Activist investor Starboard has 300 slides of advice for Darden - WSJ


Darden Restaurants Inc posted a quarterly loss a day after the Olive Garden chain owner received an action plan from activist investor Starboard Value LP to boost its share value.

Darden, however, posted a profit on an adjusted basis, sending its shares up about 2 percent in premarket trading.

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Customer visits to Olive Garden restaurants fell in every month of the quarter ended Aug. 24 as competition remained intense.

Same-restaurant sales at the Olive Garden chain, which accounts for more than half of Darden's revenue, fell 1.3 percent.

Starboard, the company's second-largest shareholder with an 8.03 percent stake, said its plan could boost Darden's stock price by $19-$38.

Starboard suggested Darden enhance the image of Olive Garden as an Italian restaurant, improve its food quality and alcohol sales, and introduce technology to reduce waiting periods at restaurants, among other measures.

The 300-slide plan also included tips on cooking pasta and breadsticks, which the hedge fund said were not prepared properly by Olive Garden.

Darden said it would review Starboard's plan, but added that it was already implementing many of the suggestions at Olive Garden and the efforts were showing results.

"We remain open minded toward all ideas that support long-term value creation for our shareholders," Darden's Chief Operating Officer Gene Lee said in a statement.

Starboard launched a fight to take over Darden's board in May, saying the then-pending sale of Red Lobster seafood restaurant chain was a "destructive transaction" that ignored the rights of shareholders.

Darden announced earlier this month a revised slate of director nominees that include four new candidates, four incumbents and four open spots for Starboard picks.

Analysts are divided on whether the move would satisfy Starboard and prevent it from seizing control of the entire 12-member board.

Darden reported a net loss of $19.3 million, or 14 cents per share, from continuing operations for the first quarter compared with a profit of $42.2 million, or 32 cents per share, a year earlier.

Revenue rose 4 percent to $1.59 billion.

Excluding items, the company earned 32 cents per share.

Analysts on average expected a profit of 31 cents per share and revenue of $1.59 billion, according to Thomson Reuters I/B/E/S.

Same-restaurant sales rose 2.8 percent at the LongHorn Steakhouse chain.

Darden's shares closed at $48.29 on Thursday on the New York Stock Exchange. Up to Thursday's close, the stock had fallen 11.2 percent this year.