NEW YORK (AP) — It's time for Olive Garden's parent company Darden Restaurants to consider looking for a new CEO, an activist investor said Wednesday.
Barington Capital Group said it sent a letter to the independent directors on Darden's board saying it was concerned by the company's "rapidly deteriorating financial performance" under chief executive Clarence Otis.
The letter said the firm has "long questioned why the board did not select a person with stronger operating experience in the industry to run Darden."
Darden said in a statement that its focus was on doing "what is in the best interest of all Darden shareholders and the board is confident in the actions the company is taking to deliver this responsibility."
The intensifying criticism comes as Darden Restaurants Inc., based in Orlando, Fla., fights to boost sales at its struggling Olive Garden and Red Lobster chains.
The chains have been losing customers since the downturn as people cut back on spending and reconsider whether the pasta or seafood meals are worth prices the restaurants charge. Another problem is the growing popularity of places like Chipotle, where people feel they can get quality food for less money.
To improve its performance, Darden said late last year that it will spin off or sell Red Lobster chain and focus on fixing Olive Garden. But Barington and another activist investor, Starboard Value, have objected and say the plan should be put to a shareholder vote.
In the letter, Barington said it didn't understand why the company was making Starboard go through "the tedious process of bringing a consent solicitation to call a special meeting in the first place." It said allowing a shareholder vote would minimize the time and resources the company spent on the matter.
Barington wants Darden to separate Olive Garden and Red Lobster as a pair from the company's more successful specialty restaurant group, which includes The Capital Grille. It also wants Darden to hold onto Red Lobster's real estate so that it could collect rent.
Additionally, Barington wants Darden to name an independent chairman to replace Otis, who has been CEO since 2004 and chairman since 2005.
Darden did not respond when asked for a response on Barington's comments regarding Otis.