Thursday, September 20, 2018
Business

Tampa parent of Outback Steakhouse, Carrabba's can't stem loss of customers

Bloomin' Brands, Tampa's beleaguered parent of such big-name restaurant chains as Outback Steakhouse and Carrabba's Italian Grill, must feel like it's been wandering the casual dining bog in search of solid ground for years.

Alas, there's no sign of dry land yet.

The company, whose holdings of 1,500-plus restaurants also include Bonefish Grill and Fleming's Prime Steakhouse and Wine Bar, on Friday reported declining customer traffic across all four of its chains, lower sales at three of its four brands, the closing of 43 underperforming restaurants and a $4.3 million loss for the fourth quarter that ended on Dec. 31.

For all of 2016, Bloomin' recorded lower sales at all four chains but reported net income of $41.7 million — a third of the company's net income in 2015.

Bloomin' Brands CEO Liz Smith, speaking to analysts by conference call Friday, again acknowledged the company's ongoing uphill struggle, cited some positive notes and, as she has before, urged patience.

"The fourth quarter and 2016 results were below expectations in a weak industry environment that remains highly competitive," Smith said. Improving sales trends remain Bloomin's "number one priority," she added.

Previous coverage: Sagging sales challenge Tampa-based Bloomin' Brands to reboot Outback Steakhouse and other chains

No question, Bloomin's fadin' — led by a 7.7 percent fourth quarter and 5.7 percent 2016 drop in customer traffic at its cornerstone Outback Steakhouse chain. Carrabba's, Bonefish and Fleming's also suffered from lower traffic in both the fourth quarter and all of 2016.

Is a turnaround really in the works? A year ago Smith promised there would be tangible improvement in the latter half of 2016. That did not happen.

Smith and her executive team are struggling with several economic and demographic hurdles. The so called "casual dining" experience at places like Outback has become more expensive, prompting diners out for steak dinners to be more discriminating about the quality and size of their meal, as well as the level of service. For example, Outback's recently promoted "center cut sirloin" runs from $11.99 for six ounces to $18.99 for 12 ounces. Other, larger steaks can cost as much as $27.99.

Competition from other chains like Texas Roadhouse, which is growing quickly, and the popular rise of independent restaurants offering less cookie-cutter dining experiences are also raising the competitive bar — especially with younger adults who can be quick to share their meal reviews online.

Previous coverage: How is Texas Roadhouse outperforming Outback Steakhouse and others?

Smith cited analytical "metrics" ranging from the pace of the dining experience and improving "steak accuracy" to higher social media scores as indicators of underlying business momentum. She also noted the "meaningful improvement" of Outback's performance so far in 2017 is better than 2016's weak numbers might suggest. Bloomin's overall performance outlook for 2017, however, is flat to down.

"Consumer behavior is evolving at a rapid pace," Smith said. "Consumers seek a differentiated dining experience and will share that experience via social media." It is very clear, Smith emphasized, that "cheap food is not going to revitalize this (casual dining) category."

For the fourth quarter, Bloomin' revenues fell slightly to just over $1 billion from the same period a year ago. It recorded a loss in net income in the quarter of $4.3 million versus a gain of $17.7 million a year earlier. Annually, Bloomin' revenues slipped to $4.2 billion in 2016, down from $4.3 billion in 2015. Net income in 2016 was $41.7 million, down sharply from $127.3 million in 2015.

Those are challenging numbers. Smith, who received $6.2 million in compensation in 2015 (the most recent numbers available), pointed to the rising consumer demand for takeout and the desire to dine on restaurant meals at home. The proliferation of third party delivery services, Smith said, is accelerating this trend — one Bloomin' aims to pursue.

She said at least 115 of the company's chain restaurants, mostly Outback and Carrabba's, will offer third party or its own delivery service by the end of March.

"This is the first structural tailwind in the industry in some time," she said. "We will go as fast as possible while being able to maintain the customer service levels that we insist on.

"You have one shot to establish yourself as a credible delivery alternative."

Contact Robert Trigaux at [email protected] Follow @venturetampabay.

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