Outback's Delivery Investment Pays Off
Bloomin’ Brands chief executive officer Liz Smith is confident the momentum Bloomin’ Brands—especially with Outback Steakhouse—has gained over the past eight quarters will continue in 2019. On a February 14 conference call Smith outlined success in sales and traffic growth across the Bloomin’ Brands portfolio, which also includes Carrabba’s Italian Grill, Bonefish Grill, and Fleming’s.
“These results were also a testament to our extraordinary team, who demonstrate our principles and beliefs and show the enthusiasm and dedication in always putting the customer first,” Smith said.
Outback’s same-store sales were up 2.9 percent to 4 percent in the fourth quarter of 2018 on top of an impressive Q4 in 2017, which finished with a 4.7 percent increase. This was the eighth consecutive quarter of positive same-store sales for Outback and its “highest annual comp sales result in six years,” Smith said.
“This overall performance was the successful combination of a multi-year effort aimed at strengthening our differentiation, improving brand health, and setting the brands up for success over the next three to five years,” Smith added.
As a company, Bloomin’s total revenues increased 1.7 percent to $1 billion in the fourth quarter and same-store sales were up 1.6 percent, marking the fifth consecutive quarter with positive same-store sales for the brand.
Some of the key initiatives contributing to the company’s success include leaning into and expanding off-premises dining and shifting toward digital personalization and loyalty options. Around $50 million was invested in these initiatives over the last quarter.
“These investments have helped to fortify the core business and expand our reach to new and existing customers,” Smith said. “We will continue to leverage our scale, portfolio of brands and data analytics to enhance engagement with higher returns.”
Bloomin’ stunned market expectations by growing earnings per share 25 percent in 2018 compared to original guidance of around 11–16 percent. The company also finished the year with positive operating margins compared to last year. “Our efforts to drive healthier traffic through higher ROI marketing activities such as digital are working and have set us up to make significant improvements in operating margins going forward,” executive vice president and chief financial officer David Deno said on the call.
Shareholders are also benefiting from Bloomin’s continued success. Since 2015 the company has returned almost $1 billion to shareholders through dividends and repurchases, Deno said. In 2018, the company repurchased 5.1 million shares of common stock, which equated to $114 millon. Bloomin’s board of directors recently approved another share repurchasing of $150 million in 2019.
“The share repurchase program has been a big win for our shareholders,” Deno said. “Our strong performance has given us the financial flexibility to balance returning cash to shareholders with prudently managing our capital structure and credit metrics. 2018 was a strong year for our company and has set us up for continued success in 2019.”
The future of off-premises
It’s no surprise off-premises dining is becoming an important part of casual dining. Off-premises sales make up 14 percent of Bloomin’s business. In the fourth quarter alone they increased 18 percent and that growth is not slowing down in 2019.
Bloomin’ has completed the roll-out of delivery at 200 locations during Q4, which means delivery is now available across 450 Outback and Carrabba’s locations. Smith said the roll-out of delivery to all locations—around 600 restaurants—will be completed by the end of 2019.
“We are very pleased with the progress, and these locations continue to perform well against several key metrics including delivery times, and deliveries per location,” she said. “We are very excited about the incremental opportunity it represents as we capitalize the growing consumer demand for enjoying restaurant meals at home.”
There was some concern about rolling out delivery at every restaurant including its highest volume restaurants, which in turn would have more delivery orders, too. However, the company hasn’t seen any issues so far at these locations.
It seems any complications with delivery have been averted with the new remodels. Outback’s exterior remodel program was finished over the last quarter and the company is now shifting to complete the interior remodels. By remodeling both the interior and exterior of the restaurants, team members have more room for the off-premises segment and are able to execute delivery more efficiently.
Outback is testing multiple design prototypes that incorporate new design elements to modernize our look while expanding the off-premises room to handle the higher expected order volume,” Smith said.
In addition to the remodeling restaurants, Outback is continuing to relocate some restaurants. In 2018, Outback relocated 14 restaurants and expects to relocate another 11 by the end of 2019.
“This relocation program continues to deliver impressive results and recent relocations are generating sales lift, well in excess of 30 percent,” Smith said. “We are very bullish about Outback and the brand is well positioned to further take market share.”
The Dine Rewards loyalty program grew by almost 800,000 members over the last quarter and now has around 8 million members. It has been a successful initiative and the company is seeing strong engagement across the Bloomin’ portfolio, Smith said. The program is continuing to evolve with customer needs and using customer data to increase digital personalization for each member.
“Our investments in [customer relationship management] strengthen engagement through more customer-centric communication, while providing a higher return from marketing spending,” Smith said.
Due to the success of the loyalty program, the company has reduced advertising costs by $25 million over the past two years.
“In summary, 2018 was an excellent year as our multi-year effort of investing behind the consumer is paying off in the form of healthy underlying traffic and margin expansion,” Smith said. “The incremental sales layers we have qualified across loyalty, digital, and off-premises will position us to capitalize on the continued sales momentum and monetize the benefits of these investments as we enter 2019 and beyond.”