CEO: Confidence in Outback Has Never Been Higher | Food Newsfeed
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flickr: Outback Steakhouse
Outback has posted six consecutive quarters of positive traffic.

CEO: Confidence in Outback Has Never Been Higher

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The classic steakhouse is ready to cash in on prior investments.
By Danny Klein October 2018 Chain Restaurants

Bloomin’ Brands chief executive officer Liz Smith saw no reason to downplay Outback’s recent performance. “I have never felt more confident in the brand health, and where Outback is,” Smith said during an October 29 conference call. She reiterated the point a few minutes later.

“I haven’t ever … felt this confident in Outback’s forward momentum.”

There was even a moment Monday where the line cut out as Smith gushed over Outback’s results. But technical difficulties only paused what turned out to be a rosy quarter for the classic steakhouse. Same-store sales rose 4.6 percent with traffic up 0.9 percent in the third quarter. The performance marked the sixth consecutive quarter of positive traffic and seventh straight period of positive comp sales.

READ MORE: How Outback got customers talking again.

The 737-unit (U.S. locations) steakhouse is in an ideal position, Smith said, to keep the results flowing. Bloomin’ invested ahead of growth and now it’s time to monetize.

In response, and to prove its confidence in the long-term growth, not just lapped improvements, Bloomin’ upped its guidance for the fiscal 2018 year in regards to earnings per share ($1.41–$1.47 from $1.38–$1.45) and blended U.S. same-store sales (2–2.5 percent from 1.5–2.5 percent) across its four brands, Outback, Fleming’s, Bonefish, and Carrabba’s. For the quarter, comps grew 2.9 percent systemwide, with Bonefish seeing a 1.8 percent increase, year-over-year, Fleming’s a 0.5 percent hike, and Carrabba’s in the red at negative 0.6 percent. The company reported revenue of $965 million.

Smith said Outback’s confidence stems from investing in “areas where the consumers want to go.” Food quality. Portions. Service. CRM and mass personalization. Moving from mass marketing to data personalization, which has returned far greater investment, Smith said. Bloomin’ is getting more efficient with its marketing spend, down from 3.8 percent to 3.2 percent last year and 3.1 percent this year thanks to a shift into digital and data personalization, and a focus on communicating one-on-one with guests.

"When you look at the sales layers that are out in front of Outback, it's not a quarterly discussion or quarterly concentric, it's just feeling like we really positioned this brand exceptionally well for the future." — Liz Smith, Bloomin' Brands CEO.

A lot of time and patience was put into building Bloomin’s data infrastructure capabilities, and now it’s time to cash in on the 7.2 million customers in its Dine Rewards program. This includes Outback, and it also includes cross-fertilizing traffic from the steakhouse’s success into Bloomin’s other brands.

“[The confidence is] centered around the investments that we have made in the box come on quality, service,” Smith said. “The vast majority of our strength is our in-house traffic and that's directly applicable to superior execution that we are having in the box.”

“When you look at the sales layers that are out in front of Outback, it's not a quarterly discussion or quarterly concentric, it's just feeling like we really positioned this brand exceptionally well for the future,” she added.

Refresh and reward

Another trigger for future gains is the ambiance focus. Outback is currently testing multiple design prototypes for a new interior remodel program. Exteriors pivoting to interiors that will modernize stores, Smith said, and expand Outback’s off-premises room to handle higher order volumes. Some could add seats to meet the improved traffic as well. The company predicts a 3 percent traffic lift, consistent with prior remodels, at these refreshed stores.

Once the prototype is settled, Outback will complete the program over a three-year period, Smith said. These are running around $300,000–$400,000 depending on the size of the box.

Meanwhile, Outback’s relocation program is firing up sales lifts well in excess of 30 percent. There are 14 in the pipeline for this year, and Smith said Outback is moving restaurants as quickly as quality sites become available. That comes down to supply and a function of category, she said. Meaning casual brands are holding onto A sites and it’s a race for real estate as much as anything else.

Regardless, Smith said Outback would tackle the opportunities as they arise, especially since some of those remodels jumped to a 50 percent sales increase. Outback has also spoken before about an opportunity to add 50 incremental restaurants. All in all, the footprint of the chain is shifting, and for the better, Smith said.

Deliver the results, and the data

In Q2, Bloomin’s 240 existing delivery locations began to “constantly hit established targets for several key metrics, including delivery time and deliveries per locations,” Smith said.

As a result, Bloomin’ resumed the rollout program in Q3 and expects to add an additional 200 locations across Outback and Carrabba’s by year’s end. Smith anticipates all locations completed in 2019.

Currently, off-premises represent about 30 percent of Bloomin’s business. It grew in the low double-digits in Q3. “Everything about that business is really coming together,” Bloomin’ CFO Dave Deno said. “Why is that? We built the in-house capability to make that happen. And we're very pleased with the adoption of our teams of doing that. And it gives us the data. It gives us that our process flow through. It gives us complete control that customer experience as we go forward,” he said.

Bloomin’ is working on an omni-channel approach. It’s also testing third parties. “Everything about delivery is exactly where we hoped in many respects on the top quartile of our restaurants,” Smith added. “It certainly is providing validation for our belief that this is: one, incremental; and two, it's absolutely where the customers going. They want to enjoy restaurant, quality food, many times in the comfort of their home.”

In respect to the omni-channel approach, Smith said it comes down to making sure the food is simply everywhere the guest is looking for it.

“We always want to be customer centric,” Smith said. “So if a customer wants to get our product, our delivery through a third-party aggregator, and it's available, we're looking at that. Some people have different ways that they go the market.”

Brazil on the mend

Smith said comps sales in Brazil, where there are 92 Outbacks, should turn positive this quarter thanks to a better macroeconomic backdrop. They dropped 3.3 percent in Q3 as the country experienced unrest living up to the recent president elections, Smith said. “This has led to protests and a lengthy truckers strike,” she said, “… that resulted in numerous lost operating days for many businesses, including our restaurants. We believe these dynamics were more event-driven rather than a reflection of the improving underlying health indicators of the Brazilian economy.

“Brazil's had 20-plus years of great performance. It's back on track and performed actually quite well in a difficult environment in 2018,” Smith said.

“I think we feel like it's a thumbs-up for Brazil,” she added later.