Underestimating American appetites: Crab Promotion Sinks Red Lobster Chief
Wed Sep 24,11:02 PM ET Add Business - AP to My Yahoo!
DES MOINES, Iowa - Darden Restaurants Inc. Wednesday said it had replaced the head of Red Lobster, its biggest chain, after an all-you-can-eat crab promotion went awry.
Darden President and Chief Operating Officer Dick Rivera will succeed Edna Morris as president of Red Lobster.
Morris, who had been in that job just 18 months, left to pursue other interests, the company said.
Darden executives said Red Lobster management had badly miscalculated how many times customers would refill their plates after paying $20 for an "endless" crab entree. Meanwhile, crab prices were going up, sending the profit margin crashing.
"It wasn't the second helping on all-you-can-eat but the third," said company chairman Joe R. Lee on a conference call.
"And maybe the fourth," added Rivera.
Also Wednesday, Orlando, Fla.-based Darden reported earnings that beat expectations for its fiscal first quarter, thanks to record sales at the company's other flagship, Olive Garden.
Results in the quarter ended Aug. 24 totaled $68.6 million, or 40 cents a diluted share, compared with $71.9 million, or 40 cents, a year ago.
Nonetheless, Darden said that sales trends at some of its businesses in September will cause fiscal second-quarter earnings to fall short of last year's 21 cents per share.
The company forecast results of between 15 cents to 18 cents a diluted share; the average analyst estimate was 22 cents, according to Thomson First Call.
Darden company announced earnings after the close of the New York Stock Exchange (news - web sites), which saw its shares at $21.37, down 48 cents, or 2.2 percent. In extended trading, the shares fell $1.97, or 9.2 percent, to $19.40. |
