The hedge fund has a reputation for initiating turnarounds, particularly at Darden Restaurants and Papa Johns.
Activist investor Starboard Value, well known for its successful campaign against Darden Restaurants in 2014, has taken a 9.9 percent stake in Outback Steakhouse parent Bloomin' Brands, according to an SEC filing.
The Wall Street Journal reported the move makes Starboard one of the public company's top five investors. Bloomin's shares rose 9 percent in premarket trading Friday after Starboard expressed interest in the company. It's unclear at this point what changes the investor is looking to implement at the restaurant entity.
Bloomin's U.S. same-store sales rose slightly at 0.8 percent in the second quarter. Traffic declined 4.2 percent, but CEO David Deno said this was in line with expectations. He added that the company's traffic outperformed the industry by 110 basis points.
For Outback specifically, domestic comps lifted 0.6 percent in the second quarter and traffic slipped 5.4 percent year-over-year. Restaurant-level operating margin improved to 16.6 percent in the second quarter thanks to productivity increases from Outback's new cooking equipment and handheld devices for servers. The advanced grills and ovens are on track to be rolled out completely by the third quarter. The casual-dining chain is also moving forward with a slimmer, 5,000-square-foot prototype that cuts costs and enhances efficiency.
Outback ended Q2 with 689 stores, followed by Carrabba's (218), Bonefish Grill (175), and Fleming's Prime Steakhouse & Wine Bar (64).
Less than a decade ago, Starboard successfully replaced Darden's entire board of directors after the hedge fund became frustrated with its direction. Starboard suggested Red Lobster and Olive Garden should be under a separate company, but Darden spurned the advisement, instead selling the seafood chain for $2.1 billion to Golden Gate Capital. Ahead of removing the board, Starboard released a comprehensive presentation on how to increase Darden's financial performance, including criticisms of Olive Garden's unlimited breadsticks and its cooking processes. The hedge fund's takeover led to a long streak of positive sales.
Starboard is also recognized for helping right the ship at Papa Johns. In early 2019, it invested $250 million in the pizza chain and named CEO Jeffrey Smith as the brand's new chairman. This followed a difficult stretch for Papa Johns in which founder and former CEO/chairman John Schnatter resigned after using the N-word on a conference call. In the years since Starboard's investment, the brand's stock price and operating income have more than doubled and same-store sales soared during the pandemic. Additionally, in 2022 Papa Johns was named in the Forbes World’s Best Employers and Best Employers for Diversity lists and achieved a score of 100 on the Human Rights Campaign Foundation’s Corporate Equality Index for the second year in a row.