Darden Restaurants, battling activist investors over the future of its struggling Red Lobster business, reiterated plans to divest the seafood chain and reported third-quarter results in line with analysts’ lowered expectations.
Darden, which also owns the Olive Garden and LongHorn Steakhouse chains, had on March 3 warned that severe winter weather hurt sales and profit in the quarter.
The company has been under pressure from Starboard Value LP and Barington Capital Group LP to improve business at Red Lobster and Olive Garden, both of which on Friday reported a fall in same-restaurant sales for the third straight quarter.
Darden plans to spin off or sell the 705-restaurant Red Lobster chain, but Barington wants Olive Garden and Red Lobster in one company and the higher-growth chains, including LongHorn Steakhouse, as a second company.
Starboard, which owns about 5.5 percent of the largest U.S. full-service restaurant operator, says the plan to spin off Red Lobster should be delayed and put to a shareholder vote.
Barington, which said it owns about 2 percent of Darden, has asked the Orlando-based company to create a publicly-traded real estate investment trust (REIT) to unlock the value of its property holdings.
Same-restaurant sales fell 8.8 percent at Red Lobster and 5.4 percent at Olive Garden in the third quarter. They rose 0.3 percent at LongHorn Steakhouse.
Total sales fell 1 percent to $2.23 billion in the quarter ended Feb. 23.
Darden’s net income fell to $109.7 million, or 82 cents per share, from $134.4 million, or $1.02 per share, a year earlier.
Analysts on average had expected the company to earn 82 cents per share, on sales of $2.25 billion, according to Thomson Reuters I/B/E/S.
The company also maintained its forecast for a 15-20 percent fall in full-year profit.
Darden’s shares closed at $49.30 on the New York Stock Exchange on Thursday.