Operations

Outback sales fall against 'softer backdrop'

The chain saw a marked slowdown after Labor Day and is planning to ease up on price increases to give consumers a break.
Same-store sales fell 1.1% at Outback in Q3. | Photo: Shutterstock

Outback Steakhouse same-store sales fell 1.1% year over year in the third quarter against what the chain called a “softer industry backdrop.” It included fewer transactions and smaller check sizes as consumers pulled back on spending. 

Executives of parent company Bloomin’ Brands said there was a marked slowdown after Labor Day, echoing reports from other casual-dining chains this earnings season. But they said demand has improved since and are expecting same-store sales to be flat to 1% positive in the current quarter.

Nonetheless, the slowdown was enough to cause Bloomin’ to downgrade its guidance for the rest of the year. It’s now expecting same-store sales growth of 1.5% to 2%, down from 2% to 4%, across its four brands.

“Driving traffic growth may be challenging with consumers more careful with their discretionary spending,” CEO Dave Deno said during an earnings call Friday.

The company plans to be more cautious with price increases to give consumers a break. It won’t raise prices again this year and will tread lightly in 2024.

“We do believe that going in with the mindset to keep pricing as low as possible is the right place to be,” said CFO Chris Meyer.

Instead, the chain is focusing on better operations to help offset inflation. It expects to realize $55 million worth of productivity benefits this year from things like handheld server tablets, which are now in use at all 689 U.S. Outbacks. 

Better productivity should also translate to better traffic, executives said. “It's not that terribly complicated,” Meyer said. “When you provide excellent service at a great value to a guest, they want to come back.”

But the chain also plans to invest more in marketing to drive people into its restaurants. It has already done some, reviving the old “No rules, just right” tagline for a series of TV spots advertising a $16.99 Steak ‘N Mate deal. However, it has pledged to avoid deep discounting to grow traffic. “It's a steak-centric model, higher price points,” Meyer said. “It doesn't lend itself necessarily to pursuing a customer cohort that's heavily motivated by couponing.”

Bright spots for the quarter included Bloomin’s restaurant-level operating margins, which rose to 13.8% from 13.1% a year ago, and Carrabba’s Italian Grill, where same-store sales grew 3% year over year. Outback’s Brazilian business also continues to do well, with same-store sales up 4.1%.

Comps declined 0.5% at Bonefish Grill and 4.1% at Fleming’s Prime Steakhouse. 

Bloomin’s poor performance of late has made it a target for activist investor Starboard Value. Starboard owns nearly 10% of Bloomin’s stock and is pushing for changes to Outback's operations, food and marketing to improve returns for shareholders.

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