Outback Steakhouse significantly outperformed its sister concepts within Bloomin’ Brands during the third quarter, posting a domestic same-store sales gain of 4.6% on a traffic rise of 0.9%.
The discrepancy in performance comes as activist investor Barington Capital Group is intensifying its pressure on Bloomin’ to divest its secondary holdings and focus exclusively on growing Outback. Another investor, Jana Holdings, called earlier in the year for the split.
The performance of the Australian-themed chain prompted Bloomin’ CEO Liz Smith to declare, “I have never felt more confident in the brand health in Outback.” She detailed plans to maintain the momentum through an expansion of self-delivery service to roughly 80% of the 737-restaurant system by the end of 2019 and a redesign of interiors, which Smith expects to boost per-store traffic by 3%.
She also praised Outback’s sibling brands: Carrabba’s Italian Grill, Bonefish Grill and Fleming’s Prime Steakhouse & Wine Bar. Bonefish and Fleming's both generated positive comp sales, of 1.8% and 0.5%, respectively, while comps for Carrabba’s slipped 0.6%.
But all three saw a decline in traffic, ranging from a slide of 4.2% at Fleming’s to 2.9% at Carrabba’s and 2.7% at Bonefish.
The slip in transactions had been expected as a side effect of Bloomin’s efforts to wean its brands off discounting, Smith said. Fleming’s actually had a very strong quarter because of the improvement in margins, she continued, adding, “The brand is on track to have record profits.”
The traffic fallout from letting up on discounts should be over, Smith added.
Still, the contrast in the performances of Outback and its sisters could fuel the ardor of Barington and its allies for a split.
Smith defended Outback’s portfolio approach without mentioning Barington or its call for streamlining. She asserted that having multiple concepts is a strength because one’s performance can offset another’s. She also noted that strategies and tactics that work well for one can be transferred to another, as Bloomin’ is currently doing with some of the rebound techniques that worked for Outback.
Executives also hinted at strengths of the other brands that may not be evident to date. Off-premise sales for Outback, for instance, are roughly 13% of total sales, or about the same mix enjoyed by all four brands, despite the casual steakhouse’s lead on delivery, the executives revealed.
Outback is currently offering self-delivery in 240 restaurants, with an expansion of the service to 200 more restaurants currently underway, according to Bloomin’. Unlike many competitors, Bloomin’ chose to have employees deliver meals, instead of teaming up with a third-party service such as Uber or Grubhub.
Sales have been growing in the low double digits, according to Bloomin’ CFO Dave Deno, and Smith noted that delivery could eventually account for 25% to 30% of sales.