flickr: Mike Mozart

Sales are on the rise at Outback, both domestically and in Brazil.

Outback Carries Bloomin’ Brands to Positive First Quarter

The casual dining company says it is "off to a very good start."

Bloomin’ Brands made “significant progress,” in the first quarter, CEO Liz Smith said in a conference call Wednesday, giving a nod to the casual dining company’s current initiatives as well as what she believes can be an exciting tailwind for an industry that has experienced consistent traffic declines in recent years.

The company, which owns Outback Steakhouse, Fleming’s, Carrabba’s, and Bonefish Grill, reported a mix mag of sorts, although the overall numbers exceeded Wall Street expectations. The Tampa, Florida-based company reported profit of 41 cents per share. Earnings, adjusted for non-recurring costs, were 54 cents per share, besting the average estimate of eight analysts surveyed by Zacks Investment Research of 52 cents per share.

Bloomin’ Brands also reported revenue of $1.14 billion in the quarter. Six analysts surveyed by Zacks had it at $1.12 billion.

The company’s first-quarter profit was $43.9 million.

However, there were two shades to this story. Outback saw a 1.4 percent increase in U.S. restaurant sales for stores open 18 months or more. Sales from the other three brands went in the other direction. At company-owned locations, Carrabba’s comparable restaurant sales fell 3.8 percent and Fleming’s 2.9 percent. Bonefish’s sales dropped 0.8 percent.

Smith says Carrabba’s new menu launch initially drove traffic but did not sustain as the year progressed. Similar to it strategy for Outback, Bloomin’ Brands plans to reduce LTOs and discounting, while focusing more on the consumer and offsite opportunities.

"The first quarter was a strong start to the year, and set us up well to achieve our 2017 goals," Smith said in a statement. "We were pleased with our performance, particularly at Outback where our investments are gaining traction. We continue to make progress domestically, reallocating spending away from discounting toward investments that strengthen brand health. In addition, our international businesses are performing well and poised for growth."

The news was far removed from Bloomin’ Brands’ February announcement when it revealed that it planned to close 43 underperforming restaurants after reporting a loss of $4.3 million in the fourth quarter. Profit in 2016 fell to $41.7 million from $127.3 million in 2015.

This was a common sight throughout the industry as casual-dining brands fought to regain traffic.

On that note, Smith said Bloomin’ Brands is optimistic it has struck a chord with those fleeting consumers, who are returning, albeit slowly, as the numbers prove.

Some indicators, she said in the conference call, include the success of their Dine Rewards program. The loyalty platform, she said, garnered 3.2 million users since last July. Also Outback’s remodeling program, of which Smith expects another 150 to be completed in 2017, resulted in around 4—5 percent sales growth at those locations. In-house initiatives, like steak preparation, portion sizing, and, again, the decision to pull back on straight price promotions, are also paying dividends. She said social media scores and other consumer metrics are reporting positive.

“[We’re focused] on simplified execution while reducing our reliance on promotional activity,” she said,

Outback is also enjoying healthy returns in Brazil where comparable restaurant sales rose 3.6 percent in the quarter. Smith used the word “bullish” to refer to Outback’s continued growth there.

“We are off to a very good start,” said David Deno, executive vice president and chief financial officer, in the call. “… We are confident that we are making the right investments, both domestically and internationally.”

Bloomin’ Brands opened 11 stores in the quarter: one Outback, two Bonefish Grills, and eight international units. The company also sold 12 restaurants properties for gross proceeds of $46 million.

Smith elaborated on the company’s move away from discounts. “We will continue to march through and take out those strict price promotions and invest them back in the customer experience,” Smith said. “We will always have brand appropriate surprises and delights in terms of promotions, but we are not going to revert to additional discounting … We are going to stay the course.”

The tailwind Smith was referring to concerns delivery. Currently, there are 116 stores across Outback and Carrabba’s that offer deliver. Smith said this will not only grow, but it will allow larger chains to claim market share in a category where the private, smaller companies are currently seeing success.

“[It’s exciting] when you think about the fact that we’re moving our brands into occasions where they can be consumed at home,” she said.

Smith noted that she expects casual dining as a whole to decline 1—2 percent in traffic across the industry. There will be “share winners and share losers,” in the fragmented field, she added, and it will come down to remaining nimble and agile. Additionally, as Outback is proving, offering an unique, local experience at each restaurant can make a major difference. “Each box you walk into has to feel independent,” she said. “… That’s what the consumer wants.”