Red Lobster's Ultimate Endless Shrimp deal contributed to third-quarter operating loss
File image of a seaside shrimp combo dish displayed for a photograph at a Red Lobster restaurant stands in Yonkers, New York. Photographer: Michael Nagle/Bloomberg via Getty Images
Customers taking Red Lobster up on its Ultimate Endless Shrimp deal contributed to a quarterly operating loss for the chain, according to investor Thai Union Group.
In early November, Thai Union Group disclosed the share of loss from operations came in at 395 million Thai baht for Red Lobster in the third quarter. That was the equivalent of $11.3 million based on Tuesday’s exchange rate.
Group CFO Ludovic Garnier, speaking during the company’s quarterly meeting with analysts, linked that loss partly to Red Lobster’s Ultimate Endless Shrimp deal.
Under that promotion, made available on a daily basis at the chain’s U.S. restaurants starting in late June, customers could pay $20 to eat as much of two shrimp options as they liked. It was previously a temporary offer.
"Something that was different from our expectation is the proportion of the people selecting this [Ultimate Endless Shrimp] promotion was much higher compared to expectation," Garnier said.
"Of course, we know on this promotion, we don’t earn a lot of money at $20. We don’t," the group CFO said, according to footage of the meeting. "The idea was to bring some traffic. We get some traffic increase, not to the level we were expecting, but still we are growing compared to last year and compared to the previous quarters. But bottom line in terms of financial performance, it did not deliver what we were expecting."
In the third quarter, Red Lobster saw a 2% quarter-over-quarter and nearly 4% year-over-year rise in traffic in part due to the shrimp deal, Garnier said. Later in the call, he told analysts he thought the chain’s guest count may have dropped in the quarter without it.
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The chain raised the cost of the deal, first to $22 and then to $25, according to Garnier.
"We do believe it’s a very strong promotion. It’s one of the iconic promotions for Red Lobster, so we’re going to keep it on the menu," he said, adding the company needed to be "much more careful" about its pricing.
Restaurant Business Online earlier reported on the deal’s financial impact.
"Industry headwinds, including high material and labor costs, high interest rates and a cyclically lower quarter" also drove the operating loss, according to Thai Union Group.
Thai Union Group has predicted Red Lobster will post 700 Thai baht share of loss from operations for the fiscal year. That will represent a significant decline from the 1.2 billion Thai baht it saw from operations in 2022.
Brands that fall under Thai Union Group’s umbrella include Chicken of the Sea, Genova Premium Tuna, Sealect, Fisho and others, according to its website.
Shares of the company’s stock have experienced about a 15% drop over the past 12 months.