Darden Sees Profit Drop 35% After Red Lobster Sale Announcement

The parent company of Olive Garden and Red Lobster missed analyst earnings estimates for the fourth quarter. Executives, who are facing shareholder opposition to the $2.1 billion sale of Red Lobster, called fiscal 2014 “a year of transformation.”

AP Photo/Alan Diaz, File

Darden Restaurants, which recently announced the $2.1 billion sale of Red Lobster despite shareholder opposition, saw its earnings lag in the fourth quarter. Profits at the parent company of the seafood chain and other casual dining restaurants like Olive Garden, Bahama Breeze, and LongHorn Steakhouse, fell 35% mainly due to declining same-store sales at its marquee restaurants.

At Olive Garden, U.S. same-restaurant sales fell 3.5% in the quarter, while that metric declined at Red Lobster by 5.6% from March to June. Darden is currently attempting a complete rebranding of its Olive Garden chain, including a new logo and more of a focus on wine and food pairings, as well as a handful of specialty cocktails and new menu items such as truffles and kale and tapas–style dishes.

Total sales at Red Lobster of $664 million in the fourth quarter were also 5.6% lower than the prior year. At Olive Garden, the $926 million in fourth quarter sales were down 2.7% year-over-year, even though the figure includes revenue from nine net new restaurants.

Few analysts were allowed to ask questions on the call, and none of them asked anything about the sale of Red Lobster, which had total fiscal year sales of $2.46 billion, down 6.2% from Darden’s previous fiscal year.

The only mentions of the sale came in a brief discussion of the company’s accounting tactics in reaching its earnings conclusions, an explanation of how the proceeds from the sale would be used to pay down company debt, and CEO Clarence Otis’ passing nod to the deal early in the call.

“Fiscal year 2014,” Otis said, “was certainly a year of transformation.”

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