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Red Lobster reported a 10.2-percent decline in same-store sales for December and decreases of 12.2 percent in January and 4.5 percent in February.

After the earnings warning on Monday, James Mitarotonda, chairman and chief executive of investor Barington Capital Group, issued a statement that said: “Darden’s deteriorating financial performance and decision to continue to separate Red Lobster without pursuing opportunities to monetize its valuable real estate have caused us to lose all confidence in the ability of Clarence Otis to manage the company.”

Anderson said Darden has opportunities to reduce its selling, general and administrative expenses.

“The company has already announced $60 million in cost reductions,” he said. “I estimate that can go as much as $100 million….”

That would put Darden in the area of expenses in the early 2000s, before the LongHorn Steakhouse acquisition.

“There is such potential for them to unleash more cost savings,” Anderson said, “and a lot of that is not customer-facing.”

Darden maintains its plan to spin off or sell the 705-unit Red Lobster chain.

“Darden remains on track to execute its previously announced plan to separate the Red Lobster business through either a tax-free spin-off to Darden shareholders or a sale of the Red Lobster business. The sale process is well underway,” the company said in a statement. “The company has also begun the process of establishing separate financials and associated infrastructure for the Red Lobster business should the board determine that the spinoff alternative creates more value for shareholders.”

The company reiterated its opposition to creating a real estate investment trust for owned properties, which both Barington and Starboard have pressed.

“Full real estate separation via the formation of a REIT would introduce significant operational complexity, remove from Darden an important strategic asset, and likely not create meaningful shareholder value,” the company said in its overview to the analyst presentation, adding that a REIT would reduce Darden’s cash flow, weaken its credit profile and increase borrowing costs.

Darden owns and operates more than 2,100 restaurants with more than $8.5 billion in annual sales.

Contact Ron Ruggless at ronald.ruggless@penton.com.
Follow him on Twitter: @RonRuggless