Motley Fool – In its second-quarter earnings announcement, Darden Restaurants revealed that it was planning on ditching Red Lobster. Management said that the Red Lobster brand had diverged from the Darden pack, and that it made more sense to spin it off or sell it than to keep running the business. The move is likely a nod to the pressure that hedge funds — notably Barington Capital — have applied to Darden recently, calling for the business to slim down its structure and separate its underperforming businesses.
While the Red Lobster division and other cost savings announced today will go part of the way toward meeting Barington’s demands, the original vision of the hedge fund is still a ways away from being realized. The company, which holds more than 2% of Darden’s stock, had wanted to see Red Lobster and Olive Garden split into their own businesses. Both brands have slowed in recent years as the market reached saturation and more fast-casual dining chains came into vogue.