filings.toolsItem 1. Financial Statements (Unaudited)
94K characters. Original on sec.gov · Markdown
Item 1. Financial Statements (Unaudited)
DARDEN RESTAURANTS, INC.
CONSOLIDATED STATEMENTS OF EARNINGS
(In millions, except per share data)
(Unaudited)
| Three Months Ended | Nine Months Ended | ||||||||||||||||||||||
| February 22, 2026 | February 23, 2025 | February 22, 2026 | February 23, 2025 | ||||||||||||||||||||
| Sales | $ | 3,345.3 | $ | 3,158.0 | $ | 9,492.1 | $ | 8,805.0 | |||||||||||||||
| Costs and expenses: | |||||||||||||||||||||||
| Food and beverage | 1,026.7 | 953.6 | 2,919.5 | 2,673.1 | |||||||||||||||||||
| Restaurant labor | 1,046.9 | 995.0 | 3,035.0 | 2,811.1 | |||||||||||||||||||
| Restaurant expenses | 528.7 | 501.0 | 1,541.2 | 1,426.9 | |||||||||||||||||||
| Marketing expenses | 39.4 | 35.4 | 137.2 | 128.9 | |||||||||||||||||||
| Pre-opening costs | 8.8 | 6.1 | 22.8 | 16.1 | |||||||||||||||||||
| General and administrative expenses | 121.5 | 116.7 | 375.4 | 387.2 | |||||||||||||||||||
| Depreciation and amortization | 141.8 | 131.9 | 414.8 | 381.1 | |||||||||||||||||||
| Impairments and (gain) loss on disposal of assets, net | 25.1 | 0.1 | (19.8) | 1.1 | |||||||||||||||||||
| Total operating costs and expenses | $ | 2,938.9 | $ | 2,739.8 | $ | 8,426.1 | $ | 7,825.5 | |||||||||||||||
| Operating income | 406.4 | 418.2 | 1,066.0 | 979.5 | |||||||||||||||||||
| Interest, net | 49.6 | 45.5 | 143.0 | 128.8 | |||||||||||||||||||
| Earnings before income taxes | 356.8 | 372.7 | 923.0 | 850.7 | |||||||||||||||||||
| Income tax expense | 46.2 | 49.0 | 117.1 | 103.7 | |||||||||||||||||||
| Earnings from continuing operations | $ | 310.6 | $ | 323.7 | $ | 805.9 | $ | 747.0 | |||||||||||||||
| Losses from discontinued operations, net of tax benefit of $1.3, $0.2, $1.6 and $0.7, respectively | (3.8) | (0.3) | (4.1) | (1.2) | |||||||||||||||||||
| Net earnings | $ | 306.8 | $ | 323.4 | $ | 801.8 | $ | 745.8 | |||||||||||||||
| Basic net earnings per share: | |||||||||||||||||||||||
| Earnings from continuing operations | $ | 2.70 | $ | 2.76 | $ | 6.95 | $ | 6.35 | |||||||||||||||
| Losses from discontinued operations | (0.03) | — | (0.04) | (0.01) | |||||||||||||||||||
| Net earnings | $ | 2.67 | $ | 2.76 | $ | 6.91 | $ | 6.34 | |||||||||||||||
| Diluted net earnings per share: | |||||||||||||||||||||||
| Earnings from continuing operations | $ | 2.68 | $ | 2.74 | $ | 6.91 | $ | 6.30 | |||||||||||||||
| Losses from discontinued operations | (0.03) | — | (0.04) | (0.01) | |||||||||||||||||||
| Net earnings | $ | 2.65 | $ | 2.74 | $ | 6.87 | $ | 6.29 | |||||||||||||||
| Average number of common shares outstanding: | |||||||||||||||||||||||
| Basic | 115.0 | 117.2 | 115.9 | 117.7 | |||||||||||||||||||
| Diluted | 115.8 | 118.0 | 116.7 | 118.5 |
See accompanying notes to our unaudited consolidated financial statements.
DARDEN RESTAURANTS, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In millions)
(Unaudited)
| Three Months Ended | Nine Months Ended | ||||||||||||||||||||||
| February 22, 2026 | February 23, 2025 | February 22, 2026 | February 23, 2025 | ||||||||||||||||||||
| Net earnings | $ | 306.8 | $ | 323.4 | $ | 801.8 | $ | 745.8 | |||||||||||||||
| Foreign currency adjustment | 0.8 | — | (4.2) | — | |||||||||||||||||||
| Change in fair value of derivatives and amortization of unrecognized gains and losses on derivatives, net of taxes of $0.3, $(0.2), $0.4 and $0.4, respectively | 5.8 | 4.2 | (3.5) | 7.1 | |||||||||||||||||||
| Net unamortized gain (loss) arising during the period, including amortization of unrecognized net actuarial gain (loss), net of taxes of $0.0, $0.0, $0.1 and $0.1, respectively, related to pension and other post-employment benefits | 0.1 | 0.1 | 0.3 | 0.4 | |||||||||||||||||||
| Other comprehensive income (loss) | $ | 6.7 | $ | 4.3 | $ | (7.4) | $ | 7.5 | |||||||||||||||
| Total comprehensive income | $ | 313.5 | $ | 327.7 | $ | 794.4 | $ | 753.3 |
See accompanying notes to our unaudited consolidated financial statements.
DARDEN RESTAURANTS, INC.
CONSOLIDATED BALANCE SHEETS
(In millions)
| February 22, 2026 | May 25, 2025 | ||||||||||
| (Unaudited) | |||||||||||
| ASSETS | |||||||||||
| Current assets: | |||||||||||
| Cash and cash equivalents | $ | 240.4 | $ | 240.0 | |||||||
| Receivables, net | 107.7 | 93.8 | |||||||||
| Inventories | 345.3 | 311.6 | |||||||||
| Prepaid income taxes | 179.3 | 135.6 | |||||||||
| Prepaid expenses and other current assets | 136.5 | 156.7 | |||||||||
| Total current assets | $ | 1,009.2 | $ | 937.7 | |||||||
| Land, buildings and equipment, net of accumulated depreciation and amortization of $4,426.0 and $4,066.4, respectively | 4,984.4 | 4,716.0 | |||||||||
| Operating lease right-of-use assets | 3,478.1 | 3,555.9 | |||||||||
| Goodwill | 1,658.2 | 1,659.4 | |||||||||
| Trademarks | 1,346.4 | 1,346.4 | |||||||||
| Other assets | 412.5 | 371.6 | |||||||||
| Total assets | $ | 12,888.8 | $ | 12,587.0 | |||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | |||||||||||
| Current liabilities: | |||||||||||
| Accounts payable | $ | 451.4 | $ | 439.6 | |||||||
| Short-term debt | 290.0 | — | |||||||||
| Accrued payroll | 203.5 | 207.5 | |||||||||
| Accrued income taxes | 1.4 | 4.7 | |||||||||
| Other accrued taxes | 79.7 | 83.0 | |||||||||
| Unearned revenues | 654.9 | 599.4 | |||||||||
| Other current liabilities | 927.4 | 913.3 | |||||||||
| Total current liabilities | $ | 2,608.3 | $ | 2,247.5 | |||||||
| Long-term debt | 2,141.0 | 2,128.9 | |||||||||
| Deferred income taxes | 354.2 | 278.8 | |||||||||
| Operating lease liabilities - non-current | 3,754.3 | 3,816.9 | |||||||||
| Other liabilities | 1,927.0 | 1,803.6 | |||||||||
| Total liabilities | $ | 10,784.8 | $ | 10,275.7 | |||||||
| Stockholders’ equity: | |||||||||||
| Common stock and surplus | $ | 2,297.0 | $ | 2,295.6 | |||||||
| Retained earnings (deficit) | (217.4) | (16.1) | |||||||||
| Accumulated other comprehensive income | 24.4 | 31.8 | |||||||||
| Total stockholders’ equity | $ | 2,104.0 | $ | 2,311.3 | |||||||
| Total liabilities and stockholders’ equity | $ | 12,888.8 | $ | 12,587.0 |
See accompanying notes to our unaudited consolidated financial statements.
DARDEN RESTAURANTS, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
For the Three and Nine Months Ended February 22, 2026 and February 23, 2025
(In millions)
(Unaudited)
| Common Stock And Surplus | |||||||||||||||||||||||||||||||||||||||||
| Shares | Amount | Retained Earnings (Deficit) | Accumulated Other Comprehensive Income | Total Stockholders’ Equity | |||||||||||||||||||||||||||||||||||||
| Balance at November 23, 2025 | 115.3 | $ | 2,298.4 | $ | (235.7) | $ | 17.7 | $ | 2,080.4 | ||||||||||||||||||||||||||||||||
| Net earnings | — | — | 306.8 | — | 306.8 | ||||||||||||||||||||||||||||||||||||
| Other comprehensive income | — | — | — | 6.7 | 6.7 | ||||||||||||||||||||||||||||||||||||
| Dividends declared ($1.50 per share) | — | — | (174.2) | — | (174.2) | ||||||||||||||||||||||||||||||||||||
| Stock option exercises | — | 1.9 | — | — | 1.9 | ||||||||||||||||||||||||||||||||||||
| Stock-based compensation | — | 7.3 | — | — | 7.3 | ||||||||||||||||||||||||||||||||||||
| Repurchases of common stock | (0.7) | (12.9) | (114.3) | — | (127.2) | ||||||||||||||||||||||||||||||||||||
| Issuance of stock under Employee Stock Purchase Plan and other plans | 0.1 | 3.6 | — | — | 3.6 | ||||||||||||||||||||||||||||||||||||
| Other | — | (1.3) | — | — | (1.3) | ||||||||||||||||||||||||||||||||||||
| Balance at February 22, 2026 | 114.7 | $ | 2,297.0 | $ | (217.4) | $ | 24.4 | $ | 2,104.0 | ||||||||||||||||||||||||||||||||
| Balance at May 25, 2025 | 117.0 | $ | 2,295.6 | $ | (16.1) | $ | 31.8 | $ | 2,311.3 | ||||||||||||||||||||||||||||||||
| Net earnings | — | — | 801.8 | — | 801.8 | ||||||||||||||||||||||||||||||||||||
| Other comprehensive income (loss) | — | — | — | (7.4) | (7.4) | ||||||||||||||||||||||||||||||||||||
| Dividends declared ($4.50 per share) | — | — | (525.2) | — | (525.2) | ||||||||||||||||||||||||||||||||||||
| Stock option exercises | 0.1 | 7.9 | — | — | 7.9 | ||||||||||||||||||||||||||||||||||||
| Stock-based compensation | — | 41.5 | — | — | 41.5 | ||||||||||||||||||||||||||||||||||||
| Repurchases of common stock | (2.7) | (53.6) | (477.9) | — | (531.5) | ||||||||||||||||||||||||||||||||||||
| Issuance of stock under Employee Stock Purchase Plan and other plans | 0.3 | 10.3 | — | — | 10.3 | ||||||||||||||||||||||||||||||||||||
| Other | — | (4.7) | — | — | (4.7) | ||||||||||||||||||||||||||||||||||||
| Balance at February 22, 2026 | 114.7 | $ | 2,297.0 | $ | (217.4) | $ | 24.4 | $ | 2,104.0 |
| Balance at November 24, 2024 | 117.2 | $ | 2,261.0 | $ | (218.9) | $ | 28.8 | $ | 2,070.9 | ||||||||||||||||||||||||||||||||
| Net earnings | — | — | 323.4 | — | 323.4 | ||||||||||||||||||||||||||||||||||||
| Other comprehensive income | — | — | — | 4.3 | 4.3 | ||||||||||||||||||||||||||||||||||||
| Dividends declared ($1.40 per share) | — | — | (165.6) | — | (165.6) | ||||||||||||||||||||||||||||||||||||
| Stock option exercises | 0.1 | 13.9 | — | — | 13.9 | ||||||||||||||||||||||||||||||||||||
| Stock-based compensation | — | 6.0 | — | — | 6.0 | ||||||||||||||||||||||||||||||||||||
| Repurchases of common stock | (0.3) | (5.7) | (47.3) | — | (53.0) | ||||||||||||||||||||||||||||||||||||
| Issuance of stock under Employee Stock Purchase Plan and other plans | 0.1 | 3.2 | — | — | 3.2 | ||||||||||||||||||||||||||||||||||||
| Other | — | (0.1) | — | — | (0.1) | ||||||||||||||||||||||||||||||||||||
| Balance at February 23, 2025 | 117.1 | $ | 2,278.3 | $ | (108.4) | $ | 33.1 | $ | 2,203.0 | ||||||||||||||||||||||||||||||||
| Balance at May 26, 2024 | 118.9 | $ | 2,252.4 | $ | (35.5) | $ | 25.6 | $ | 2,242.5 | ||||||||||||||||||||||||||||||||
| Net earnings | — | — | 745.8 | — | 745.8 | ||||||||||||||||||||||||||||||||||||
| Other comprehensive income | — | — | — | 7.5 | 7.5 | ||||||||||||||||||||||||||||||||||||
| Dividends declared ($4.20 per share) | — | — | (497.8) | — | (497.8) | ||||||||||||||||||||||||||||||||||||
| Stock option exercises | 0.3 | 29.4 | — | — | 29.4 | ||||||||||||||||||||||||||||||||||||
| Stock-based compensation | — | 35.9 | — | — | 35.9 | ||||||||||||||||||||||||||||||||||||
| Repurchases of common stock | (2.4) | (46.3) | (320.9) | — | (367.2) | ||||||||||||||||||||||||||||||||||||
| Issuance of stock under Employee Stock Purchase Plan and other plans | 0.3 | 9.5 | — | — | 9.5 | ||||||||||||||||||||||||||||||||||||
| Other | — | (2.6) | — | — | (2.6) | ||||||||||||||||||||||||||||||||||||
| Balance at February 23, 2025 | 117.1 | $ | 2,278.3 | $ | (108.4) | $ | 33.1 | $ | 2,203.0 |
See accompanying notes to our unaudited consolidated financial statements.
DARDEN RESTAURANTS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In millions)
(Unaudited)
| Nine Months Ended | |||||||||||
| February 22, 2026 | February 23, 2025 | ||||||||||
| Cash flows—operating activities | |||||||||||
| Net earnings | $ | 801.8 | $ | 745.8 | |||||||
| Losses from discontinued operations, net of tax | 4.1 | 1.2 | |||||||||
| Adjustments to reconcile net earnings from continuing operations to cash flows: | |||||||||||
| Depreciation and amortization | 414.8 | 381.1 | |||||||||
| Impairments and (gain) loss on disposal of assets, net | (19.8) | 1.1 | |||||||||
| Stock-based compensation expense | 66.5 | 64.5 | |||||||||
| Change in current assets and liabilities | (30.2) | 50.0 | |||||||||
| Contributions to pension and postretirement plans | (1.1) | (1.2) | |||||||||
| Deferred income taxes | 80.1 | 27.2 | |||||||||
| Change in other assets and liabilities | (9.3) | (12.1) | |||||||||
| Unrealized change in trust-owned life insurance value | (30.8) | (11.1) | |||||||||
| Other, net | 4.9 | 3.5 | |||||||||
| Net cash provided by operating activities of continuing operations | $ | 1,281.0 | $ | 1,250.0 | |||||||
| Cash flows—investing activities | |||||||||||
| Purchases of land, buildings and equipment | (540.9) | (472.6) | |||||||||
| Proceeds from disposal of land, buildings and equipment | 33.0 | — | |||||||||
| Cash used in business acquisitions, net of cash acquired | — | (613.7) | |||||||||
| Purchases of capitalized software and other assets | (18.5) | (17.9) | |||||||||
| Other, net | 3.3 | 4.6 | |||||||||
| Net cash used in investing activities of continuing operations | $ | (523.1) | $ | (1,099.6) | |||||||
| Cash flows—financing activities | |||||||||||
| Proceeds from issuance of common stock | 18.2 | 38.9 | |||||||||
| Dividends paid | (521.5) | (494.6) | |||||||||
| Repurchases of common stock, inclusive of excise tax | (534.4) | (367.2) | |||||||||
| Proceeds from (repayments of) short-term debt, net | 290.0 | (28.6) | |||||||||
| Proceeds from issuance of long-term debt | — | 750.0 | |||||||||
| Principal payments on finance leases, net | (13.8) | (15.5) | |||||||||
| Payment of debt issuance costs | — | (6.9) | |||||||||
| Net cash used in financing activities of continuing operations | $ | (761.5) | $ | (123.9) | |||||||
| Cash flows—discontinued operations | |||||||||||
| Net cash used in operating activities of discontinued operations | (2.4) | (7.9) | |||||||||
| Net cash used in discontinued operations | $ | (2.4) | $ | (7.9) | |||||||
| Increase (decrease) in cash, cash equivalents, and restricted cash | (6.0) | 18.6 | |||||||||
| Cash, cash equivalents, and restricted cash - beginning of period | 254.5 | 220.1 | |||||||||
| Cash, cash equivalents, and restricted cash - end of period | $ | 248.5 | $ | 238.7 | |||||||
| Reconciliation of cash, cash equivalents, and restricted cash: | February 22, 2026 | February 23, 2025 | ||||||||||||
| Cash and cash equivalents | $ | 240.4 | $ | 224.2 | ||||||||||
| Restricted cash included in prepaid expenses and other current assets | 8.1 | 14.5 | ||||||||||||
| Total cash, cash equivalents, and restricted cash shown in the statement of cash flows | $ | 248.5 | $ | 238.7 |
DARDEN RESTAURANTS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
(In millions)
(Unaudited)
| Nine Months Ended | |||||||||||
| February 22, 2026 | February 23, 2025 | ||||||||||
| Cash flows from changes in current assets and liabilities | |||||||||||
| Receivables, net | $ | 0.3 | $ | 15.0 | |||||||
| Inventories | (33.7) | (32.1) | |||||||||
| Prepaid expenses and other current assets | 4.1 | (4.4) | |||||||||
| Accounts payable | (0.5) | 7.2 | |||||||||
| Accrued payroll | (3.9) | 8.9 | |||||||||
| Prepaid/accrued income taxes | (46.1) | (12.2) | |||||||||
| Other accrued taxes | (3.3) | (0.4) | |||||||||
| Unearned revenues | 55.5 | 45.7 | |||||||||
| Other current liabilities | (2.6) | 22.3 | |||||||||
| Change in current assets and liabilities | $ | (30.2) | $ | 50.0 |
See accompanying notes to our unaudited consolidated financial statements.
DARDEN RESTAURANTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
**Note 1.**Basis of Presentation
Darden Restaurants, Inc. (we, our, Darden or the Company) owns and operates full-service dining restaurants in the United States under the trade names 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®. As of February 22, 2026, through subsidiaries, 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.
We have prepared these consolidated financial statements pursuant to the rules and regulations of the Securities and Exchange Commission (SEC). Certain information and footnote disclosures normally presented in annual financial statements prepared in accordance with U.S. generally accepted accounting principles (GAAP) have been condensed or omitted pursuant to such rules and regulations. In the opinion of management, all adjustments considered necessary for a fair presentation have been included and are of a normal recurring nature. We operate on a 52/53-week fiscal year which ends on the last Sunday in May. Our fiscal year ending May 31, 2026 will contain 53 weeks of operation. Operating results for interim periods presented are not necessarily indicative of results that may be expected for the full fiscal year.
These statements should be read in conjunction with the consolidated financial statements and related notes to consolidated financial statements included in our Annual Report on Form 10-K for the fiscal year ended May 25, 2025. We prepare our consolidated financial statements in conformity with GAAP. The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of sales and costs and expenses during the reporting period. Actual results could differ from those estimates.
We have reclassified certain amounts in prior-period financial statements to conform to the current period’s presentation.
On July 14, 2025, we closed on the sale of eight Olive Garden restaurants in Canada (Olive Garden Canada Restaurants) to Recipe Unlimited Corporation (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 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 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 brands. 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 the assets related to the 14 Bahama Breeze restaurants to be closed. See Note 7 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 the $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 approximately $8.5 million ($6.4 million, net of tax) during the nine months ended February 22, 2026, which are 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 2026, which resulted in $267.2 million of goodwill, representing sales and unit growth opportunities, in addition to supply chain and support cost synergies.
Recently Issued Accounting Standards Adopted
As of May 25, 2025, we adopted Accounting Standards Update (ASU) 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, which updates reportable segment disclosure requirements primarily through enhanced disclosures about significant segment expenses. The adoption of ASU 2023-07 did not impact the Company’s results of operations, cash flow, or financial condition. See Note 6 for the Company’s segment disclosures.
DARDEN RESTAURANTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Recently Issued Accounting Standards Not Yet Adopted
In December 2023, the Financial Accounting Standards Board (FASB) issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which updates income tax disclosures related to rate reconciliation and requires disclosure of income taxes paid by jurisdiction. The amendments also provide further disclosure comparability. The amendments are effective for fiscal years beginning after December 15, 2024. The amendments should be applied prospectively; however, retrospective application is permitted. Management is currently evaluating this ASU to determine its impact on the Company’s disclosures. We plan to adopt in the fourth quarter of fiscal 2026.
In November 2024, the FASB issued ASU 2024-03, Income Statement-Reporting Comprehensive Income-Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses, which requires detailed disclosure amounts for purchases of inventory, employee compensation, depreciation, intangible asset amortization, and depreciation, depletion and amortization as part of oil and gas producing activities in each relevant expense caption on the income statement. The ASU requires companies to include amounts already required by GAAP in the same disclosure, provide a qualitative description of remaining amounts not separately disaggregated, and disclose the total selling expenses along with the definition of selling expenses in annual reports. The amendment is effective for fiscal years beginning after December 15, 2026. Early adoption is permitted. The amendment should be applied prospectively; however, retrospective application is permitted. Management is currently evaluating this ASU to determine its impact on the Company’s disclosures. We plan to adopt the amendment in fiscal 2028.
In September 2025, the FASB issued ASU 2025-06, Intangibles—Goodwill and Other—Internal-Use Software Costs (Subtopic 350-40): Targeted Improvements to the Accounting for Internal-Use Software. This ASU modernizes outdated guidance for internal-use software costs to reflect current development practices, including agile and iterative methods, replacing the previous waterfall-based model. The amendments eliminate the requirement to classify costs by development stages (preliminary, application development, and post-implementation) and introduce a principles-based threshold for capitalization. Under the new guidance, capitalization begins when management authorizes and commits funding for the project and it is probable the project will be completed and the software will perform its intended function (probable-to-complete threshold). Management is currently evaluating the impact of this guidance on its consolidated financial statements and related disclosures. We plan to adopt the amendment in fiscal 2028.
Note 2. Revenue Recognition
Deferred revenue liabilities from contracts with customers included on our accompanying consolidated balance sheets was comprised of the following:
| (in millions) | February 22, 2026 | May 25, 2025 | ||||||||||||
| Unearned revenues | ||||||||||||||
| Deferred gift card revenue | $ | 688.5 | $ | 628.8 | ||||||||||
| Deferred gift card discounts | (34.6) | (30.1) | ||||||||||||
| Other | 1.0 | 0.7 | ||||||||||||
| Total | $ | 654.9 | $ | 599.4 | ||||||||||
| Other liabilities | ||||||||||||||
| Deferred franchise fees - non-current | $ | 11.3 | $ | 5.3 |
DARDEN RESTAURANTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
The following table presents a rollforward of deferred gift card revenue:
| Three Months Ended | Nine Months Ended | |||||||||||||||||||||||||
| (in millions) | February 22, 2026 | February 23, 2025 | February 22, 2026 | February 23, 2025 | ||||||||||||||||||||||
| Beginning balance | $ | 593.8 | $ | 576.9 | $ | 628.8 | $ | 620.6 | ||||||||||||||||||
| Sale of Olive Garden Canada gift card balances | — | — | (0.4) | — | ||||||||||||||||||||||
| Acquired deferred gift card revenue | — | — | — | 2.6 | ||||||||||||||||||||||
| Activations | 348.2 | 346.5 | 614.2 | 599.9 | ||||||||||||||||||||||
| Redemptions and breakage | (253.5) | (250.7) | (554.1) | (550.4) | ||||||||||||||||||||||
| Ending balance | $ | 688.5 | $ | 672.7 | $ | 688.5 | $ | 672.7 |
DARDEN RESTAURANTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 3. Additional Financial Information
Supplemental Balance Sheet Information
The components of lease assets and liabilities on the consolidated balance sheet were as follows:
| (in millions) | Balance Sheet Classification | February 22, 2026 | May 25, 2025 | |||||||||||||||||
| Operating lease right-of-use assets | Operating lease right-of-use assets | $ | 3,478.1 | $ | 3,555.9 | |||||||||||||||
| Finance lease right-of-use assets | Land, buildings and equipment, net | 1,389.7 | 1,294.2 | |||||||||||||||||
| Total lease assets, net1 | $ | 4,867.8 | $ | 4,850.1 | ||||||||||||||||
| Operating lease liabilities - current | Other current liabilities | $ | 218.0 | $ | 220.1 | |||||||||||||||
| Finance lease liabilities - current | Other current liabilities | 16.1 | 23.8 | |||||||||||||||||
| Operating lease liabilities - non-current | Operating lease liabilities - non-current | 3,754.3 | 3,816.9 | |||||||||||||||||
| Finance lease liabilities - non-current | Other liabilities | 1,706.3 | 1,583.8 | |||||||||||||||||
| Total lease liabilities1 | $ | 5,694.7 | $ | 5,644.6 | ||||||||||||||||
| 1 Includes $4.1 million of right-of-use assets and $8.2 million of lease liabilities related to defaulted restaurant leases of a formerly owned brand. |
Supplemental Cash Flow Information
| Nine Months Ended | ||||||||||||||
| (in millions) | February 22, 2026 | February 23, 2025 | ||||||||||||
| Cash paid for interest and income taxes were as follows: | ||||||||||||||
| Interest, net of amounts capitalized | $ | 130.3 | $ | 114.5 | ||||||||||
| Income taxes, net of refunds | 74.5 | 80.9 | ||||||||||||
| Non-cash investing and financing activities were as follows: | ||||||||||||||
| Increase in land, buildings and equipment through accrued purchases | $ | 59.2 | $ | 43.6 | ||||||||||
| Right-of-use assets obtained in exchange for new operating lease liabilities2 | 51.4 | 360.2 | ||||||||||||
| Right-of-use assets obtained in exchange for new finance lease liabilities | 97.9 | 104.0 | ||||||||||||
| Net change in right-of-use assets mainly due to reclassification between categories upon modification | 101.2 | 95.2 | ||||||||||||
| 2 Fiscal 2025 includes $334.2 million from the acquisition of Chuy’s. |
We had restricted cash of $8.1 million and $14.5 million as of February 22, 2026 and May 25, 2025, respectively, which represents cash held as security for a standby letter of credit. Restricted cash is included in Prepaid expenses and other current assets on our consolidated balance sheet. See Note 12, Commitments and Contingencies, for further details regarding standby letters of credit.
Note 4. Income Taxes
The effective income tax rate for continuing operations for the three months ended February 22, 2026 was 12.9 percent compared to an effective income tax rate for the three months ended February 23, 2025 of 13.1 percent. The decrease in the tax rate is primarily driven by mark to market impacts on hedges related to our deferred compensation programs. The effective income tax rate for continuing operations for the nine months ended February 22, 2026 was 12.7 percent compared to an effective income tax rate for the nine months ended February 23, 2025 of 12.2 percent. The increase in the effective tax rate is primarily attributable to a reduction in an expected IRS refund, partially offset by the adjustment of our expected tax liability related to the disposition of the Olive Garden Canada Restaurants.
DARDEN RESTAURANTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Included in our remaining balance of unrecognized tax benefits is $1.4 million related to tax positions for which it is reasonably possible that the total amounts could change within the next 12 months based on the outcome of examinations or as a result of the expiration of the statute of limitations for specific jurisdictions.
H.R. 1, also known as the One Big Beautiful Bill Act (OBBBA), was enacted on July 4, 2025. The legislation included several provisions that impact the timing and magnitude of certain tax deductions, including restoring 100% bonus depreciation for qualifying property and the immediate expensing of domestic research and development costs. We have applied the provisions impacting our financial position for the nine months ended February 22, 2026, and will continue to assess the potential impacts on our financial position, results of operations, and cash flows as additional guidance from the OBBBA is issued.
Note 5. Net Earnings per Share
Outstanding stock options, restricted stock and equity-settled performance stock units granted by us represent the only dilutive effect reflected in diluted weighted average shares outstanding, none of which impact the numerator of the diluted net earnings per share computation. Stock options, restricted stock and equity-settled performance stock units excluded from the calculation of diluted net earnings per share because the effect would have been anti-dilutive, were as follows:
| Three Months Ended | Nine Months Ended | |||||||||||||||||||||||||
| (in millions) | February 22, 2026 | February 23, 2025 | February 22, 2026 | February 23, 2025 | ||||||||||||||||||||||
| Anti-dilutive stock-based compensation awards | 0.2 | — | 0.1 | 0.1 |
Note 6. Segment Information
We manage our restaurant brands, Olive Garden, LongHorn Steakhouse, Cheddar’s Scratch Kitchen, Chuy’s, Yard House, Ruth’s Chris, The Capital Grille, Seasons 52, Eddie V’s, Bahama Breeze, and The Capital Burger in North America as operating segments. The brands operate principally in the U.S. within the full-service dining segment. We aggregate our operating segments into reportable segments based on a combination of the size, economic characteristics and sub-segment of full-service dining within which each brand operates. We have four reportable segments: (1) Olive Garden, (2) LongHorn Steakhouse, (3) Fine Dining and (4) Other Business.
The Olive Garden segment includes the results of our company-owned Olive Garden restaurants in the U.S. and Canada (through the disposition date of all Olive Garden Canada Restaurants). The LongHorn Steakhouse segment includes the results of our company-owned LongHorn Steakhouse restaurants in the U.S. The Fine Dining segment aggregates our premium brands that operate within the fine-dining sub-segment of full-service dining and includes the results of our company-owned Ruth’s Chris, The Capital Grille, and Eddie V’s restaurants in the U.S. The Other Business segment aggregates our remaining brands and includes the results of our company-owned Cheddar’s Scratch Kitchen, Yard House, Chuy’s, Seasons 52, Bahama Breeze, and The Capital Burger restaurants, in the U.S. and results from our franchise operations.
External sales are derived principally from food and beverage sales. We do not rely on any major customers as a source of sales, and the customers and long-lived assets of our reportable segments are predominantly in the U.S. There were no material transactions among reportable segments during the quarter and nine months ended February 22, 2026.
Resources are allocated and performance is assessed by the Company’s President and Chief Executive Officer, whom the Company has determined to be its Chief Operating Decision Maker (CODM). Our CODM uses segment profit as the measure for assessing performance of our segments. Segment profit includes revenues and expenses directly attributable to restaurant-level results of operations (sometimes referred to as restaurant-level earnings). Non-cash lease-related expenses from our operating segments are recorded to the corporate level as restaurant expenses (which is a component of segment profit), pre-opening costs and depreciation and amortization. Additionally, our lease-related right-of-use assets are not managed or evaluated at the operating segment level, but rather at the corporate level.
During the fourth quarter of 2025, we changed our reporting of segment profit to exclude pre-opening costs in order to better align with our internal reporting and provide a better representation of restaurant-level operating costs. Fiscal 2025 figures for the three and nine months ended February 23, 2025 were recast for comparability.
DARDEN RESTAURANTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
The following tables reconcile our segment results to our consolidated results reported in accordance with GAAP.
| (in millions) | Olive Garden | LongHorn Steakhouse | Fine Dining | Other Business | Corporate | Consolidated | ||||||||||||||||||||||||||||||||
| For the three months ended February 22, 2026 | ||||||||||||||||||||||||||||||||||||||
| Sales | $ | 1,393.0 | $ | 854.2 | $ | 402.0 | $ | 696.1 | $ | — | $ | 3,345.3 | ||||||||||||||||||||||||||
| Food and beverage | 332.7 | 360.5 | 128.9 | 204.6 | — | 1,026.7 | ||||||||||||||||||||||||||||||||
| Restaurant labor | 482.7 | 218.7 | 106.6 | 238.9 | — | 1,046.9 | ||||||||||||||||||||||||||||||||
| Restaurant expenses | 230.7 | 113.2 | 75.3 | 136.8 | (27.3) | 528.7 | ||||||||||||||||||||||||||||||||
| Marketing | 26.9 | 2.8 | 2.7 | 7.0 | — | 39.4 | ||||||||||||||||||||||||||||||||
| Segment profit | $ | 320.0 | $ | 159.0 | $ | 88.5 | $ | 108.8 | $ | 27.3 | $ | 703.6 | ||||||||||||||||||||||||||
| Depreciation and amortization | $ | 50.5 | $ | 24.6 | $ | 18.0 | $ | 31.4 | $ | 17.3 | $ | 141.8 | ||||||||||||||||||||||||||
| Impairments and (gain) loss on disposal of assets, net | — | — | — | — | 25.1 | 25.1 | ||||||||||||||||||||||||||||||||
| Pre-opening costs | 2.7 | 3.0 | 0.5 | 1.3 | 1.3 | 8.8 | ||||||||||||||||||||||||||||||||
| (in millions) | Olive Garden1 | LongHorn Steakhouse | Fine Dining | Other Business | Corporate | Consolidated | ||||||||||||||||||||||||||||||||
| For the nine months ended February 22, 2026 | ||||||||||||||||||||||||||||||||||||||
| Sales | $ | 4,056.8 | $ | 2,406.5 | $ | 1,004.7 | $ | 2,024.1 | $ | — | $ | 9,492.1 | ||||||||||||||||||||||||||
| Food and beverage | 971.3 | 1,026.7 | 326.3 | 595.2 | — | 2,919.5 | ||||||||||||||||||||||||||||||||
| Restaurant labor | 1,423.2 | 626.7 | 288.6 | 696.5 | — | 3,035.0 | ||||||||||||||||||||||||||||||||
| Restaurant expenses | 677.5 | 323.8 | 208.7 | 406.7 | (75.5) | 1,541.2 | ||||||||||||||||||||||||||||||||
| Marketing | 99.9 | 9.4 | 7.0 | 20.9 | — | 137.2 | ||||||||||||||||||||||||||||||||
| Segment profit | $ | 884.9 | $ | 419.9 | $ | 174.1 | $ | 304.8 | $ | 75.5 | $ | 1,859.2 | ||||||||||||||||||||||||||
| Depreciation and amortization | $ | 148.2 | $ | 70.7 | $ | 53.0 | $ | 94.1 | $ | 48.8 | $ | 414.8 | ||||||||||||||||||||||||||
| Impairments and (gain) loss on disposal of assets, net | — | — | — | — | (19.8) | (19.8) | ||||||||||||||||||||||||||||||||
| Pre-opening costs | 6.1 | 6.1 | 2.1 | 5.0 | 3.5 | 22.8 | ||||||||||||||||||||||||||||||||
| Purchases of land, buildings and equipment | 188.3 | 149.8 | 71.0 | 131.8 | — | 540.9 | ||||||||||||||||||||||||||||||||
DARDEN RESTAURANTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
| (in millions) | Olive Garden1 | LongHorn Steakhouse | Fine Dining | Other Business | Corporate | Consolidated | ||||||||||||||||||||||||||||||||
| For the three months ended February 23, 2025 | ||||||||||||||||||||||||||||||||||||||
| Sales | $ | 1,330.3 | $ | 768.1 | $ | 385.3 | $ | 674.3 | $ | — | $ | 3,158.0 | ||||||||||||||||||||||||||
| Food and beverage | 320.0 | 315.0 | 122.4 | 196.2 | — | 953.6 | ||||||||||||||||||||||||||||||||
| Restaurant labor | 464.1 | 198.7 | 101.1 | 231.1 | — | 995.0 | ||||||||||||||||||||||||||||||||
| Restaurant expenses | 214.1 | 101.5 | 72.3 | 134.7 | (21.6) | 501.0 | ||||||||||||||||||||||||||||||||
| Marketing | 24.6 | 1.3 | 2.7 | 6.8 | — | 35.4 | ||||||||||||||||||||||||||||||||
| Segment profit | $ | 307.5 | $ | 151.6 | $ | 86.8 | $ | 105.5 | $ | 21.6 | $ | 673.0 | ||||||||||||||||||||||||||
| Depreciation and amortization | $ | 46.9 | $ | 21.3 | $ | 17.6 | $ | 32.1 | $ | 14.0 | $ | 131.9 | ||||||||||||||||||||||||||
| Impairments and (gain) loss on disposal of assets, net | — | — | — | — | 0.1 | $ | 0.1 | |||||||||||||||||||||||||||||||
| Pre-opening costs | 0.9 | 2.3 | 0.7 | 1.5 | 0.7 | 6.1 | ||||||||||||||||||||||||||||||||
| (in millions) | Olive Garden1 | LongHorn Steakhouse | Fine Dining | Other Business | Corporate | Consolidated | ||||||||||||||||||||||||||||||||
| For the nine months ended February 23, 2025 | ||||||||||||||||||||||||||||||||||||||
| Sales | $ | 3,831.9 | $ | 2,191.7 | $ | 970.2 | $ | 1,811.2 | $ | — | $ | 8,805.0 | ||||||||||||||||||||||||||
| Food and beverage | 926.8 | 902.3 | 309.1 | 534.9 | — | 2,673.1 | ||||||||||||||||||||||||||||||||
| Restaurant labor | 1,346.4 | 570.1 | 272.7 | 621.9 | — | 2,811.1 | ||||||||||||||||||||||||||||||||
| Restaurant expenses | 626.2 | 297.3 | 201.8 | 365.6 | (64.0) | 1,426.9 | ||||||||||||||||||||||||||||||||
| Marketing | 97.1 | 7.1 | 7.0 | 17.7 | — | 128.9 | ||||||||||||||||||||||||||||||||
| Segment profit | $ | 835.4 | $ | 414.9 | $ | 179.6 | $ | 271.1 | $ | 64.0 | $ | 1,765.0 | ||||||||||||||||||||||||||
| Depreciation and amortization | $ | 138.4 | $ | 62.2 | $ | 51.8 | $ | 87.1 | $ | 41.6 | $ | 381.1 | ||||||||||||||||||||||||||
| Impairments and (gain) loss on disposal of assets, net | — | — | — | — | 1.1 | 1.1 | ||||||||||||||||||||||||||||||||
| Pre-opening costs | 2.7 | 3.8 | 3.2 | 4.2 | 2.2 | 16.1 | ||||||||||||||||||||||||||||||||
| Purchases of land, buildings and equipment | 187.4 | 109.2 | 73.3 | 102.7 | — | 472.6 | ||||||||||||||||||||||||||||||||
1 Segment results include sales from the Olive Garden Canada Restaurants sold on July 14, 2025.
| (in millions) | February 22, 2026 | May 25, 2025 | ||||||||||||
| Segment Assets | ||||||||||||||
| Olive Garden | $ | 2,920.5 | $ | 2,880.5 | ||||||||||
| LongHorn Steakhouse | 2,206.1 | 2,077.1 | ||||||||||||
| Fine Dining | 2,661.6 | 2,623.5 | ||||||||||||
| Other Business | 3,809.9 | 3,821.0 | ||||||||||||
| Corporate | 1,290.7 | 1,184.9 | ||||||||||||
| Consolidated | $ | 12,888.8 | $ | 12,587.0 |
DARDEN RESTAURANTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
A reconciliation of segment profit to earnings from continuing operations before income taxes is below.
| Three Months Ended | Nine Months Ended | |||||||||||||||||||||||||
| (in millions) | February 22, 2026 | February 23, 2025 | February 22, 2026 | February 23, 2025 | ||||||||||||||||||||||
| Segment profit | $ | 703.6 | $ | 673.0 | $ | 1,859.2 | $ | 1,765.0 | ||||||||||||||||||
| Less pre-opening costs | (8.8) | (6.1) | (22.8) | (16.1) | ||||||||||||||||||||||
| Less general and administrative expenses | (121.5) | (116.7) | (375.4) | (387.2) | ||||||||||||||||||||||
| Less depreciation and amortization | (141.8) | (131.9) | (414.8) | (381.1) | ||||||||||||||||||||||
| Less impairments and gain (loss) on disposal of assets, net | (25.1) | (0.1) | 19.8 | (1.1) | ||||||||||||||||||||||
| Less interest, net | (49.6) | (45.5) | (143.0) | (128.8) | ||||||||||||||||||||||
| Earnings before income taxes | $ | 356.8 | $ | 372.7 | $ | 923.0 | $ | 850.7 |
Note 7. Impairments and Disposal of Assets
Impairments and (gain) loss on disposal of assets, net, in our accompanying consolidated statements of earnings were comprised of the following:
| Three Months Ended | Nine Months Ended | |||||||||||||||||||||||||
| (in millions) | February 22, 2026 | February 23, 2025 | February 22, 2026 | February 23, 2025 | ||||||||||||||||||||||
| Restaurant impairments | $ | 22.4 | $ | — | $ | 22.4 | $ | — | ||||||||||||||||||
| Disposal (gains) losses | — | — | (45.0) | 0.1 | ||||||||||||||||||||||
| Other | 2.7 | 0.1 | 2.8 | 1.0 | ||||||||||||||||||||||
| Impairments and (gain) loss on disposal of assets, net | $ | 25.1 | $ | 0.1 | $ | (19.8) | $ | 1.1 |
Restaurant impairments for the three and nine months ended February 22, 2026 were primarily related to the expected closures of restaurants and conversions of certain Bahama Breeze restaurants to other Darden brands. Disposal (gains) losses for the nine months ended February 22, 2026 were primarily related to the sale of the assets of the Olive Garden Canada Restaurants and certain liabilities related thereto. Disposal (gains) losses for the nine months ended February 23, 2025 were related to the closure of previously impaired restaurants. Other impacts for the three months and nine months ended February 22, 2026 were primarily related to lease terminations. Other impacts for the three and nine months ended February 23, 2025 were related to right-of-use asset adjustments on early lease terminations, product loss from a facility fire in our distribution network, and liquor license impairment.
DARDEN RESTAURANTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 8. Stockholders’ Equity
Accumulated Other Comprehensive Income (AOCI)
The components of AOCI, net of tax, for the three and nine months ended February 22, 2026 were as follows:
| (in millions) | Foreign Currency Translation Adjustment | Unrealized Gains (Losses) on Derivatives | Benefit Plan Funding Position | Accumulated Other Comprehensive Income | ||||||||||||||||||||||
| Balance at November 23, 2025 | $ | (0.4) | $ | 21.1 | $ | (3.0) | $ | 17.7 | ||||||||||||||||||
| Gain (loss) | 0.8 | 7.2 | — | 8.0 | ||||||||||||||||||||||
| Reclassification realized in net earnings | — | (1.4) | 0.1 | (1.3) | ||||||||||||||||||||||
| Balance at February 22, 2026 | $ | 0.4 | $ | 26.9 | $ | (2.9) | $ | 24.4 | ||||||||||||||||||
| Balance at May 25, 2025 | $ | 4.6 | $ | 30.4 | $ | (3.2) | $ | 31.8 | ||||||||||||||||||
| Gain (loss) | 0.8 | (0.8) | — | — | ||||||||||||||||||||||
| Reclassification realized in net earnings | (5.0) | (2.7) | 0.3 | (7.4) | ||||||||||||||||||||||
| Balance at February 22, 2026 | $ | 0.4 | $ | 26.9 | $ | (2.9) | $ | 24.4 |
The components of AOCI, net of tax, for the three and nine months ended February 23, 2025 were as follows:
| (in millions) | Foreign Currency Translation Adjustment | Unrealized Gains (Losses) on Derivatives | Benefit Plan Funding Position | Accumulated Other Comprehensive Income | ||||||||||||||||||||||
| Balance at November 24, 2024 | $ | 4.6 | $ | 27.4 | $ | (3.2) | $ | 28.8 | ||||||||||||||||||
| Gain (loss) | — | 4.6 | — | 4.6 | ||||||||||||||||||||||
| Reclassification realized in net earnings | — | (0.4) | 0.1 | (0.3) | ||||||||||||||||||||||
| Balance at February 23, 2025 | $ | 4.6 | $ | 31.6 | $ | (3.1) | $ | 33.1 | ||||||||||||||||||
| Balance at May 26, 2024 | $ | 4.6 | $ | 24.5 | $ | (3.5) | $ | 25.6 | ||||||||||||||||||
| Gain (loss) | — | 7.9 | — | 7.9 | ||||||||||||||||||||||
| Reclassification realized in net earnings | — | (0.8) | 0.4 | (0.4) | ||||||||||||||||||||||
| Balance at February 23, 2025 | $ | 4.6 | $ | 31.6 | $ | (3.1) | $ | 33.1 |
DARDEN RESTAURANTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
The following table presents the amounts and line items in our consolidated statements of earnings where adjustments reclassified from AOCI into net earnings were recorded.
| Amount Reclassified from AOCI into Net Earnings | |||||||||||||||||||||||||||||
| Three Months Ended | Nine Months Ended | ||||||||||||||||||||||||||||
| (in millions) AOCI Components | Location of Gain (Loss) Recognized in Earnings | February 22, 2026 | February 23, 2025 | February 22, 2026 | February 23, 2025 | ||||||||||||||||||||||||
| Derivatives | |||||||||||||||||||||||||||||
| Commodity contracts | (1) | $ | 0.7 | $ | (0.6) | $ | 0.4 | $ | (1.7) | ||||||||||||||||||||
| Equity contracts | (2) | 0.2 | 0.1 | 0.6 | — | ||||||||||||||||||||||||
| Interest rate contracts | (3) | 0.9 | 0.9 | 2.6 | 2.6 | ||||||||||||||||||||||||
| Foreign exchange forwards | (4) | — | — | (0.2) | — | ||||||||||||||||||||||||
| Total before tax | $ | 1.8 | $ | 0.4 | $ | 3.4 | $ | 0.9 | |||||||||||||||||||||
| Tax (expense) benefit | (0.4) | — | (0.7) | (0.1) | |||||||||||||||||||||||||
| Net of tax | $ | 1.4 | $ | 0.4 | $ | 2.7 | $ | 0.8 | |||||||||||||||||||||
| Benefit plan funding position | |||||||||||||||||||||||||||||
| Recognized net actuarial gain (loss) - pension/postretirement plans | (5) | $ | 0.1 | $ | 0.1 | $ | 0.2 | $ | 0.1 | ||||||||||||||||||||
| Recognized net actuarial gain (loss) - other plans | (5) | (0.2) | (0.2) | (0.6) | (0.6) | ||||||||||||||||||||||||
| Total before tax | $ | (0.1) | $ | (0.1) | $ | (0.4) | $ | (0.5) | |||||||||||||||||||||
| Tax (expense) benefit | — | — | 0.1 | 0.1 | |||||||||||||||||||||||||
| Net of tax | $ | (0.1) | $ | (0.1) | $ | (0.3) | $ | (0.4) | |||||||||||||||||||||
| Cumulative translation adjustment | (4) | $ | — | $ | — | $ | 5.0 | $ | — | ||||||||||||||||||||
| Tax (expense) benefit | — | — | — | — | |||||||||||||||||||||||||
| Net of tax | $ | — | $ | — | $ | 5.0 | $ | — |
(1)Primarily included in food and beverage costs and restaurant expenses. See Note 10 for additional details.
(2)Included in general and administrative expenses. See Note 10 for additional details.
(3)Included in interest, net on our consolidated statement of earnings.
(4)Included in impairments and (gain) loss on disposal of assets, net on our consolidated statement of earnings.
(5)Included in the computation of net periodic benefit costs, which is a component of general and administrative expenses.
Note 9. Stock-Based Compensation
We grant stock options for a fixed number of shares to certain employees with an exercise price equal to the fair value of the shares at the date of grant. We also grant restricted stock, restricted stock units and performance stock units with a fair value generally determined based on our closing stock price on the date of grant. In addition, we grant cash-settled stock units (Darden stock units) which are classified as liabilities and are marked to market as of the end of each period.
DARDEN RESTAURANTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
The weighted-average fair value of non-qualified stock options and the related assumptions used in the Black-Scholes option pricing model for options granted during the periods presented were as follows:
| Nine Months Ended | |||||||||||
| February 22, 2026 | February 23, 2025 | ||||||||||
| Weighted-average fair value | $ | 72.10 | $ | 44.79 | |||||||
| Dividend yield | 2.9 | % | 3.6 | % | |||||||
| Expected volatility of stock | 41.3 | % | 40.8 | % | |||||||
| Risk-free interest rate | 4.0 | % | 4.1 | % | |||||||
| Expected option life (in years) | 6.3 | 6.3 | |||||||||
| Weighted-average exercise price per share | $ | 208.51 | $ | 139.43 |
The weighted-average grant date fair value of market-based performance stock units and the related assumptions used in the Monte Carlo simulations to record stock-based compensation for units granted during the periods presented were as follows:
| Nine Months Ended | |||||||||||
| February 22, 2026 | February 23, 2025 | ||||||||||
| Dividend yield (1) | 0.0 | % | 0.0 | % | |||||||
| Expected volatility of stock | 25.8 | % | 26.5 | % | |||||||
| Risk-free interest rate | 3.7 | % | 4.2 | % | |||||||
| Expected life (in years) | 3.8 | 2.9 | |||||||||
| Weighted-average grant date fair value per unit | $ | 244.14 | $ | 181.65 |
(1)Assumes a reinvestment of dividends.
The following table presents a summary of our stock-based compensation activity for the nine months ended February 22, 2026.
| (in millions) | Stock Options | Restricted Stock/ Restricted Stock Units | Equity-Settled Performance Stock Units | Cash-Settled Darden Stock Units | ||||||||||||||||||||||
| Outstanding beginning of period | 1.03 | 0.26 | 0.33 | 0.64 | ||||||||||||||||||||||
| Awards granted | 0.11 | 0.06 | 0.16 | 0.13 | ||||||||||||||||||||||
| Awards granted performance impact | — | — | 0.10 | — | ||||||||||||||||||||||
| Awards exercised/vested | (0.09) | (0.07) | (0.15) | (0.21) | ||||||||||||||||||||||
| Awards forfeited | — | — | — | (0.02) | ||||||||||||||||||||||
| Outstanding end of period | 1.05 | 0.25 | 0.44 | 0.54 |
DARDEN RESTAURANTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
We recognized expense from stock-based compensation as follows:
| Three Months Ended | Nine Months Ended | |||||||||||||||||||||||||
| (in millions) | February 22, 2026 | February 23, 2025 | February 22, 2026 | February 23, 2025 | ||||||||||||||||||||||
| Stock options | $ | 1.0 | $ | 1.0 | $ | 7.6 | $ | 6.6 | ||||||||||||||||||
| Restricted stock/restricted stock units | 1.5 | 1.5 | 9.0 | 8.4 | ||||||||||||||||||||||
| Equity-settled performance stock units | 3.4 | 2.4 | 20.8 | 17.2 | ||||||||||||||||||||||
| Cash-settled Darden stock units | 10.3 | 9.6 | 25.0 | 28.6 | ||||||||||||||||||||||
| Employee stock purchase plan | 0.9 | 0.8 | 2.6 | 2.4 | ||||||||||||||||||||||
| Director compensation program/other | 0.5 | 0.3 | 1.5 | 1.3 | ||||||||||||||||||||||
| Total stock-based compensation expense | $ | 17.6 | $ | 15.6 | $ | 66.5 | $ | 64.5 |
Note 10. Derivative Instruments and Hedging Activities
We enter into derivative instruments for risk management purposes only, including derivatives designated as hedging instruments as provided by FASB ASC Topic 815, Derivatives and Hedging, and those utilized as economic hedges. We use financial derivatives to manage interest rate, commodity and compensation risks inherent in our business operations. Cash flows related to derivatives are included in operating activities.
By using these instruments, we expose ourselves, from time to time, to credit risk and market risk. Credit risk arises from the failure of a counterparty to perform under the terms of a derivative contract. When the fair value of a derivative contract is positive, the counterparty owes us, which creates credit risk for us. We minimize this credit risk by entering into transactions with creditworthy counterparties. Market risk is the adverse effect on the value of a financial instrument that results from a change in interest rates, commodity prices, or the market price of our common stock. We minimize this market risk by establishing and monitoring parameters that limit the types and degree of market risk that may be undertaken.
We designate commodity contracts and equity forward contracts as cash flow hedging instruments. We have one interest rate swap agreement, which is designated as a fair value hedge of the related debt. Further, we entered into equity forward contracts to hedge the risk of changes in future cash flows associated with recognized, employee-directed investments in our common stock within the non-qualified deferred compensation plan. We did not elect hedge accounting with the expectation that changes in the fair value of the equity forward contracts would offset changes in the fair value of our common stock investments in the non-qualified deferred compensation plan.
DARDEN RESTAURANTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
The notional and fair values of our derivative contracts were as follows:
| Fair Values | |||||||||||||||||||||||||||||||||||||||||
| (in millions, except per share data) | Number of Shares Outstanding | Weighted-Average Per Share Forward Rates | Notional Values | Derivative Assets (1) | Derivative Liabilities (1) | ||||||||||||||||||||||||||||||||||||
| February 22, 2026 | February 22, 2026 | May 25, 2025 | February 22, 2026 | May 25, 2025 | |||||||||||||||||||||||||||||||||||||
| Equity forwards: | |||||||||||||||||||||||||||||||||||||||||
| Designated | 0.2 | $174.21 | $ | 28.9 | $ | — | $ | — | $ | 0.2 | $ | 0.8 | |||||||||||||||||||||||||||||
| Not designated | 0.4 | 149.51 | 54.2 | — | — | 0.5 | 2.2 | ||||||||||||||||||||||||||||||||||
| Total equity forwards (2) | $ | — | $ | — | $ | 0.7 | $ | 3.0 | |||||||||||||||||||||||||||||||||
| Commodity contracts: | |||||||||||||||||||||||||||||||||||||||||
| Designated | N/A | N/A | $ | 4.5 | $ | 0.1 | $ | — | $ | 0.2 | $ | 0.9 | |||||||||||||||||||||||||||||
| Not designated | N/A | N/A | — | — | — | — | — | ||||||||||||||||||||||||||||||||||
| Total commodity contracts (3) | $ | 0.1 | $ | — | $ | 0.2 | $ | 0.9 | |||||||||||||||||||||||||||||||||
| Interest rate related | |||||||||||||||||||||||||||||||||||||||||
| Designated - Fair value hedge | N/A | N/A | $ | 300.0 | $ | — | $ | — | $ | 31.1 | $ | 40.0 | |||||||||||||||||||||||||||||
| Not designated | N/A | N/A | — | — | — | — | — | ||||||||||||||||||||||||||||||||||
| Total interest rate related | $ | — | $ | — | $ | 31.1 | $ | 40.0 | |||||||||||||||||||||||||||||||||
| Foreign exchange forwards | |||||||||||||||||||||||||||||||||||||||||
| Designated | N/A | N/A | $ | — | $ | — | $ | — | $ | 0.2 | |||||||||||||||||||||||||||||||
| Not designated | N/A | N/A | $ | — | $ | — | $ | — | $ | — | |||||||||||||||||||||||||||||||
| Total foreign exchange forwards | $ | — | $ | — | $ | — | $ | 0.2 | |||||||||||||||||||||||||||||||||
| Total derivative contracts | $ | 0.1 | $ | — | $ | 32.0 | $ | 44.1 |
(1)Derivative assets and liabilities are included in receivables, net and other current liabilities, as applicable, on our consolidated balance sheets.
(2)Designated and undesignated equity forwards extend through July 2029.
(3)Commodity contracts extend through June 2026.
DARDEN RESTAURANTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
The effects of derivative instruments accounted for as cash flow hedging instruments in the consolidated statements of earnings were as follows:
| Amount of Gain (Loss) Recognized in AOCI | Amount of Gain (Loss) Reclassified from AOCI to Earnings | |||||||||||||||||||||||||||||||||||||
| Three Months Ended | Three Months Ended | |||||||||||||||||||||||||||||||||||||
| (in millions) | February 22, 2026 | February 23, 2025 | February 22, 2026 | February 23, 2025 | ||||||||||||||||||||||||||||||||||
| Equity (1) | $ | 6.8 | $ | 3.8 | $ | 0.2 | $ | 0.1 | ||||||||||||||||||||||||||||||
| Commodity (2) | 0.5 | 1.0 | 0.7 | (0.6) | ||||||||||||||||||||||||||||||||||
| Interest rate (3) | — | — | 0.9 | 0.9 | ||||||||||||||||||||||||||||||||||
| Total | $ | 7.3 | $ | 4.8 | $ | 1.8 | $ | 0.4 | ||||||||||||||||||||||||||||||
| Amount of Gain (Loss) Recognized in AOCI | Amount of Gain (Loss) Reclassified from AOCI to Earnings | |||||||||||||||||||||||||||||||||||||
| Nine Months Ended | Nine Months Ended | |||||||||||||||||||||||||||||||||||||
| (in millions) | February 22, 2026 | February 23, 2025 | February 22, 2026 | February 23, 2025 | ||||||||||||||||||||||||||||||||||
| Equity (1) | $ | (1.8) | $ | 8.5 | $ | 0.6 | $ | — | ||||||||||||||||||||||||||||||
| Commodity (2) | 1.3 | (0.8) | 0.4 | (1.7) | ||||||||||||||||||||||||||||||||||
| Interest rate (3) | — | — | 2.6 | 2.6 | ||||||||||||||||||||||||||||||||||
| Foreign exchange forwards (4) | — | — | (0.2) | — | ||||||||||||||||||||||||||||||||||
| Total | $ | (0.5) | $ | 7.7 | $ | 3.4 | $ | 0.9 |
(1)Location of the gain (loss) reclassified from AOCI to earnings is general and administrative expenses.
(2)Location of the gain (loss) reclassified from AOCI to earnings is food and beverage costs and restaurant expenses.
(3)Location of the gain (loss) reclassified from AOCI to earnings is interest, net.
(4)Location of the gain (loss) reclassified from AOCI to earnings is impairments and (gain) loss on disposal of assets, net.
The effects of derivative instruments in fair value hedging relationships in the consolidated statement of earnings were as follows:
| Amount of Gain (Loss) Recognized in Earnings on Derivatives | Amount of Gain (Loss) Recognized in Earnings on Related Hedged Item | |||||||||||||||||||||||||||||||||||||
| Three Months Ended | Three Months Ended | |||||||||||||||||||||||||||||||||||||
| (in millions) | February 22, 2026 | February 23, 2025 | February 22, 2026 | February 23, 2025 | ||||||||||||||||||||||||||||||||||
| Interest rate (1)(2) | $ | 0.8 | $ | 0.4 | $ | (0.8) | $ | (0.4) | ||||||||||||||||||||||||||||||
| Amount of Gain (Loss) Recognized in Earnings on Derivatives | Amount of Gain (Loss) Recognized in Earnings on Related Hedged Item | |||||||||||||||||||||||||||||||||||||
| Nine Months Ended | Nine Months Ended | |||||||||||||||||||||||||||||||||||||
| (in millions) | February 22, 2026 | February 23, 2025 | February 22, 2026 | February 23, 2025 | ||||||||||||||||||||||||||||||||||
| Interest rate (1)(2) | $ | 8.9 | $ | 7.1 | $ | (8.9) | $ | (7.1) | ||||||||||||||||||||||||||||||
(1) Location of the gain (loss) recognized in earnings on derivatives and related hedged item is interest, net.
(2) Hedged item in fair value hedge relationship is debt.
DARDEN RESTAURANTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
The effects of derivatives not designated as hedging instruments in the consolidated statements of earnings were as follows:
| Amount of Gain (Loss) Recognized in Earnings | ||||||||||||||||||||||||||
| (in millions) | Three Months Ended | Nine Months Ended | ||||||||||||||||||||||||
| Location of Gain (Loss) Recognized in Earnings on Derivatives | February 22, 2026 | February 23, 2025 | February 22, 2026 | February 23, 2025 | ||||||||||||||||||||||
| Food and beverage costs and restaurant expenses | $ | 0.2 | $ | — | $ | 0.2 | $ | — | ||||||||||||||||||
| General and administrative expenses | $ | 15.8 | $ | 10.7 | $ | 8.4 | $ | 18.3 | ||||||||||||||||||
| Total | $ | 16.0 | $ | 10.7 | $ | 8.6 | $ | 18.3 |
Based on the fair value of our derivative instruments designated as cash flow hedges as of February 22, 2026, we expect to reclassify approximately $4.6 million of net gains on derivative instruments from AOCI to earnings during the next 12 months based on the maturity of our contracts. However, the amounts ultimately realized in earnings may change and will be dependent on the fair value of the contracts on the respective settlement dates.
Note 11. Fair Value Measurements
The fair values of cash equivalents, receivables, net, accounts payable and short-term debt approximate their carrying amounts due to their short duration or market based interest rates.
The following tables summarize the fair values of financial instruments measured at fair value on a recurring basis as of February 22, 2026 and May 25, 2025.
| Items Measured at Fair Value at February 22, 2026 | |||||||||||||||||||||||||||||
| (in millions) | Fair value of assets (liabilities) | Quoted prices in active market for identical assets (liabilities) (Level 1) | Significant other observable inputs (Level 2) | Significant unobservable inputs (Level 3) | |||||||||||||||||||||||||
| Derivatives: | |||||||||||||||||||||||||||||
| Commodities futures, swaps and options | (1) | $ | (0.1) | $ | — | $ | (0.1) | $ | — | ||||||||||||||||||||
| Equity forwards | (2) | (0.7) | — | (0.7) | — | ||||||||||||||||||||||||
| Interest rate swaps - fair value hedge | (3) | (31.1) | — | (31.1) | — | ||||||||||||||||||||||||
| Total | $ | (31.9) | $ | — | $ | (31.9) | $ | — |
| Items Measured at Fair Value at May 25, 2025 | |||||||||||||||||||||||||||||
| (in millions) | Fair value of assets (liabilities) | Quoted prices in active market for identical assets (liabilities) (Level 1) | Significant other observable inputs (Level 2) | Significant unobservable inputs (Level 3) | |||||||||||||||||||||||||
| Derivatives: | |||||||||||||||||||||||||||||
| Commodities futures, swaps and options | (1) | $ | (0.9) | $ | — | $ | (0.9) | $ | — | ||||||||||||||||||||
| Equity forwards | (2) | (3.0) | — | (3.0) | — | ||||||||||||||||||||||||
| Interest rate swaps - fair value hedge | (3) | (40.0) | — | (40.0) | — | ||||||||||||||||||||||||
| Foreign exchange forwards | (4) | (0.2) | — | (0.2) | — | ||||||||||||||||||||||||
| Total | $ | (44.1) | $ | — | $ | (44.1) | $ | — |
(1)The fair value of our commodities futures, swaps and options is based on closing market prices of commodity contracts, inclusive of the risk of nonperformance.
(2)The fair value of equity forwards is based on the closing market value of Darden stock, inclusive of the risk of nonperformance.
DARDEN RESTAURANTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(3)The fair value of our interest rate swap agreements is based on current and expected market interest rates, inclusive of the risk of nonperformance.
(4)The fair value of our foreign exchange forwards is based on closing forward exchange market prices, inclusive of the risk of nonperformance.
The carrying value and fair value of long-term debt as of February 22, 2026, was $2.14 billion and $2.20 billion, respectively. The carrying value and fair value of long-term debt as of May 25, 2025 was $2.13 billion. The fair value of long-term debt, classified as Level 2 in the fair value hierarchy, is determined based on market prices or, if market prices are not available, the present value of the underlying cash flows discounted at our incremental borrowing rates.
The fair value of non-financial assets measured at fair value on a non-recurring basis, classified as Level 2 in the fair value hierarchy, is determined based on third-party market appraisals. As of February 22, 2026 and May 25, 2025, adjustments to the fair values of non-financial assets measured at fair value on a non-recurring basis, classified as Level 2, were not material.
The fair value of non-financial assets measured at fair value on a non-recurring basis, classified as Level 3 in the fair value hierarchy, is determined based on appraisals, sales prices of comparable assets, or estimates of discounted future cash flows. As of February 22, 2026, adjustments to the fair values of non-financial assets, classified as Level 3, were $19.1 million, which resulted in an ending fair value of zero. As of May 25, 2025, the fair value of non-financial assets, specifically right-of-use assets, classified as Level 3, were determined to be $8.0 million. See Note 7 for additional information.
Note 12. Commitments and Contingencies
As collateral for performance on contracts and as credit guarantees to banks and insurers, we are contingently liable for guarantees of subsidiary obligations under standby letters of credit. As of February 22, 2026 and May 25, 2025, we had $71.9 million and $80.0 million, respectively, of standby letters of credit related to workers’ compensation and general liabilities accrued in our consolidated financial statements. As of February 22, 2026 and May 25, 2025, we had $16.7 million of surety bonds related to other payments. Most surety bonds are renewable annually.
As of February 22, 2026 and May 25, 2025, we had $87.0 million and $76.5 million, respectively, of guarantees associated with leased properties that have been assigned to third parties, primarily related to our disposition of Red Lobster in fiscal 2015 and the sale of the Olive Garden Canada Restaurants during the first quarter of fiscal 2026. These amounts represent the maximum potential amount of future payments under the guarantees. The fair value of the maximum potential future payments discounted at our weighted-average cost of capital as of February 22, 2026 and May 25, 2025, amounted to $68.0 million and $61.2 million, respectively. In the event of default by a third party, the indemnity and default clauses in our assignment agreements govern our ability to recover from and pursue the third party for damages incurred as a result of its default. We do not hold any third-party assets as collateral related to these assignment agreements, except to the extent the agreements permit us to recapture the related leasehold interest. The liability recorded for our expected credit losses under these leases as of February 22, 2026 was $10.6 million. These guarantees expire over their respective lease terms, which range from fiscal 2026 through fiscal 2035.
We are subject to private lawsuits, administrative proceedings and claims that arise in the ordinary course of our business. A number of these lawsuits, proceedings and claims may exist at any given time. These matters typically involve claims from guests, employees and others related to operational issues common to the restaurant industry, and can also involve infringement of, or challenges to, our trademarks and copyrights or the trademarks and copyrights of others. While the resolution of a lawsuit, proceeding or claim may have an impact on our financial results for the period in which it is resolved, we believe that the final disposition of the lawsuits, proceedings and claims in which we are currently involved, either individually or in the aggregate, will not have a material adverse effect on our financial position, results of operations or liquidity.
Note 13. Subsequent Events
On March 18, 2026, the Board of Directors declared a cash dividend of $1.50 per share payable on May 1, 2026 to all shareholders of record as of the close of business on April 10, 2026.
Previous: Cover and table of contents · Next: Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations