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OSI reports traffic increase, though sales still down at Outback

TAMPA — OSI Restaurant Partners LLC on Friday reported sales gains at three of its restaurant brands, while its anchor, Outback Steakhouse, continued to lag in negative territory.

The casual dining giant nonetheless reported traffic gains in all four of its major chains and said the company is gradually improving performance and "outperformed" the soft recovery spreading across the sit-down, full-service dining industry.

Sales in stores open more than a year — a barometer of a chain's hold on its customer base — were up 1.1 percent at Carrabba's Italian Grill, 3.6 percent at Bonefish Grill and 5.2 percent at the high-end Fleming's Prime Steakhouse and Wine Bar.

Same store sales declined, however, by 2.9 percent at Outback, which accounts for more than half the company's business. That's a marked improvement over the double-digit declines that dogged the chain a year ago.

Overall, OSI revenue slipped to $947 million in the quarter that ended March 31, down from $964 million in the same quarter a year ago. Privately held OSI reported a loss of $1 million, which compared with net income of $82 million a year ago.

The performance came a week after Moody's Investors Service upgraded OSI's debt rating a notch to stable. Moody's noted that OSI's liquidity and debt protections had "improved" enough to support its continuing to pay down debt.

OSI blamed the decline on attempts to gain market share by luring more traffic to Outback with promotional discounts and lower-priced menu choices, and the sale of its Cheeseburger in Paradise unit in 2009.

Going forward, the company is focused heavily on rejuvenating the Outback chain. The company has been testing several new standard store prototypes since last summer in locations from Virginia Beach to Sarasota. Much of its $70 million to $90 million in capital spending this year will go into remodeling about 50 stores.

"This is a year of test and invest to perfect a formula for sustainable comparable store sales growth," said Dirk Montgomery, chief financial officer.

OSI also reported no deal yet since it hired Goldman Sachs to oversee the sale of its Asian development rights in China, plus existing stores in South Korea, Hong Kong and Japan.

Analysts expect the assets to fetch around $300 million. Most of the Asian presence is in Outback Steakhouses in South Korea. Overall, the Asian presence generated net income of $3.3 million on revenue of $240 million in the year that ended Sept. 30.

Reportedly, three private equity funds and CJ Group, a competitive rival among family restaurant chains in South Korea, are in the hunt.

Mark Albright can be reached at albright@sptimes.com or (727) 893-8252.

OSI reports traffic increase, though sales still down at Outback 05/14/10 [Last modified: Friday, May 14, 2010 9:21pm]
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