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February 12, 2014

United States

Florida—Red Lobster Hurt By High Prices

 

The Starboard Value Fund, which is leading the fight to prevent Darden Restaurants from spinning off Red Lobster, cites shrimp price inflation as a major contributor to Red Lobster’s problems. A mid-priced, seafood restaurant chain headquartered in the United States, Red Lobster has over 700 outlets worldwide and probably uses more farmed shrimp than any other restaurant in the world!

 

In a letter to Darden in late January 2014, Starboard Value Fund, which controls about 5.5% of Darden’s shares and is threatening to organize other shareholders to challenge the Board, said: “Red Lobster is currently facing several challenges, including declining same-store sales and severe shrimp price inflation, driven by a blight [EMS] that is currently affecting Asian shrimp supplies.”

 

Starboard argues that spinning off Red Lobster fails to deal with its underlying problems and that the same issues—high costs, including sales and administrative costs—will continue to plague new owners.

 

Red Lobster has long been an anchor for seafood sales in the USA. The weakening and hollowing out of the company would be a net loss for the industry, as weaker companies find it harder to be leaders in terms of quality and environmental standards, where Darden has excelled.

 

Source: Seafood.com (an online, subscription-based, fisheries news service).  Editor and Publisher, John Sackton (phone 1-781-861-1441, email jsackton@seafood.com).  Doubling of Shrimp Prices May Be Contributing to the Break Up of Red Lobster.  John Sackton.  February 11, 2014.

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