Pillsbury Chief Quits on Heels of Earnings Dip

John M. Stafford has resigned as chairman, president and chief executive of Pillsbury Co., the Minneapolis-based food and restaurant company that had its first decline in earnings in 16 years in 1987.

A company statement did not explain the departure of Stafford, 51, who resigned after the Pillsbury board of directors met Monday in Naples, Fla. Stafford had been chief executive since May, 1985, and chairman since September, 1985. Stafford’s predecessor, William H. Spoor, 65, was named to the vacated posts while a search committee seeks a new chief executive.

Stafford’s aides said the resignation was voluntary, according to Johnny Thompson, a company spokesman. However, some industry analysts said the company’s board asked Stafford to resign because of an earnings slide associated with financial problems at Burger King and other Pillsbury restaurant operations.

Costs associated with the consolidation of Pillsbury’s troubled restaurant operations--about $91 million in all--will force Pillsbury to declare a loss in its third quarter, which ended Monday, according to Stephen Carnes, an analyst with Piper Jaffray in Minneapolis.

The consolidation costs include restaurant closings. For example, 15 company-owned Burger Kings will be sold or closed, Pillsbury said. Another 145 Burger King restaurants will be remodeled and 50 of the franchise-operated hamburger outlets will be modernized or closed, the company said. None of the affected outlets are in California.

In its last fiscal year, which ended in May, the company had net income of $182 million, down from $208 million in 1986.

“The problem is a lack of performance,” Carnes said. “The company is making changes because it’s been down and has been digging a bigger hole.”

Carnes said Pillsbury has experienced problems in its consumer food operations, which produce Green Giant vegetables, Jeno’s pizza, Totino’s pizza and Haagen-Dazs ice cream. For example, when Pillsbury acquired Jeno’s in 1986, it had difficulty getting stores to stock Jeno’s and Totino’s products because both were initially marketed as low-cost pizzas, Carnes said.

“The restaurant operations have been a big part of the problem,” Carnes said. “The company (restaurant) operations have generally lacked quality . . . and consistency and it’s tough to get customers back when they turn away.”

Another analyst, Ronald Strauss of William Blair in Chicago, said Stafford was asked to leave the company because Pillsbury diversified too much under his tenure. For example, Pillsbury acquired Quik Wok, a fast-food restaurant, while trying to maintain Bennigan’s and Steak & Ale restaurants.

“If Pillsbury has erred, it has erred because they’re not focused enough,” Strauss said. “The successful people and the successful companies don’t spread themselves too thin . . . . However, Stafford inherited many of the company’s problems.”