Embattled Darden Restaurants, Inc. (NYSE:DRI) reported disappointing fiscal fourth quarter earnings Friday, June 20th. The company reported earnings of 84 cents per share, compared to a consensus analyst estimate of 94 cents per share (per Bloomberg). The continuing poor results are sure to increase the pressure on Darden’s management from unhappy shareholders.
Darden’s detailed earnings results
Darden Restaurants, Inc. (NYSE:DRI) reported revenues of $2.32 billion for for the quarter ending May 25, in a statement released earlier Friday. Revenues came in just under analyst estimates of $2.33 billion.
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The restaurant owner is continuing to struggle to attract diners to the Olive Garden, its biggest chain, as more and more diners are going newer restaurants and casual eateries that offer high-quality fare. According to the statement, same-store sales at Olive Garden decreased by 3.5%, compared with a 5.4% decline in the third quarter.
Darden Restaurants, Inc. (NYSE:DRI) net income declined by 35% in the quarter to $86.5 million, or 65 cents a share, from $133.2 million, or $1.01 a share, last year.
Shares of Darden were down 3.6% to $47.75 in early trading today. The share price of the company has slipped 8.9% so far this year, while the S&P 500 Index is up over 6%.
Controversy over Red Lobster sale
Darden Restaurants, Inc. (NYSE:DRI) agreed to sell the slumping Red Lobster brand to Golden Gate Capital for $2.1 billion back in May. Management said it will use the money to revive Olive Garden’s growth. However, several major investors in the company have objected to the move, and are lobbying to replace board members and monetize its properties as an independent real estate investment trust.
The disagreement is about whether the Darden BoD squandered shareholder value selling off the firm’s 700 Red Lobster properties, or if the board actually got a respectable price considering the recent drop off in the chain’s sales. Red Lobster caters to an older, lower middle-class family audience that has been financially pinched, leading to weak sales for several consecutive quarters. The iconic seafood brand also has high overhead, given a rising prices for shellfish and seafood in general, and can’t raise prices much without losing more customers.