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On average, consumers at Red Lobster spent between USD 19.25 and USD 19.75 last year. (Photo: Stock File)
Crab prices and more weaken Red Lobster sales
(UNITED STATES, 9/24/2010)
Red Lobster has suffered from poorer sales this last quarter due to elevated crab prices, a later start for an "endless shrimp" deal and the oil spill in the Gulf of Mexico, according to company executives.
Owned by Orlando-based Darden Restaurants, the Red Lobster chain showed the weakest performance of all six Darden brands, including Olive Garden and LongHorn Steakhouse.
The Q1 sales of USD 600 million fell 0.8 per cent from Q1 2009 with sales at its established restaurants dropping by 1.7 per cent. The entire industry saw weak sales the past quarter.
Darden experienced an overall 19 per cent rise in profit at USD 113.3 million and USD 1.81 billion in sales, a 4.2 per cent lift, reports Orlando Sentinel.
It was a "disappointing start to the new fiscal year at this brand," Darden President and COO Drew Madsen said about Red Lobster.
Despite Red Lobster's recent Crabfest specials, Darden executives explained that many cost-conscious consumers were not drawn to the restaurants because prices were too high. And a new seafood jambalaya dish available through a different promotion also flopped, possibly due to oil spill contamination concerns, Madsen speculated.
Some of the quarter's weakness is blamed on the two week late start of the USD 15.99 "endless shrimp" special this year. Still, analysts foresee that the promotion will energise the chain’s figures this quarter.
"It's less a base business question. It's less a brand question. It's more a promotional effectiveness question during the first quarter," Madsen noted.
Red Lobster has been focusing on fresh, grilled seafood instead of its traditional fried fish and remodeling restaurants in an effort to refurbish its brand as more sophisticated.
However, the company is having trouble reconciling its relatively lofty prices with the income of its typical customers, which Madsen portrayed as "a little lower on income … than some of our other brands." On average, a consumer spent between USD 19.25 and USD 19.75 last year at Red Lobster.
The chain must "figure out a way to better communicate a compelling value through promotions and advertising," restaurant-industry analyst Brad Ludington theorised.
Red Lobster’s Crabfest promotion had performed so well with consumers in tests that its USD 12.99 starting price was changed to USD 14.99, Madsen told, which "might have been just a little bit high," particularly since competitors have forcefully given discounts to their clients.
Darden hopes that endorsing distinctive menu offerings like Crabfest at its chains instead of price focused deals offered by competitors can improve sales.
Analysts expect the company to have per-share earnings of 77 cents, up 15 per cent year-on-year, on USD 1.82 billion in sales.
Related articles:
- Darden Restaurants ups 2010 outlook
- Shrimp prices rocket by over 40 pct
By Natalia Real
[email protected]
www.seafood.media
Information of the company:
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Address:
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450 South Orange Ave, Suite 800
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City:
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Orlando
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State/ZIP:
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Florida (FL 32801)
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Country:
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United States
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Phone:
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+1 800-562-7837
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E-Mail:
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[email protected]
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Skype:
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https://www.instagram.com/redlobster/
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