(Adds analyst's comment, forecast, background, details; updates
By Shailaja Sharma
June 20 Darden Restaurants Inc, facing
shareholder resistance to the planned sale of its struggling Red
Lobster seafood chain, forecast a full-year profit far below
Starboard Value LP launched a fight to take over Darden's
board last month, a week after the company said it planned to
sale Red Lobster to Golden Gate Capital for $2.1 billion.
The activist investors called the deal a "destructive
transaction" that ignored shareholder rights, and said it would
nominate a full 12-candidate slate for election at the company's
Sept. 30 annual meeting.
Starboard, backed by Barington Capital, has said it had
identified other ways to save costs, boost revenue and revamp
the company that would not require the sale.
Starboard owns 6.2 percent of Darden, while Barington
represents shareholders holding more than 2 percent.
Darden said on Friday the sale was on track and it expects
to receive $1.6 billion after tax and costs.
The company also said it plans reposition its flagship Olive
Garden chain through remodels, menu additions, a new logo and
Shares of the largest operator of full-service restaurants
in the United States fell as much as 4.5 percent.
"Investors remain skeptical that the initiatives will drive
a turn in same-store sales, given the past six quarters of
same-store sales declines...," Susquehanna Financial Group
analyst Rachael Rothman said in a note.
The company said it expects Olive Garden same-restaurant
sales to remain unchanged or rise by up to 1 percent for the
year ending May 2015. Olive Garden will account for about 60
percent of Darden's revenue after the sale of Red Lobster.
Darden, which also owns the Seasons 52 and Capital Grille
chains, also forecast full-year adjusted earnings of $2.22-2.30
per share, compared with the average analyst estimate of $2.79,
according to Thomson Reuters I/B/E/S.
Darden's same-restaurant sales have been lagging those of
fast-casual rivals such as the less-expensive Chipotle Mexican
Same-restaurant sales fell 3.5 percent at Olive Garden and
about 6 percent at Red Lobster for the fourth quarter ended May
Net income fell to $86.5 million, or 65 cents per share,
from $133.2 million, or $1.01 per share, a year earlier.
Analysts had expected 94 cents.
Costs related to Darden's plan to separate Red Lobster and
other charges hurt profit by 19 cents per share.
Total costs increased 7 percent to $1.62 billion.
Net sales rose 3.6 percent to $1.65 billion. Including
discontinued operations, sales rose nearly 1 percent to $2.32
billion. Analysts expected sales of $2.33 billion.
Orlando-based Darden's shares were down 3 percent at $48 on
the New York Stock Exchange on Friday.
(Reporting by Lisa Baertlein in Los Angeles; Editing by Joyjeet