Outback Steakhouse is seeing some early signs of a turnaround—emphasis on early.
Same-store sales at the 673-unit casual-dining brand fell 0.6% year over year in the second quarter, with traffic improving each month of the period. It was a modest improvement compared to the previous three quarters.
The brand reported momentum from some of its recent efforts to right the ship, specifically the Aussie 3-Course value meal. The meal, which features an appetizer, entree and slice of cheesecake starting at $14.99, has led to better traffic and value scores and has driven more visits from loyal customers, said Mike Spanos, CEO of Outback parent company Bloomin’ Brands.
“I feel really good about it and I think that's been the primary reason we've seen a nice traffic uptick in Outback,” he said during an earnings call Wednesday.
Spanos also touted a 15% smaller menu at Outback that has eased operations and improved food consistency, and said the brand may look to shrink the menu further.
But the brand still has ground to cover in other areas, he said, particularly its service model, steak quality, and value as it works to claw back share in the casual-dining segment.
On the service front, Outback is testing a new table-to-server ratio in which each server will be assigned to four tables, rather than six plus runner support. Spanos said the six-table system began two years ago after Outback rolled out handheld server tablets, but that the heavier load has hurt the customer experience, especially during busy periods.
On the heels of a menu satisfaction survey earlier this year, Outback is also testing a new steak lineup featuring a higher-quality product and an updated cooking process. “As a steakhouse, we have to lead with great steak quality,” Spanos said.
And on value, it’s testing opening price points across its categories and some new menu items. Spanos did not go into further detail there, but said that all three pillars are geared toward giving customers a better overall value and ultimately driving traffic.
“I think the fundamental of this is, we want to have a really good equation in terms of what you pay for what you get,” Spanos said.
The changes are part of a wholesale turnaround effort under Spanos, who joined Bloomin’ in September from Delta Air Lines. Earlier this week, Bloomin’ announced a series of leadership changes intended to support the turnaround, including shifting CFO Michael Healy to the newly created role of EVP of strategy and transformation.
Spanos has repeatedly cautioned that the plan will take time, and the company has moved deliberately so far, experimenting with new ideas at a small group of 14 restaurants this year. It is now ready to expand that test group to 42 units, and will spend an additional $3 million on quality, service and value upgrades in those restaurants.
That incremental investment was one of several factors that led Bloomin’ to lower its annual profit guidance on Wednesday, disappointing investors. The Tampa-based company is now expecting earnings per share (EPS) in a range of $1 to $1.10, down from $1.20 to $1.40 previously.
Also factoring into the downgrade is an expected $6 million impact from tariffs on restaurant-level margins in the third and fourth quarters, which Bloomin’ had not previously blended into its EPS guidance due to the uncertainty of the tariff situation earlier in the year. The company is not planning to raise menu prices to offset those costs.
Bloomin’ also expects to spend an additional $6 million to $8 million over the rest of the year to cover rising costs for insurance claims. And it is bracing for ongoing traffic challenges at 166-unit Bonefish Grill, where same-store sales declined 5.8% in the second quarter.
“While the team remains very focused on improving the trend, we still see risk in this brand and have incorporated this in our guide,” Healy told analysts Wednesday.
Bloomin’s stock plunged after its results were published and was down nearly 29% as of Wednesday afternoon.
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