Bloomin' Brands, Inc. (BLMN): Navigating Challenges and Opportunities Ahead

Published on March 12, 2025 | Ticker: BLMN

Company Overview

Bloomin' Brands, Inc. (BLMN) is one of the largest casual dining restaurant companies in the world, with a portfolio of leading, differentiated restaurant concepts that include Outback Steakhouse, Carrabba's Italian Grill, Bonefish Grill, and Fleming's Prime Steakhouse & Wine Bar. The company has a long and storied history, having been founded in 1988 with the opening of the first Outback Steakhouse in Tampa, Florida.

Over the years, Bloomin' Brands has expanded its footprint significantly, both domestically and internationally. As of the end of fiscal year 2024, the company owned and operated 1,170 restaurants across 46 states, Guam, and 12 countries, with an additional 291 franchised restaurants. The company's diverse portfolio of concepts caters to a wide range of consumer preferences, from the casual, Australian-inspired Outback Steakhouse to the polished-casual Bonefish Grill and the fine-dining Fleming's Prime Steakhouse & Wine Bar.

Historical Growth and Development

The company's growth trajectory has been marked by strategic acquisitions and concept launches. In 1996, Bloomin' Brands added Carrabba's Italian Grill to its portfolio by acquiring the existing 16 locations. This was followed by the acquisition of Bonefish Grill in 2001 and the launch of Fleming's Prime Steakhouse & Wine Bar in 1998. The company's international expansion began in 1997 with the opening of its first international Outback Steakhouse location.

Bloomin' Brands has demonstrated resilience in the face of industry challenges, notably during the 2008-2009 financial crisis, which significantly impacted the casual dining sector. The company adapted by closing underperforming locations, implementing cost-saving initiatives, and enhancing the customer experience at its remaining restaurants. In 2012, Bloomin' Brands went public on the NASDAQ stock exchange, providing additional capital for investment in existing brands and pursuit of new growth opportunities.

Throughout its history, Bloomin' Brands has maintained a commitment to providing high-quality dining experiences while fostering a strong, supportive culture for its team members. The company's portfolio of iconic brands, diversified geographic footprint, and focus on operational excellence have been key factors in its ability to navigate industry challenges and maintain its position as a leader in the casual dining segment.

Financials

Bloomin' Brands' financial performance has been mixed in recent years. In fiscal year 2024, the company reported total revenues of $3.95 billion, a 5.2% decrease compared to the prior year, which included an extra operating week. Net income from continuing operations for the year was a loss of $46.7 million, compared to income of $212.8 million in fiscal 2023. The company's adjusted diluted earnings per share for fiscal 2024 was $1.45, down from $2.38 in the prior year.

The decrease in financial performance was largely driven by a number of factors, including lower comparable restaurant sales, increased costs related to labor and commodities inflation, and higher impairment and closure charges. Comparable restaurant sales in the U.S. declined 1.1% in fiscal 2024, with traffic down 4.4% and average check up 3.3%. The company's Outback Steakhouse brand, which accounts for the majority of Bloomin' Brands' revenue, saw a 1.2% increase in comparable sales, while Carrabba's Italian Grill and Bonefish Grill both experienced declines.

For the most recent quarter (Q4 2024), Bloomin' Brands reported revenue of $972 million, an 8% decrease compared to Q4 2023. This decline was primarily due to lapping the 53rd week in 2023, which contributed $83.5 million in sales. U.S. comparable restaurant sales declined 1.1%, and traffic declined 5.1%, underperforming the casual dining industry. However, average check increased 4% in Q4.

The company's annual operating cash flow for fiscal 2024 was $228.1 million, with annual free cash flow of $7.4 million. The annual net loss for the year was $128 million.

Strategic Initiatives

To address these challenges, Bloomin' Brands has initiated a holistic strategy focused on three key priorities: simplifying the agenda, consistently delivering a great guest experience, and turning around the Outback Steakhouse brand. As part of this strategy, the company has taken a number of actions, including:

1. Refranchising its Brazil operations, retaining a 33% ownership stake, in order to simplify its business and allow management to focus on its core U.S. operations.

2. Restructuring its organization to flatten layers and empower brand presidents with dedicated teams to drive their respective businesses.

3. Reducing menu items by 10-20% across its brands to simplify operations and improve execution.

4. Investing in technology, such as the rollout of Ziosk pay-at-the-table tablets at Outback Steakhouse, to enhance the guest experience.

5. Appointing veteran Outback Steakhouse executive Pat Hafner as the brand's new President, tasked with leading the turnaround efforts.

Future Outlook

Looking ahead, Bloomin' Brands has provided guidance for fiscal 2025 that reflects the ongoing challenges the business is facing. The company expects U.S. comparable restaurant sales to decline between 2% and flat, with adjusted diluted earnings per share in the range of $1.20 to $1.40. This guidance assumes commodity inflation of 2.5% to 3.5% and labor inflation of 4% to 5%.

For Q1 2025, the company is guiding for U.S. comparable restaurant sales between -0.5% and -1.5%, and adjusted diluted EPS between $0.55 and $0.60, which includes a $0.04 negative impact from weather and holiday shifts.

The company expects a full-year tax rate close to 0% due to FICA tip credits and anticipates Brazil royalty revenue to be lower than the historical intercompany royalty rate, creating a $10 million headwind. Additionally, Bloomin' Brands plans to invest approximately $10 million in Ziosk, product enhancements, and IT infrastructure.

Despite the near-term headwinds, Bloomin' Brands remains optimistic about the long-term potential of its portfolio of brands. The company is focused on strategically investing in its existing restaurant base through remodels and targeted new unit development, while also exploring opportunities to grow its international franchise footprint.

Liquidity

Bloomin' Brands maintains a strong liquidity position, which is crucial for navigating the current challenging operating environment. As of the end of fiscal 2024, the company had $474 million in available borrowing capacity on its $1.2 billion revolving credit facility, with $710 million outstanding and $16 million in undrawn letters of credit. This robust liquidity provides the company with financial flexibility to execute its strategic initiatives, invest in its brands, and weather potential economic uncertainties.

The company's debt-to-equity ratio stood at 16.79 as of December 29, 2024, while its current ratio was 0.34 and quick ratio was 0.26. These metrics indicate a relatively high level of leverage and potential short-term liquidity challenges, which the company will need to manage carefully in the coming years.

Segment Overview

U.S. Segment:

The U.S. segment includes all of Bloomin' Brands' restaurants operating in the United States. As of December 29, 2024, this segment comprised:

Outback Steakhouse: 553 company-owned and 122 franchised locations

Carrabba's Italian Grill: 192 company-owned and 18 franchised locations
Bonefish Grill: 162 company-owned and 4 franchised locations
Fleming's Prime Steakhouse & Wine Bar: 63 company-owned locations

International Franchise Segment: This segment includes Bloomin' Brands' franchised restaurants operating outside the United States. As of the end of fiscal year 2024, the company had 145 franchised restaurants across 11 countries and Guam, predominantly featuring the Outback Steakhouse and Carrabba's Italian Grill concepts.

Industry Trends

The global food and beverages market was valued at $6.57 trillion in 2023 and is anticipated to grow at a CAGR of 5.9% between 2024 and 2028, reaching $8.81 trillion by the end of the forecast period. This growth trajectory presents both opportunities and challenges for Bloomin' Brands as it navigates the competitive casual dining landscape.

Risks and Challenges

Risks to the Bloomin' Brands investment thesis include continued macroeconomic and inflationary pressures, increased competition in the casual dining sector, and the company's ability to effectively execute on its turnaround plans for the Outback Steakhouse brand. Additionally, the company's international expansion plans, particularly in emerging markets, could be subject to a variety of political, economic, and regulatory risks.

Conclusion

Overall, Bloomin' Brands' portfolio of well-known and differentiated restaurant concepts, coupled with the company's strategic initiatives and strong financial position, position it for potential long-term success, despite the near-term challenges it currently faces. The company's focus on simplifying operations, consistently delivering a great guest experience, and driving long-term shareholder value through reinvestment in the base business, debt reduction, and returning excess cash to shareholders demonstrates a clear strategy for navigating the current operating environment. Investors interested in the casual dining industry would be wise to closely monitor the company's progress as it works to implement its turnaround plans and position itself for sustainable growth in the years ahead.

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