Editor's note: What follows below is a brief distillation from Hedgeye Restaurants Analyst Howard Penney's institutional research note yesterday. If you are an individual investor and would like more information on how you can subscribe to Hedgeye click here. Institutional investors, please ping firstname.lastname@example.org.
- We woke up to news today that activist investor Starboard may call a special meeting to halt Red Lobster's spinoff.
- As we wrote in our note, “Clarence’s Legacy, A Half-Baked Plan,” back when the plan was announced, Darden CEO Clarence Otis’ legacy will be defined by his unwillingness to make the changes necessary to create significant value for shareholders.
- The takeaway from stock action (and, in our opinion, sentiment since 12/20/13) is DRI rallies when there is movement toward replacing management and sells off when management publicly digs their heels in.
- All told, the plan presented in December seems reactionary and hastily put together. It fails to address declining traffic, margins and relevance as well as potential solutions to these issues.
- After a series of conversations with industry insiders and some independent thinking, we’ve concluded that Darden’s strategic initiatives could actually end up destroying shareholder value.
- Our plan creates four operating companies focused on: Italian, Seafood, Steak and Growth. This would properly allow for intensive focus on guest targets and specific brand priorities in each respective category.