Shrimp costs have Red Lobster in hot water

Published on NewsOK Modified: March 21, 2014 at 9:02 am •  Published: March 21, 2014
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ORLANDO, Fla. (AP) — A spike in shrimp costs is causing yet more trouble for Red Lobster.

The seafood chain's parent company Darden Restaurants on Friday reported a lower quarterly profit in line with its previously announced estimates. Sales at its struggling Olive Garden and Red Lobster chains dropped by 5.4 percent and 8.8 percent respectively, as reported on March 3.

The Orlando-based company has been fighting to win back customers at its flagship chains and has said it will spin off or sell Red Lobster to focus its attention on fixing Olive Garden with a revamped menu and marketing. Both chains have been losing customers as more affordable alternatives such as Chipotle have gained in popularity.

But in recent months, another factor weighing on Red Lobster was higher shrimp costs. Executives said that costs in the quarter rose about 30 percent because a "production issues in Asia." They said don't expect relief until the early part of its fiscal 2015 year.

On an annual basis, Chief Financial Officer Brad Richmond said the company is facing a $30 million increase in shrimp costs.

For the quarter ended Feb. 23, Darden posted a profit of $109.7 million, or 82 cents per share, matching its guidance. That was down almost 23 percent from year-ago earnings of $134.4 million, or $1.02 per share.

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