongHorn Steakhouse’s sales increase for fiscal 2026 was primarily driven by additional sales from an extra week of operations, a same-restaurant sales increase, and revenue from new restaurants. The increase in same-restaurant sales in fiscal 2026 resulted from a 3.4 percent increase in average check and a 3.7 percent increase in same-restaurant guest counts.

Fine Dining’s sales increase for fiscal 2026 was driven by additional sales from an extra week of operations, revenue from new restaurants, and same-restaurant sales increases. The increase in same-restaurant sales in fiscal 2026 resulted from a 1.4 percent increase in average check, offset by a 0.2 percent decrease in same-restaurant guest counts.

Other Business’s sales increase for fiscal 2026 was driven by additional sales from an extra week of operations, a U.S. same-restaurant sales increase, and revenue from new restaurants, in addition to a full year of sales from Chuy’s. The increase in

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same-restaurant sales in fiscal 2026 resulted from a 3.3 percent increase in average check combined with a 0.6 percent increase in same-restaurant guest counts.

COSTS AND EXPENSES

The following table sets forth selected operating data as a percent of sales from continuing operations for the periods indicated. This information is derived from the consolidated statements of earnings for the fiscal years ended May 31, 2026 and May 25, 2025.

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