Barington Capital Group, representing a group of shareholders of Bloomin’ Brands, Inc., sent a letter and 87-slide presentation to Elizabeth Smith, chairman and CEO of Bloomin,’ on Feb. 21 recommending the company implement a variety of measures to improve long-term value.
The move could be in anticipation of a poor fourth quarter and full-year earnings report.
In the letter, Barington notes a sustained period of underperformance. Over the last three years, Bloomin’ stock has declined by 14.4 percent. Although this year it went up by 12.4 percent, Barington writes it off as the aftermath of Jana Partners’ acquisition of 8.7 percent of the company’s shares.
Barington sees Bloomin’ Brands’ underperformance as a result of poor operating execution, weak same-store sales, declining unit counts, substantial asset impairment charges, ineffective advertising, and excessive corporate expenses. The group asks Bloomin’ Brands to reimagine everything from company structure to expenses.
Barington first asks Smith to consider cutting smaller brands like Bonefish Grill, Carrabba's, and Fleming’s loose, forming a new company separate from Outback, which would operate independently.
“We believe that the Company’s attempt to operate these divergent brands under one corporate entity has negatively impacted strategic focus and operating execution at Outback as well as at the Company’s other brands,” the letter signed by James Mitarotonda states. Outback needs to focus on steaks; Bonefish needs to focus on fish; Carrabba’s needs to focus on Italian; and Fleming’s needs to focus on their high-end customers, Barington says.
Mitarotonda representing Barington also encourages Smith to focus again on customer experience, comparing Outback to the better-performing brand of Texas Roadhouse. “Over the last five years, we believe management lost their focus and has ceded leadership in the steakhouse category to Texas Roadhouse,” the letter says.
Furthermore, Barington notes corporate and advertising expenses need to be reduced by approximately $90 million and corporate governance and board of directors composition needs to be improved by repealing the classified board, adopting a majority-voting standard for uncontested director elections, and appointing an independent chair.
Despite all its critical feedback, however, Barington does see hope in Bloomin’ Brands’ future. “Despite the Company's disappointing financial and share price performance, we believe that Bloomin’ has significant upside potential,” the presentation that further elaborates the letter states.
Bloomin’ Brands responded with a statement saying it welcomes open communication with shareholders and constructive input that may help the company in advancing its goal of enhancing value. “The Bloomin' Brands Board of Directors and management team have a record of taking deliberate actions to drive long-term value creation and will continue to take actions to advance this objective,” the press release stated.
Bloomin’ Brands will release its fourth-quarter earnings and full-year results on Feb. 22.