Yahoo Finance Red Lobster Owner In Talks To Sell Stake After $22 Million Loss In 2023
The well-publicized travails of Red Lobster continue as 2024 progresses, most recently with news that owner Thai Union Group is actively engaged in selling its 49% share of the company. This follows a stated $22 million loss for Red Lobster in 2023 and reported legal consultations for debt restructuring via Chapter 11 bankruptcy protection.
It's not the first mention of divestiture by Thai Union, which revealed in January 2024 its intent to sell Red Lobster. In a consequent February earnings call, it informed investors of preparations for the bidding process. It appears the action has now moved from bidding to active negotiations with potential buyers, per a financial filing by Thai Union.
Expectations of one-time investor gains from the sale are low, considering the chain's poor performance over time. Coupled with Red Lobster's losses in the final two quarters of 2023, culminating in the staggering $22 million annual loss, are apparent issues with mismanagement, corporate turnover, increasing market competition, pandemic-related transformations, and a changing customer base. This follows reported declines of at least 5% in casual restaurant dining from 2013 to 2023, according to researchers from Technomic. Miscalculations on how to revive business at the nearly 650 Red Lobster locations have added significant fuel to the fire.
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Endless Headaches, Endless Shrimp
When the Bangkok-based Thai Union Group, a seafood supplier, bought into Red Lobster in 2016, it had already been a major shrimp supplier to the chain, fulfilling orders for at least 20 years. By purchasing a $581 million share in the Red Lobster enterprise, eventually graduating to the position of major shareholder, it reportedly hoped to expand its shrimp distribution. However, there was insufficient experience in running a U.S. restaurant, much less hundreds of them in a major chain.
The most recent stumble, accounting for $11 million of the eventual $22 million loss in 2023, revolved around an ill-fated shrimp promotion. The Endless Shrimp extravaganza at Red Lobster had been a long-loved, limited-time yearly event. As a seafood supply company, Thai Union gambled on profitability from both ends, turning the annual all-you-can-eat promotion into a permanent menu item.
It failed spectacularly, with diners ordering multiple rounds of shrimp and lingering longer at tables to do so. Snaking customer lines and reduced profits proved lethal to the Red Lobster chain, accelerating its downfall and leading to the current sell-off negotiations. That said, it appears to be a bigger loss for Red Lobster fans than for Thai Union Group, which posted an equivalent of roughly $32 million in overall profit for the first quarter of 2024, an increase of more than 50% from a year earlier. Let's just hope the company leaves Red Lobster's Cheddar Bay biscuits untouched on its way out the door.
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