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Financing

Fewer items mean profit improvement for Outback Steakhouse's owner

Bloomin’ Brands sales continued to improve, and it saw little impact on sales as coronavirus spread rapidly in Florida and Texas.
Photograph: Shutterstock

Bloomin’ Brands has cut items from its menu and helped restore its cash flow.

The Tampa, Fla.-based owner of Outback Steakhouse and Carrabba’s Italian Grill on Friday noted that its same-store sales continued to improve through last week, even as the coronavirus continued to spread in many of its strongest markets.  

Same-store sales declined 39% throughout all of its restaurants in the quarter ended June 28, including a 33% decline at its flagship Outback.

Yet they were down 12.6% at Outback last week and down 18.7% at all of its concepts—with its more polished casual Bonefish Grill (down 35%) and Fleming’s Prime Steakhouse (down 36%) lagging.

The company said it generated positive cash flow last month, however, and credited it in part with a simplification effort that included culling items from the menu and improving labor that made its restaurants more efficient.

For example, executives said on Friday, cost of goods sold was just 10 basis points higher than last year despite lower check averages. And employees are spending less time on food prep work, which has helped save on labor.

“The streamlined menus we have utilized since the onset of this pandemic have helped reduce food waste to record low levels,” CFO Christopher Meyer said on the company’s second quarter earnings call Friday. He noted that hourly labor as a percent of sales was down 190 basis points last month from pre-COVID levels, excluding relief pay.

“That’s absolutely something we want to preserve moving forward,” Meyer added. “That’s going to help in cost of goods sold in terms of waste reduction, and it’s going to help with labor.”

Bloomin’ Brands shifted rapidly to off-premise-only after states shut down dining rooms in May. Executives said that the shift helped the company avoid furloughs and layoffs. That, CEO Dave Deno said, helped the company quickly ramp up dine-in service once states began to reopen. And executives said that dine-in level has persisted even as the coronavirus has spread.

As of last week, 928 of Bloomin’ Brands more than 1,000 U.S. locations are open for dine-in service.

At Outback, average weekly sales at dine-in restaurants has improved from $54,741 during the week ended July 5 to $60,095 the week ended July 19. Same-store sales last week at those 527 restaurants with dine-in were down 10.7%.

Executives expressed confidence in the restaurants’ performance despite the return of the coronavirus, which has slowed sales growth across the country. For instance, they noted they’ve seen no real impact from the surge in the virus across its Florida restaurants.

And they noted that the stores that are currently performing best are their restaurants in states that opened early. Meyer said 129 restaurants across all of its brands, mostly Outback locations, generated positive same-store sales last week.

“What we’ve learned is when you open appropriately with in-restaurant dining in a clean, safe environment for consumers, you offer the food we offer and the service, people want to come into our restaurants,” Deno said. “People want to come and enjoy some dining. That’s clearly what we’re seeing.”

One of the challenges for Bloomin’ is to keep the off-premise service the company gained during the pandemic.

As dine-in sales have returned, off-premise sales remain at a considerably higher level than they were pre-pandemic. Before the coronavirus, the company generated about $10 million per week in off-premise sales at all of its concepts.

In April, that increased to $32 million per week. Last week, it was still at an elevated level, $23 million. Total sales at the company’s restaurants was $52 million during the week, meaning off-premise sales were at about 45%.

“That shift is going to stay,” Deno said. “That is something that’s going to stay with casual dining. People enjoy our food and the fact that we’ll be able to make these gains during this time and the investments we made have really paid off.”

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