Bloomin' Brands, Inc. Q2 FY2025 earnings call

Management Statement and Operational Highlights:

• Leadership Changes: Announced changes in senior leadership, including Michael Healy moving to Executive Vice President, Strategy and Transformation; Eric Christel joining as CFO-elect; Jessica Mitory as Senior Vice President, CHRO; Ali Charri as Senior Vice President, Guest Insights and Analytics; Rafael Sanchez as CIO; Randy Scruggs promoted to Senior Vice President, Supply Chain; Tara Kurian promoted to Senior Vice President, IR, FP&A and International; Susan Cline promoted to Group Vice President, Strategy and Transformation; John Bettin joining as Senior Vice President, President of Bonefish Grow.
• Operational Priorities:
  • Simplify Agenda and Consistency: Menu reductions implemented across brands, Outback menu further reduced with tests, Aussie 3-course as everyday value offer driving traffic improvement. Leadership teams spending more time in restaurants.
  • Outback Turnaround: Expanded testing to 42 restaurants focusing on menu simplification, innovation, guest experience. Testing revised service model (1:4 server to table station ratio), improving steak quality through menu satisfaction surveys and testing, menu innovation and value through opening price point tests. Brand positioning work underway.
  • Remodels: Thorough assessment of restaurant network, planning ~10 Outback remodels in 2025 with 3 spending scopes, repurposing capital from new restaurant openings to remodels.

Segment Performance:

• Outback: Q2 U.S. traffic was down 2%, sequential improvement from Q1. Sales comp negative 10 basis points, improved from Q1's negative 50 basis points. Traffic at Outback strengthened throughout the quarter driven by the Aussie 3-course offering.
• Carrabba's: Continued positive comp sales growth driven by strong off-premises, including catering and experiential wine dinners.
• Fleming's: Maintained sales momentum with strong holiday and in-restaurant traffic driven by events and catering platforms. Revenue contribution details were not explicitly provided in absolute terms with percentages, but each brand's performance was discussed in context of their respective sales and traffic trends.

Guidance:

• Adjusted diluted EPS range revised to $1-$1.10.
• Factors influencing guidance: Tariff impact expected to be ~$6 million spread Q3-Q4, general liability insurance claim costs expected to result in ~$6-$8 million expense Q3-Q4, ~$3 million investments in quality, service, and value (majority impacting Q4), tax benefit from FICA tip credits expected ~$11-$14 million.
• Q3 2025 guidance: U.S. comparable restaurant sales expected flat to negative 100 basis points; adjusted diluted EPS expected negative $0.15 to negative $0.10, including ~$1-$2 million negative impact from Brazil ownership.

Risks:

• Industry share loss as defined by Black Box, with in-restaurant dining being the biggest opportunity but taking time to reverse market share trends.
• Uncertainty around operational changes (e.g., revised service model, steak quality tests) delivering expected results.
• Increase in general liability insurance claim costs due to higher average cost per case.
• Uncertainty related to the timeline and success of the Outback turnaround, including the time needed to see traffic benefits from increased guest frequency.

Q: On Outback general managers, considering average unit volumes not as high as peers, any other methods of change for GM level?

A: Michael Spanos stated goal is to pay at market average, current structure is good, assessing structure as part of strategic plan with variable component to drive sales and profit growth.

Q: Bigger picture on Outback turnaround, prioritize near-term opportunities and where in the process?

A: Michael Spanos said early innings, focused on service model, steak quality, value components, continuing to test and learn.

Q: Aussie 3 course, info on check size, add-ons, frequency?

A: Michael Spanos said ~2/3 guests trade up to higher levels, ~20% trade up on desserts, mix headwind included in guidance, guests like the value.

Q: Early findings from initial 14 Outback test restaurants?

A: Michael Spanos said potential of the brand is tremendous, guests love craveable food in casual environment, cumulative impact of service model, steak quality, value, and ambience, change management needed.

Q: Menu reduction actions in Outback, guest and employee experience, more room to go?

A: Outbackers like simplified operation, guests respond positively, menu reduced from mid-80s to low 70s, aiming for mid-60s over time.

Q: Carrabba's strength and strategic changes?

A: Michael Spanos said Carrabba's team focused on daypart conversion, strength from experiential wine dinners, catering, Bistro sandwiches, and OPD growth.

Q: Pullback on advertising, impact on OpEx?

A: Michael Spanos said reduced nonworking marketing, more focus on ROI, making marketing more efficient and effective.

Q: Labor investments, labor inflation?

A: Michael Spanos said reallocating costs with server to table station ratio test, using hot schedule AI laboring tools; William Michael Healy said labor inflation running ~4% and anticipated to continue through end of year.

Q: Repair and maintenance survey findings, remodels in 2026?

A: Michael Spanos said focused on asset condition, prioritizing by restaurant, 3 remodel scopes, shifting dollars from new restaurants to remodels.

Q: Outback performance in various regions?

A: Michael Spanos said no outliers in Q2, performance consistent across all geographies.