Jeff Smith, the activist investor who orchestrated a remarkable turnover of Darden Restaurants Inc. board of directors, resigned as the chairman of the casual-dining operator on Tuesday. Smith is CEO and managing member of New York-based hedge fund Starboard Value L.P.
Smith will be replaced as chairman by Chuck Stonsteby, who along with Smith was one of 12 people elected to Darden’s board in October 2014 amid massive shareholder discontent with the Orlando-based company.
“It is with mixed emotion that I leave the board of directors,” Smith said in a statement. “I will thoroughly miss working with the capable and talented people throughout the company and I am so incredibly proud of what we have been able to accomplish together. I am able to move on to other projects at this time because of the outstanding chemistry and capabilities of both the board and management.”
Smith announced his resignation on the day that Darden reported 6.2 percent combined same-store sales growth for all seven of its concepts in the company’s fiscal third quarter ended Feb. 22.
That included a 6.8 percent growth for Olive Garden, the Italian chain that had been struggling in the years before Starboard led a fight to push major changed at the company.
Same-store sales grew 5.2 percent for LongHorn Steakhouse, 5.3 percent for The Capital Grille, 4.1 percent for Eddie V’s, 3.9 percent for Yard House, 5.7 percent for Seasons 52 and 9.9 percent for Bahama Breeze.
Some of that growth was due to a calendar shift, and on a comparable basis same-store sales for the combined chains grew 4.2 percent.
“Our strong same-restaurant sales reinforce that our strategy is working as we continued to profitably grow market share during the quarter,” CEO Gene Lee said in a statement. “Our teams are building loyalty every day with better guest experiences and improved value.”
Revenues at Darden increased 6.7 percent to $1.85 billion, from $1.73 billion, though net earnings declined 21 percent to $105.8 million, or 84 cents per share, from $133.8 million, or $1.01 per share. Much of that decline was due to costs associated with the retirement of debt.
Since Starboard’s takeover, Darden has undergone a number of changes, including the spinoff of much of its real estate into Four Corners Property Trust as well as a simplified organizational structure.
Starboard had owned nearly 9 percent of Darden stock at the time of the proxy fight but has been reducing those holdings this year. The activist has set its sights on a different target: The Internet media company Yahoo. Starboard has proposed a takeover of that company similar to the one it orchestrated with Darden.
“I am fully confident in Gene’s terrific leadership and execution and I know that [Stonsteby] will be an outstanding chairman,” Smith said.
Stonsteby is currently the chief administrative officer and chief financial officer with The Michaels Companies Inc. But he had previously worked for two decades with Brinker International, including as CFO from 2001 through 2010.
“I am humbled by the opportunity to chair the board of directors of this great company,” he said in a statement. “I look forward to leading this strong board of talented directors and partnering with Gene and his team to continue to deliver value for all stakeholders.”
Said Lee: “With [Smith’s] vision, efforts and constructive attitude, we formed a strong partnership, helping Darden accomplish a number of extraordinary feats over the last 18 months, including regaining our position as a leader in full-service dining, re-establishing a guest and employee-focused culture of excellence and completing the spinoff of Four Corners Property Trust.”
He said that Stonsteby “is a proven leader with extensive industry experience, which makes him uniquely qualified to lead the board at this time.”
Contact Jonathan Maze at [email protected]
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