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OSI sales and profits improve slowly

TAMPA — Sales and profits are improving slowly at the parent of Outback Steakhouse, but officials Wednesday said a full-fledged fix requires a methodical plan to rejuvenate the brand.

"We expect our industry will continue to be soft in both sales and traffic through 2010," said Liz Smith, chief executive of OSI Restaurant Partners, which operates 1,477 restaurants and five casual dining chains. "So it is going to take investments in menu, marketing and stores for us to emerge from this economic environment as a winner."

Speaking on an earnings call for the first time since arriving at the Tampa company five months ago, Smith outlined plans to bulk up the company's research, consumer tracking, technology and training efforts. She also intends to spend up to $90 million on renovations at up to 50 of the 970 Outback stores, but added about half of them need it.

The key element: avoid deep discounting by offering a value menu enhanced with more variety, healthy choices and portion options. That includes launching several sub-500 calorie entrees this month.

Lauding OSI's talent and culture, she also is assembling a permanent team to look for efficiency and increased productivity.

"It is a muscle we need to develop so it becomes a mind-set, not a project," she said.

With the privately-held company still facing big debt payments, Smith has to bankroll new long-term strategies and experiments with productivity gains and cost cutting until sales rebound.

Indeed, revenues dropped 9 percent to $3.6 billion in 2009, down from $3.9 billion in 2008. The company lost $54 million, a significant improvement over a $739 million loss in 2008, most of which was for goodwill written down when OSI was taken private.

OSI's difficulties mirror the rest of the sit-down dining industry where same store sales decreases are partly blamed on lower prices needed to maintain traffic.

Most OSI brands drew more traffic in 2009, so those brands gained market share, officials said.

During the fourth quarter ended Dec. 31, sales in stores open more than a year slumped, but less deeply than the double-digit declines of a year ago.

Outback and Fleming's Prime Steakhouse were down 6 percent while Carrabba's Italian Grill was down 4 percent. The company does not break out the performance of Roy's.

Bonefish Grill was among the few sit-down causal brands to show a positive sales gain of 1 percent.

The company reported that Smith was paid $4.8 million to take the job last year, virtually all of it in stock option awards since she earned only a fraction of her $1 million base salary.

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

OSI sales and profits improve slowly 03/31/10 [Last modified: Thursday, April 1, 2010 5:24pm]

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