Drew Madsen is retiring as president and chief operating officer of Darden Restaurants Inc., a move that comes as the company begins implementing several cost-cutting measures.
Gene Lee, president of Darden’s Specialty Restaurant Group, will succeed Madsen, effective immediately, the company said Friday. Madsen will continue through the transition period until he retires at the end of the second quarter in November.
The company also said it would eliminate 85 positions in its corporate staff and make cuts in marketing, supply chain and other areas to produce a savings of $50 million a year starting in fiscal 2015.
“We’ve concluded that as the sluggish and uneven economic recovery we’ve been experiencing for some time now persists, we can expect appreciably greater sales volatility in our industry,” Clarence Otis, Darden’s chairman and chief executive, said in a call with analysts.
Otis said the staff reductions and other cost-cutting measures would produce about $25 million in savings, but that would be offset by $10 million in upfront costs to implement the plan.
“These actions provide us with the financial flexibility, in the face of heightened volatility, to do two things we need to do to regain our brand momentum: invest in providing affordability to those guests who want and need affordability, and invest in refining our offers in ways that are responsive to guests who are more focused on other attributes of the dining experience,” Otis said, citing technology platforms and the potential for targeted marketing rather than broadcast media.
Darden announced the changes as it reported a 36.6-percent decline in profit for the Aug. 25-ended first quarter. Net income fell to $70.3 million, or 53 cents per share, from $110.8 million, or 85 cents per share, in the year-earlier period. Revenue rose 6.1 percent to $2.16 billion compared to $2.03 billion in the prior-year period.
Same-store sales at Darden’s Olive Garden and Red Lobster slipped in the first quarter. Olive Garden’s same-store sales fell 4 percent, and Red Lobster’s U.S. units fell 5.2 percent. Among other brands, same-store sales rose 3.2 percent at LongHorn, 2.7 percent at Bahama Breeze, 3.2 percent at The Capital Grille and 2.1 percent at Eddie V’s. Same-stores sales showed declines of 4.4 percent at and 1.5 percent at Yard House.
Lee told analysts he would view affordability and changing consumer needs in casual dining through the lense of his operational background.
“As far as saying anything more at this point in time would be irresponsible,” Lee said. “You know what they say: A prescription without diagnosis is malpractice. I really would like to have some time to talk to the team in great detail, learn more about each of the businesses.”
Lee joined Darden following its 2007 acquisition of RARE Hospitality, where he had served as president and COO since 2001.
Kim Lopdrup will take over leadership of the company's specialty restaurant group and continue to lead new business development initiatives. Prior to his current role, Lopdrup served for seven years as president of Red Lobster.
Madsen joined Darden in 1998 as executive vice president of marketing for Olive Garden. He became COO in December 2004.
Otis said in a statement that "while we respect and understand Drew's decision to retire, he will be sincerely missed as a colleague and friend.”
Darden owns and operates more than 2,100 restaurants.
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