Delivery, offsite business, CRM deployment drive sales momentum for Bloomin’ Brands, Outback in Q3
Delivery could represent more than 25 percent of sales for the combined chains of Bloomin’ Brands—Outback Steakhouse, Bonefish Grill, Carrabba’s Italian Grill and Fleming’s Prime Steakhouse and Wine Bar—in the very near future, said Elizabeth Smith, CEO for Bloomin’ Brands on a Q3 investor conference call September 29. The company benefited from having added 240 locations across the system thus far, and Bloomin’ Brands expects to add another 200 units by the end of this year.
This appears to be a big contributor to the Q3 comparable sales growth achieved on a combined basis of 2.9 percent in the U.S., a 4.6-percent rise at Outback Steakhouse, including a 0.9-percent bump in traffic, and a 1.8-percent increase at Bonefish Grill. Total offsite sales comprise about 13-15 percent of sales for Bloomin’ Brands’ portfolio now, noted Smith. David Deno, Bloomin’ Brands EVP and chief financial, administrative and accounting officer, indicated that about 70 to 80 percent of Carrabba’s and Outback stores are “eligible” to be delivery restaurants (urban/suburban vs. rural).
The company reported comparable sales at Carrabba’s down 0.6 percent, compared to a 2.8 percent decrease in last year’s third quarter, and Fleming’s up 0.5 percent, albeit with negative traffic, compared to a decline of 1.0 percent in comparable Q3 sales last year. The management team at Bloomin’ Brands is bullish on delivery and upgrades to the system, as well as, on the profitability side, moving away from discounting, which has been a plague at other casual-dining restaurant chains.
In fact, migration from legacy discounting programs is what is putting downward pressure on comp sales for Carrabba’s and Fleming’s. At Carrabba’s, discounting is down 37 percent and the chain has moved away from “disruptive” LTOs, focusing on proprietary wine dinners, Amore Mondays, Family Bundles, leveraged by delivery platforms and food quality execution, Smith added.
At Fleming’s Prime Steakhouse, Bloomin’ Brands is moving away from discounting, as well, noted Smith. “We made the conscious decision on Fleming’s to move away from legacy-value offerings, such as our 567 bar menu, $29.95 Prime Rib and some non-holiday gift card distributions. We anticipated the negative impact on traffic from these actions, however, they have had a positive impact on profitability. The brand is on track to have record profit.” Year-to-date comparable sales for Fleming’s in 2018 are up 1.4 percent, compared to a 1.8 percent decline last year.
Bonefish Grill enjoyed Q3 comparable sales growth of 1.8 percent, compared to a 4.3 percent decline in the same quarter last year. Bloomin’ Brands executives are simplifying the operation there and adding new offerings. An all-new, all-day brunch menu was implemented, and they are also counting on returning to strong operational execution to represent the brand well: fresh, creative seafood, paired with great cocktails & service in a friendly, local atmosphere. Additionally, the marketing strategy and ad spend have shifted local, executives say, to position Bonefish as the “unchained chain.” Year-to-date, comparable sales at Bonefish are up 1.1 percent, compared to a 2.4 percent decrease last year.
Bloomin’ Brands’ Dine Rewards program added additional customers to reach over 7.2 million members as of the third quarter. “Our investments in CRM strengthen engagement through more customer-centric communications, while providing a higher return from marketing spending,” added Smith. “For a perspective, these investments have enabled us to reduce our advertising spend from 3.8 percent in 2016 to approximately 3.1 percent over the last two years, while improving ROIs (return on investments).”
At Outback Steakhouse, comparable sales growth of 4.6 percent, compared to a 0.6-percent increase in last year’s third quarter, was driven by management shifting advertising spend to personal, digital engagement with customers and growing the Outback off-premises business, said Bloomin’ Brands’ CEO. Smith is leveraging what other big-chain executives are turning their attention toward: big marketing data and the revenue potential of off-premises business, as customers continue to show a penchant for convenience, as well as online ordering. Year-to-date comparable sales for Outback are up 4.3 percent, compared 0.8 percent growth last year.
Ongoing remodels at Outback, pegged around $300,000-$400,000, have been bumping sales about 5 to 7 percent at upgraded locations. These are interior-focused remodels, upgrading design and decor, but also modernizing the restaurants, and removing legacy “to-go” areas for increased seating capacity. Smith suggested a restaurant relocation program is adding to profitability and producing significant higher annual unit volume and comparable sales growth based on relocated Outback units showing sales lifts of 30 to 50 percent, as Bloomin’ Brands executives continue to look for “A-quality sites” to reap the benefits of such returns. According to her, there are an additional 50 Outback restaurants that could go through this relocation program, and 14 relocations will have been completed during 2018.
Diluted earnings per share were $0.04 in the third quarter, compared to $0.06 last year in the same quarter. Year-to-date diluted EPS is $1.02, compared to $0.88 last year. The international segment was down 3.3 percent at Outback Steakhouses. In the totality of all owned brands in Brazil, the company experienced one-time impacts from supply chain disruptions caused by political unrest and protests following the presidential election. Comparable sales in Brazil have resumed during the beginning of Q4, noted the company. Bloomin’ Brands had a net two closings during Q3 and the company opened four new international restaurants and one domestic location during the quarter.
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Photo credit: Outback (featured), Bonefish Grill (inline)