Profit Falls at Olive Garden's Parent Company

Olive Garden darden restaurant earnings food beverage dining restaurants
Alan Diaz/AP
NEW YORK -- The struggling parent company of Olive Garden and Red Lobster reported a sharply lower quarterly profit Friday and said that its president and chief operating officer will retire.

Darden Restaurants (DRI) said Drew Madsen, 57, will be succeeded by the president of its specialty restaurant group, Gene Lee. The appointment is effective immediately. The company's specialty restaurant group, which includes chains such as The Capital Grille and Bahama Breeze, has performed better than the company's flagship chains.

At Olive Garden, the company's biggest chain, sales fell 4 percent at restaurants open at least a year in the latest quarter. The figure fell 5.2 percent at Red Lobster. The declines came despite the company's ongoing efforts to revitalize menus and advertising to better reflect changing eating habits.

In the specialty restaurant group, sales edged up 0.5 percent at restaurants open at least a year. The metric is a key gauge because it strips out the impact of newly opened and closed locations.

To cut spending by about $50 million a year, the company is also reducing its workforce by between 80 to 85 positions, as well as making program cuts. A representative said the personnel cuts won't be at the restaurant level.

For the three months ended Aug. 25, the company said it earned $70.2 million, or 53 cents a share. That's compared with $110.8 million, or 85 cents a share, in the year-ago period. Analysts expected a profit of 70 cents a share.

Sales rose to $2.16 billion, helped by the opening of new locations. That was short of the $2.19 billion Wall Street expected, according to FactSet.

Darden, based in Orlando, Fla., said Madsen will work with Lee and Darden's other executives on the transition until he retires. Madsen joined the company in 1998 as executive vice president of marketing for Olive Garden. He became COO in December 2004.

Lee joined Darden in 2007. Kim Lopdrup will take over leadership of the company's specialty restaurant group and continue to lead its new business development initiatives.

Darden's stock fell in premarket trading Friday.

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All anyone needs to do is take their family to Oilve Garden for dinner and they will see exactly why not many customers return for further dinning. They advertise as a family dining restaurant and in practice they try to be a faux upscale establishment. For the diners, the value for money is poor.

September 20 2013 at 4:22 PM Report abuse rate up rate down Reply