Q2 2024 Earnings Summary
- Introduction of Value-Focused Promotions to Drive Traffic: Bloomin' Brands is enhancing its value offerings to attract customers, exemplified by the introduction of the $14.99 3-course meal at Outback, reduced from the previous $16.99. This promotion aims to drive traffic and take market share in a challenging environment, and initial feedback has been positive. The company utilizes comprehensive advertising channels, including TV, social media, and digital platforms, to promote this value offering.
- Strong Growth Prospects in Brazil: Despite macroeconomic challenges such as higher interest rates and recent flooding, Bloomin' Brands' Brazilian business remains robust as the #1 restaurant company in the market. The company plans to open 20 high-returning restaurants in Brazil this year. Additionally, remodeled restaurants, like the recent one in Rio, have seen unbelievable reception and significant sales increases, indicating strong growth potential.
- Improving Commodity Cost Outlook: While beef costs are still expected to be inflationary, the company is experiencing favorability versus how we began the year. Their beef contracting strategy allows them to benefit from market favorability, which could positively impact margins and profitability.
- Bloomin' Brands has lowered its Q3 same-store sales guidance to be flat to negative 2%, citing ongoing traffic weakness and industry volatility, which may impact revenue growth.
- The fine dining segment, including Fleming's, is experiencing greater challenges than casual dining, with traffic down more significantly, indicating potential continued weakness in higher-end dining.
- The company faces significant cost pressures, including increased construction costs and ongoing beef inflation, which may pressure margins and returns on investment.
-
Q3 Same-Store Sales Guidance
Q: Explain components of Q3 guidance: down 2% to flat?
A: Management expects same-store sales to be flat to down 2% in Q3, driven by continued traffic softness in the casual dining sector. They anticipate traffic trends similar to Q2, with average check holding steady. Despite industry volatility, they are confident in taking market share through promotions like the $14.99 three-course meal and remain focused on controllable factors. -
Beef Inflation and Construction Costs
Q: Update on outlook for beef and construction costs?
A: Beef costs remain highly inflationary but are more favorable than initially expected, allowing the company to benefit from market favorability due to their contracting methods. Construction costs have risen significantly, but management continues to achieve high returns by selectively pursuing projects with strong economics and actively managing the pipeline. -
$14.99 Meal Impact on Traffic
Q: Is the $14.99 meal boosting traffic enough?
A: The $14.99 three-course meal at Outback is believed to effectively drive traffic, even with a $2 reduction from the previous $16.99 price point. It offers great value and plenty of food, appealing to choosy consumers in a softer environment. Early feedback is positive, and the promotion is being advertised across all channels, including TV and digital media. -
Outback's Value Strategy
Q: How is Outback addressing consumer value focus?
A: Outback is building value into its menu to navigate the softer environment, notably through the $14.99 three-course meal. This offer is engineered for strong economics, motivating guests to visit while maintaining profitability. Management is pleased with initial results and plans to continue value offerings throughout the year. -
Brazil Operations Outlook
Q: What's the outlook for Brazil operations?
A: The Brazilian business, the country's #1 restaurant company, anticipates choppiness and softness due to higher interest rates and severe flooding impacting sales. Despite this, the brand remains strong, with plans to open 20 new restaurants and minimal price increases to support consumers. Recent remodels have seen exceptional reception and significantly increased sales. -
Fine Dining Performance
Q: How is Fleming's performing vs. casual dining?
A: Fleming's has faced more challenges than casual dining, partly due to prior significant gains. However, it is gaining market share within fine dining. Management is elevating food, beverage, and service, remaining very bullish on the brand despite traffic challenges. -
Marketing Spend Approach
Q: Thoughts on flat marketing amid promotions?
A: Management plans to hold marketing spend flat in the second half but can increase it based on return on investment. They emphasize the importance of compelling offers like the $14.99 meal. Robust analytics guide their marketing decisions to drive traffic and connect with guests. -
G&A Expense Expectations
Q: How will G&A expenses trend this year?
A: G&A expenses were slightly lower in Q2 due to minor variances but are expected to be relatively flat for the full year.