Will Darden Restaurants Feed Its Investors’ Cravings for a Company Split?
Certain activist investors are now calling for a change at Darden Restaurants (NYSE:DRI), and they’re quick to offer their strategies for a more profitable restaurant game plan.
Darden currently owns Olive Garden, Red Lobster, and six other restaurant chains that range from middle-of-the-road to upscale establishments, but while some of its 2,100 restaurants are faring successfully, still managing to draw customers despite a recovering economy that has many people shifting to lower-priced options, other company offerings are experiencing lackluster sales and a drop-off in consumer demand.
According to The Wall Street Journal, hedge fund Barington Capital Group LO, a shareholder with a 2.8 percent stake in Darden, is pushing for a company split, and the investors also want Darden to cash in on its real estate in order to facilitate higher shareholder returns.
Barington argues that Darden would be better off if it established one company with its Olive Garden and Red Lobster restaurants, and another with its chains that are experiencing higher growth, such as Capital Grille and Seasons 52. That’s because middle-of-the-road chains like Olive Garden have recently witnessed sales declines as consumers show more of an interest in lower-priced establishments, while upscale restaurants like Capital Grille continue to maintain their sales thanks to well-off consumers who can still afford to frequent the establishments.