Darden Restaurants Inc. has nominated a new slate of directors, to be voted on at its annual shareholder meeting on Oct. 10.
The casual-dining operator will retain just four out of its 12 current members and give four seats to activist investor Starboard Value L.P., an increase of one member from Darden’s previous slate.
Starboard, which holds 8.8 percent of Darden shares, has issued its own slate of board members, and is supported by Barington Capital Group L.P., which owns about 2 percent of Darden shares.
The board proposed by Darden management would have four members unaffiliated with either Darden or Starboard, four Starboard nominees and four incumbent members.
Charles A. Ledsinger, Jr., non-executive chairman of Darden’s board of directors, said in a press release that the slate would provide new perspective and “avoids many of the risks and destabilization that would result from full board turnover and giving control to a single shareholder’s nominees.”
The four independent nominees are Gregory L. Burns, chief executive of The Gregory Burns Consulting Group and former CEO of O’Charley’s Inc.; Jeffrey H. Fox, non-executive chairman of the board of Convergys Corporation; Steve Odland, president and CEO of The Committee for Economic Development and former president of the foodservice division of Sara Lee Bakery; and Checkers Drive-In Restaurants Inc. CEO Enrique Silva.
Incumbents on the slate are Michael W. Barnes, Christopher Fraleigh, Michael Rose and Maria Sastre.
The remaining four candidates would be named by Starboard, whose own slate includes Jean M. Birch, former president of IHOP; Bradley D. Blum, former president of Olive Garden; Lionel L. Nowell III, former senior executive at Pizza Hut and CFO of Pepsi Bottling Group; Charles “Chuck” M. Sonsteby, former CFO of Brinker International Inc.; and Alan N. Stillman, former chairman of Smith & Wollensky and founder of TGI Fridays.
Baird Equity Research hailed the new slate, saying it reflected “a prudent approach,” noting that the new slate “should help to bring new perspective to the company while maintaining some continuity.”
Darden released expectations for the first quarter of its 2015 fiscal year, which ended on Aug. 24.
The company said it expects a loss of between 13 cents and 15 cents per share for the first quarter of its 2015 fiscal year, but it anticipates a profitable year overall.
The loss was largely the result of approximately 37 cents per share of “debt breakage costs” related to the planned retirement of $1 billion in debt, the company said. Otherwise, earnings per share for the quarter ended Aug. 24 would be between 31 cents and 33 cents, it said.
It anticipated same-store sales increases at LongHorn Steakhouse of 2.8 percent; The Capital Grille, 3.9 percent; Eddie V’s, 2.5 percent; Yard House, 2.3 percent; and Bahama Breeze, 1.1 percent. It expected same-store sales decreases of 1.3 percent at Olive Garden and 0.3 percent at Seasons 52.
Traffic continued to decline at Olive Garden’s 834 locations, the company said. Year-over-year traffic fell 0.9 percent in June, 4.3 percent in July and 2.3 percent in August.
LongHorn Steakhouse also suffered from traffic declines in June and July, of 1.1 percent and 1.6 percent, respectively, but it slightly improved 0.2 percent in August.
Darden has been plagued in recent years by sluggish performance of its largest brand, Olive Garden, and 706-unit Red Lobster, which it sold to Golden Gate Capital for $2.1 billion in July, against the wishes of Starboard, which said the price was too low.
Darden continues to expect net earning per share “for continuing operations” of between $1.81 to $1.90 for the fiscal year.
Darden reported progress on the turnaround strategy it unveiled for Olive Garden last winter. Guest satisfaction scores have risen at Olive Garden in the categories of attentiveness, pace of meal, food taste and “overall,” the company said
Darden has remodeled three Olive Garden locations, and those three have seen traffic increase more than 10 percent on average. Another 75 remodels were planned for fiscal 2015, the company said.
The company-wide rollout of online ordering resulted in a 13-percent increase in takeout business at Olive Garden, Darden reported. It also said in a press release that it was testing tablets at several restaurants, “which has generated very encouraging results, including check growth due to an increase in add-on sales, increased table turns, a 60% pay-at-the-table rate and increased guest survey response rates, as well as an increase in tip percentage for servers.”
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