Bloomin’ Brands CEO David Deno rejects any argument that casual dining is fading away. In fact, he’s thrilled to be part of the segment.
“$80 billion category without a huge market share leader with a lot of chance to grow and take share,” Deno said during the company’s Q1 earnings call.
Casual dining took a backseat to quick service during the pandemic because of convenience, but the playing field isn’t as uneven as it used to be. Bloomin’s U.S. off-premises business mixed 23 percent in Q1 and its third-party delivery business has remained at 12 percent over the past five quarters. At Outback specifically, off-premises accounted for 26 percent of sales, while Carrabba’s saw a 30 percent mix. Roughly 79 percent of to-go and delivery sales came through digital channels in the quarter, and Outback’s new online ordering system and mobile app (three million users) are exceeding expectations.
At the same time, Deno has seen the dine-in customer return. To his point, some quick-service chains have attributed slower sales to guests returning to pre-pandemic behaviors and sit-down occasions. Wingstop identified this trend in July 2022 when its Q2 comps dropped 3.3 percent. In response, the fast casual decided to reopen dining rooms systemwide. More recently, Domino’s said during its Q1 earnings call that its 2.1 percent decline in delivery same-store sales was partially due to customers opting for dine-in.
When COVID restrictions relented, Bloomin’ discovered just how much consumers missed restaurants, and Deno said that includes the much-desired millennial and Gen Z demographics. Now it’s a matter of offering great value to retain those guests.
“When we go into new territories with good assets, the customers are there,” Deno said. ” … I think importantly, if you look at some of our price points that we offer versus maybe other parts of the industry, be it fast casual or [quick service], we offer pretty good value compared to some of those other players. So I think I’m very bullish on the casual-dining industry, new development, new channels of distribution, carryout and delivery. The digital opportunity is there, it’s big, we got to know our customers.”
Bloomin’s U.S. comps increased 5.1 percent in the first quarter, boosted by a 5.8 percent rise in average check. That was offset by a dip in traffic, which was down 70 basis points in Q1. However, that is a big improvement from Q4, even with a 330-basis-point favorable impact on Q1 traffic from lapping Omicron and unfavorable weather.
Outback’s same-store sales lifted 4.9 percent in Q1. Carrabba’s saw comps grow 6.7 percent, followed by Bonefish Grill (+5.2 percent) and Fleming’s Prime Steakhouse & Wine Bar (+3.6 percent).
In Q2, Bloomin’ expects year-over-year same-store sales growth of 0.5 percent to 1.5 percent, inclusive of 5 percent higher average check and traffic decreasing around 4 percent. When comparing against 2019, the company has seen an uptick in comps and traffic between the last five weeks of Q1 and the first few weeks of Q2.
“We feel pretty good about the overall guide at least in terms of where the consumer is,” CFO Chris Meyer said.
Deno attributed Q2’s projected traffic decline to lapping the strongest period from last year. The brand believes its trends will improve during the balance of 2023. That’s why Bloomin’ is still confident in new unit investments. A new Carrabba’s north of Tampa recently opened, and it’s among the highest-volume stores in the system.
“So clearly, there’s an opportunity to grow these brands beyond where they are today as we go forward,” Deno said.
Pricing was 7.6 percent in Q1, but Meyer said it should lower as the year progresses. Since COVID began, the brand feels it’s done well in relative pricing versus competitors. Bloomin’ took effectively zero pricing in 2020 and bumped it up around 2 percent in 2021 and 7 percent in 2022. Through the end of last year, the company was less than 10 percent higher in pricing than it was when the pandemic started.
The company’s goal is to take as little pricing as possible in 2023.
“It just depends on how this year plays out,” Meyer said. “If we don’t think we have the pricing power with the consumer then we may not take it. But given our strong start in Q1, we may have some flexibility on taking less pricing as the year progresses but we’re not going to make those decisions until as late as possible.”
Deno said casual-dining customers remain steadfast in the face of inflationary menu prices. Higher-end guests come in with similar frequency, particularly around holidays. Bloomin’ had its best week in history on Valentine’s Day, and it’s hoping to have a successful Mother’s Day as well. The lower-end consumer is still visiting restaurants, but with some check management. Menu mix decreased about 180 basis points in the first quarter. Catering sales have doubled from where they were a year ago, but the average check per order is lower. The company is seeing growth in lunch, but the average check is much softer during that daypart compared to dinner.
Bloomin’ is choosing to stay away from discounting, similar to its biggest casual-dining peers.
“We can’t control what the customer does,” Deno said. “But we want to be very prudent with our discounting and promotions. We want to continue to offer things that we’re grateful for the customer and also offer good return for the company. That’s one of the reasons why our margins are hanging in there so well. But we want to build healthy traffic through sales layers. We don’t want to participate in any big-time discounting or promotions even though we’ve seen an uptick in parts of the industry. And I’d stress again, some of the things that we’re offering, for instance, the Sirloin & Lobster Mac & Cheese for $16.99 at Outback is really a terrific product. So that’s where we tend to play.”
Bloomin’ ended Q1 with 1,471 restaurants: Outback, 691; Carrabba’s, 218; Bonefish Grill, 177; Fleming’s, 65; Aussie Grill, seven.