Business
Red Lobster, an icon of casual American dining, files for bankruptcy
Red Lobster, the seafood chain whose cheddar biscuits and bottomless shrimp specials have long captivated the American palate and pocketbook, filed for Chapter 11 bankruptcy protection Sunday.
The behemoth of casual dining, which abruptly shuttered dozens of locations last week, has floundered in recent years, beset by managerial missteps, the impact of a sale to a private equity firm a decade ago and, most recently, its inability to bounce back after pandemic closures battered the restaurant industry.
In a court filing, the Orlando, Fla.-based company said it has more than 100,000 creditors and between $1 billion and $10 billion in estimated liabilities. The chain said it saw a net loss of $76 million during the last fiscal year alone.
“This restructuring is the best path forward for Red Lobster,” Chief Executive Jonathan Tibus said in a statement.
The chain said its remaining locations — about 580 across the U.S. and Canada, as well franchise locations in a handful of other countries — will operate as usual throughout the bankruptcy process.
Despite its dire situation, the chain painted itself in court papers as a diminished but still powerful company.
“Today, Red Lobster is the largest casual dining seafood chain in the United States,” the filing says — with “the largest” underlined for emphasis. The chain purchases 20% of all North American lobster tails sold, it said, and more than 15% of the world’s supply of rock lobster.
But the company acknowledged that its performance has deteriorated in recent years. In the bankruptcy filing, it says that the number of customers each year has dropped by nearly a third since 2019.
Several factors contributed to losses last year, the company said, including market forces, such as inflation, and above-market rates paid for rent at several locations.
For years, Red Lobster, which was founded in 1968 in Lakeland, Fla., was owned by Darden Restaurants, the company that owns Olive Garden and LongHorn Steakhouse. In 2014, Darden sold the chain to Golden Gate Capital, a San Francisco private equity firm, for more than $2 billion.
As part of that sale, Red Lobster agreed to spin off its real estate assets in a sale-leaseback transaction, requiring the chain to pay rent for locations it once owned. Last year, Red Lobster shelled out more than $190 million in lease obligations, according to the bankruptcy filing.
Another serious misstep: last year’s “Ultimate Endless Shrimp” promotion for $20.
During a presentation last year, Ludovic Garnier, chief financial officer of Thai Union Group, a seafood conglomerate that eventually took over the equity firm’s stake in Red Lobster, blamed the shrimp deal in large part for an operating loss of about $11 million during the third quarter.
Debtors are investigating the circumstances surrounding the promotion, bankruptcy records show.
While a single bungled promotion wouldn’t fell a company unless it was already teetering, the all-you-can-eat deal was a blunder, experts say.
Red Lobster launched the promotion as consumers were on the hunt for a good deal, said Jim Salera, a research analyst at Stephens who tracks the restaurant industry. Instead of accomplishing what the company had hoped for — enticing swaths of people who would buy pricey drinks, desserts and other add-on charges or those who would become brand loyalists — the promotion was viewed by many consumers as a challenge, Salera said.
“People were literally going in to just eat the endless shrimp and maybe a Diet Coke,” he said. “They’re really not engaging with the brand; they’re engaging with the price point.”
Business
Heidi O’Neill, Formerly of Nike, Will Be New Lululemon’s New CEO
Lululemon, the yoga pants and athletic clothing company, has hired a former executive from a rival, Nike, as its new chief executive.
Heidi O’Neill, who spent more than 25 years at Nike, will take the reins and join Lululemon’s board of directors on Sept. 8, the company announced on Wednesday.
The leadership change is happening during a tumultuous time for Lululemon, which had grown to $11 billion in revenue by persuading shoppers to ditch their jeans and slacks for stretchy leggings. But lately, sales have declined in North America amid intense competition and shifting fashion trends, with consumers favoring looser styles rather than the form-fitting silhouettes for which Lululemon is best known.
“As I step into the C.E.O. role in September, my job will be to build on that foundation — to accelerate product breakthroughs, deepen the brand’s cultural relevance, and unlock growth in markets around the world,” Ms. O’Neill, 61, said in a statement.
Lululemon, based in Vancouver, British Columbia, has also been entangled in a corporate power struggle over the company’s future. Its billionaire founder, Chip Wilson, has feuded with the board, nominated independent directors and criticized executives.
Lululemon’s previous chief executive, Calvin McDonald, stepped down at the end of January as pressure mounted from Mr. Wilson and some investors. One activist investor, Elliott Investment Management, had pushed its own chief executive candidate, who was not selected.
The interim co-chiefs, Meghan Frank and André Maestrini, will lead the company until Ms. O’Neill’s arrival, when they are expected to return to other senior roles. The pair had outlined a plan to revive sales at Lululemon, promising to invest in stores, save more money and speed up product development.
“We start the year with a real plan, with real strategies,” Mr. Maestrini said in an interview this year. “We make sure decisions are made fast.”
Lululemon said last month that it would add Chip Bergh, the former chief executive of Levi Strauss, to its board to replace David Mussafer, the chairman of the private equity firm Advent International, whom Mr. Wilson had sought to remove.
Ms. O’Neill climbed the organizational chart at Nike for decades, working across divisions including consumer sports, product innovation and brand marketing, and was most recently its president of consumer, product and brand. She left Nike last year amid a shake-up of senior management that led to the elimination of her role.
Analysts said Ms. O’Neill would be expected to find ways to energize Lululemon’s business and reset the company’s culture in order to improve performance.
“O’Neill is her own person who will come with an agenda of change,” said Neil Saunders, the managing director of GlobalData, a data analytics and consulting company. “The task ahead is a significant one, but it can be undertaken from a position of relative stability.”
Business
Angry Altadena residents ask officials to halt Edison’s undergrounding work
Eaton wildfire survivors’ anger about Southern California Edison’s burying of electric wires in Altadena boiled over Tuesday with residents calling on government officials to temporarily halt the work.
In a letter to the Los Angeles County Board of Supervisors, more than 120 Altadena residents and the town’s council wrote that they had witnessed “manifest failures” by Edison in recent months as it has been tearing up streets and digging trenches to bury the wires.
The residents cited the unexpected financial cost of the work to homeowners and possible harm to the town’s remaining trees. They also pointed out how the work will leave telecommunication wires above ground on poles.
“The current lack of coordination is compounding the stress of a community still reeling from the Eaton Fire, and risks causing further irreparable harm,” the residents wrote.
The council voted unanimously Tuesday night to send the letter.
Scott Johnson, an Edison spokesman, said Wednesday that the company has been working to address the concerns, including by looking for other sources of funds to help pay for the homeowners’ costs.
“We recognize this community has already faced a number of challenges,” he said.
Johnson said the company will allow homeowners to keep existing overhead lines connecting their homes to the grid if they are worried about the cost.
Edison’s crews, Johnson said, have also been trained to use equipment that avoids roots and preserves the health of trees.
The utility has said that burying the wires as the town rebuilds thousands of homes destroyed in the fire will make the electrical grid safer and more reliable.
But anger has grown as work crews have shown up unexpectedly and residents learned they’re on the hook to pay tens of thousands of dollars to connect their homes to the buried lines.
Residents have also found the crews digging under the town’s oak and pine trees that survived last year’s fire. Arborists say the trenches could destroy the roots of some of the last remaining trees and kill them.
Amy Bodek, the county’s regional planning director, recently warned Edison that a government ordinance protects oak trees and that “utility trenching is not exempt from these requirements.”
Residents have also pointed out that in much of Altadena, the telecom companies, including Spectrum and AT&T, have not agreed to bury their wires in Edison’s trenches. That means the telecom wires will remain on poles above ground, which residents say is visually unappealing.
“While our community supports the long-term benefits of moving utilities underground, the current execution by SCE is placing undue financial and planning burdens on homeowners, causing irreparable harm to our heritage tree canopy, and proceeding without adequate local oversight,” the residents wrote.
They want the project halted until the problems are addressed.
Edison announced last year that it would spend as much as $925 million to underground and rebuild its grid in Altadena and Malibu, where the Palisades fire caused devastation.
The work — which costs an estimated $4 million per mile — will earn the utility millions of dollars in profits as its electric customers pay for it over the next decades.
Pedro Pizarro, chief executive of Edison International, told Gov. Gavin Newsom last year that state utility rules would require Altadena and Malibu homeowners to pay to underground the electric wire from their property line to the panel on their house. Pizarro estimated it would cost $8,000 to $10,000 for each home.
But some residents, who need to dig long trenches, say it will cost them much more.
“We are rebuilding and with the insurance shortfall, our finances are stretched already,” Marilyn Chong, an Altadena resident, wrote in a comment attached to the letter. “Incurring the additional burden of financing SCE’s infrastructure is not something we can or should have to do.”
Other fire survivors complained of Edison’s lack of planning and coordination with residents.
“I’ve started rebuilding, and apparently there won’t be underground power lines for me to connect with in time when my house will be done,” wrote Gail Murphy. “So apparently I’m supposed to be using a generator, and for how long!?”
Johnson said the company has set up a phone line for people with concerns or questions. That line — 1-800-250-7339 — is answered Monday through Saturday, he said.
Residents can also go to Edison’s office in Altadena at 2680 Fair Oaks Avenue. The office is open Monday to Friday from 8 to 4:30.
It’s unclear if the Eaton fire would have been less disastrous if Altadena’s neighborhood power lines had been buried.
The blaze ignited under Edison’s towering transmission lines that run through Eaton Canyon. Those lines carry bulk power through the company’s territory. In Altadena, Edison is burying the smaller distribution lines, which carry power to homes.
The government investigation into the cause of the fire has not yet been released. Pizarro has said that a leading theory is that a century-old transmission line, which had not carried power for 50 years, somehow re-energized to spark the blaze.
The fire killed at least 19 people and destroyed more than 9,400 homes and other structures.
Business
Oil Prices Rise as Investors Weigh Cease-Fire Extension
Oil prices rose and stocks moved slightly higher on Wednesday as investors tried to make sense of President Trump’s decision to extend the cease-fire with Iran despite doubts about the status of another round of peace talks.
An adviser to Mohammad Bagher Ghalibaf, the influential speaker of the Iranian Parliament, dismissed the cease-fire announcement, saying that it had “no meaning.” He equated the U.S. naval blockade with bombings, with commercial vessels coming under attack near the Strait of Hormuz, the crucial shipping lane that has been at the center of a growing energy crisis.
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