The share price of Thai Union Group Public Company Limited (SET: TU) plunged sharply late Friday after Bloomberg reported that the company is weighing on selling its investment in Red Lobster.
Prices fell as much as 6.00% to THB 14.10 per share in the afternoon session. The share price closed at THB 14.50 per share, down THB 0.50 or 3.33% on Friday, March 10, 2023.
The sales of Red Lobster should be a wise move for the company as its operations have been facing continuous losses. However, some are speculated that the selling price could be lower than the acquisition cost at the time.
Red Lobster’s operations in 4Q22 were at THB 456 million of loss (THB 344 million loss from operations and THB 112 million loss from lease accounting adjustment). This was higher than the THB 256 million loss contribution in 4Q21 (THB 147 million loss from operations and THB 109 million loss from lease accounting adjustment). 2022 share of loss from operations was THB 1,207 million vs. THB 178 million in 2021.
TU is one of the world’s largest producers of canned tuna. The company invested $575 million for a 25% stake in Red Lobster in 2016 with an additional preferred stock that can convert into a further 24% shareholding. The Thai seafood producer added another 13.7% of common equity interest in 2020.
As of 2020, Red Lobster had more than 700 locations worldwide, including in the United States (including Puerto Rico, Guam) and Canada, as well as in China, Ecuador, Hong Kong, Japan, Malaysia, Mexico, Philippines, Turkey and the United Arab Emirates.
As of February 15, 2023, there are 662 Red Lobster stores in the United States.
However, the U.S. is facing difficulty of lacking workers as well as rising material costs. Some companies were reportedly not being able to recruit enough employees despite an offer to boost pay and benefits.
According to Restaurant Business, the Red Lobster chain closed at least eight locations in the U.S. over the past few months of this year.
Meanwhile, the recent ins and outs of executives of the seafood chain has been ranked at high-profile exits among its executive group. In April 2022 CEO Kelli Valade resigned after less than a year. Then CFO David Schmidt also left the company not long after. VP of Strategic Sourcing Joe Zhou resigned in January after nearly 30 years with the company.
Bloomberg cited that Chief Executive Officer of TU Thiraphong Chansiri said in an interview earlier this week that the company has never prolonged any bad businesses, which was seen as an implication to the seafood chain in the U.S. that weighed on its bottom line in 2022 results that could otherwise record growing revenue driven by pet food and ambient seafood businesses.
Mr. Thiraphong also noted that its pet food business will be the main driver of earnings growth, while concerns over recession in the U.S. and Europe will have limited impact due to tuna and seafood products being considered affordable basic foods. However, the company could record slower growth in the first quarter of this year as some customers might reduce their orders after a high volume of purchases in 2022 that led to huge stock in inventories.
