Red Lobster’s turnaround in the first half of the year appears to have stalled, even after making its Ultimate Endless Shrimp deal a menu mainstay, a major shareholder in the Orlando-based seafood chain has revealed.
Thailand-based seafood supplier Thai Union said in an earnings report that Red Lobster’s share of loss from operations got worse in the quarter ending Sept. 30. Converted from Thai currency in November, the loss went from about $9.5 million last year to about $11.1 million this year.
Red Lobster’s move at the end of June to start serving its Ultimate Endless Shrimp promotion every day also didn’t appear to make as big a wave as what was expected from the investor.
A webcast slideshow from Thai Union said the deal did drive some traffic growth but fell short of expectations and financial performance.
San Diego-based restaurant analyst John Gordon said the deal’s $20 price was too high, noting Olive Garden’s Never Ending Pasta Bowl promotion starts at $13.99.
“The marketing effort to do this floundered,” Gordon said. “The new CEO is already in place. So they’ve got to try again. They’ve got to try something else that works.That was a reasonable effort on the shrimp, for a fish house to do that, but they’ve got to try something else.”
After nearly a year and a half without a CEO, Red Lobster in September named longtime executive Horace Dawson to the top position. Dawson had been the chain’s executive vice president and general counsel since 2014.
Thai Union’s report, released Monday, attributed the quarter’s loss to “industry headwinds, including higher material and labor costs, high interest rates, and a cyclically lower quarter.”
Gordon said that Red Lobster’s bigger loss compared with last year was not all that material of a shift in terms of dollar amount.
“The casual dining space is still burdened with some inflation,” Gordon said.
Restaurant operators have reported declines in customer traffic for six consecutive months, according to the National Restaurant Association’s September Restaurant Performance Index.
A Red Lobster spokeswoman did not immediately respond to questions from the Orlando Sentinel.
Conditions had been improving at Red Lobster, with Thai Union reporting a “share of profit from operations” for Red Lobster in the first quarter of this year. In the second quarter, its share of loss from operations in Red Lobster decreased by 66% compared with the same time last year.
Thai Union, whose brands include Chicken of the Sea tuna, became a Red Lobster stakeholder in 2016 before teaming up with a group of investors in 2020 to acquire the rest of the company.
afuller@orlandosentinel.com
