Darden Restaurants is going to sell or spin off Red Lobster, the company announced Thursday.
The move is part of a board of directors approved comprehensive plan to enhance shareholder value. Although no final decision has been made, Darden said it expects to execute a tax-free spin-off of Red Lobster to its shareholders, but may also consider a sale of the business.
Darden on Thursday reported a 41 percent fall in quarterly profit. Red Lobster saw a 4.5 percent fall in same-restaurant sales.
The company said as consumer demand dynamics have changed, Red Lobster’s priorities and operating support requirements have come to differ meaningfully from those of Darden’s other brands, which are having “greater success increasing appeal among consumers outside their core guest profiles.” As a separate company, Red Lobster will have greater freedom to pursue marketing and operating strategies that are more tailored to the needs of those consumers who fit its core guest profile.
Kim Lopdrup, current Darden president, specialty restaurant group and new business, has been selected to serve as CEO of Red Lobster following the separation. As Lopdrup shifts his focus to support the Red Lobster separation, Harald Herrmann, current president of Yard House, will assume the role of president of the specialty restaurant group in January. Salli Setta, who was appointed as president of Red Lobster in July, will continue in that role. If, as expected, the separation for Red Lobster is a spin-off, Brad Richmond, who has been senior VP and CFO of Darden since 2006, will become chief financial and administrative officer of Red Lobster upon completion of the transaction. Darden has begun the process of identifying its Board of Directors, and identifying a potential successor to Richmond.
“This is a thrilling opportunity to build on the very strong market position Red Lobster has established over the past 46 years," said Lopdrup. "As a stand-alone company, we will be free to focus in a more single-minded manner on the many current and prospective guests who find what Red Lobster brings to the marketplace highly relevant. A priority will be highlighting and evolving signature attributes of the Red Lobster dining experience. A spin-off will also allow us to target our efforts and investments on value-creation opportunities that may be material to a stand-alone Red Lobster but not to Darden overall.”
The company also announced it will suspend new unit growth of Olive Garden.
