Darden Restaurants Inc said it would sell or spin off its struggling Red Lobster chain, bowing to pressure from activist investor Barington Capital Group after reporting another quarter of sliding profits.

The hedge fund was pushing Darden to split into two companies - one that operates its mature Olive Garden and Red Lobster chains and another for its growing brands such as LongHorn Steakhouse and Seasons 52.

Barington has said a split could push Darden's stock to between $71 and $80. Darden shares were down 3 percent at $51.38 in early trading.

Stephen Anderson of Miller Tabak & Co said he expects a sale of Red Lobster, despite weak recent results, could bring in "somewhere between $2.0 billion and $2.5 billion."

Darden, the largest U.S. full-service restaurant operator with a market value of $6.9 billion, reported a 41 percent fall in quarterly profit on Thursday.

Same-restaurant sales at Red Lobster fell 4.5 percent in the second quarter and have now declined in four of the last five quarters.

Competition from cheaper chains such as Chipotle Mexican Grill Inc and Panera Bread Co - where tipping is not required - has dented sales at Red Lobster in a patchy economic recovery.

"Red Lobster has almost (been) forgotten as a place to eat by U.S. families as they perceive the brand as not offering the most value per plate," said Brian Sozzi, chief executive of Belus Capital Advisors.

New York-based Barington, which represents shareholders who own more than 2 percent of Darden, said in October that the company had become too large and complex to compete with rivals such as Cheesecake Factory and Brinker International's Chili's Grill & Bar.

Brinker has employed a similar spin-off strategy - divesting a number of brands over the last several years to focus on its Maggiano's Little Italy and Chili's chains.

Orlando-based Darden said on Thursday it would suspend expansion of the Olive Garden chain and slow the opening of new branches of its LongHorn Steakhouse brand.

The reduced growth is expected to lower capital spending by at least $100 million annually. The company also said it would not purchase any more restaurant brands for the foreseeable future.

These changes, which are expected to save $60 million in annual costs from the financial year starting May 26, 2014, will be used to support dividends, share buybacks and to strengthen its credit profile, Darden said.

Net income in the second quarter ended November 24 fell to $19.8 million, or 15 cents per share, from $33.6 million, or 26 cents per share, a year earlier.

Revenue rose 4.5 percent to $2.05 billion because of growth at restaurants other then Red Lobster and Olive Garden.

Goldman Sachs & Co is financial adviser to Darden, while Latham & Watkins will be its legal counsel. Wachtell, Lipton, Rosen & Katz is the legal adviser to Darden's board.

(Additional reporting by Lisa Baertlein; Editing by Kirti Pandey and Saumyadeb Chakrabarty)