Bloomin' Brands, Inc. Q3 FY2026 earnings call

CEO Mike Spanos outlined a turnaround strategy anchored in four strategic platforms, emphasizing consistent execution and long-term sustainable growth.

• Deliver a Remarkable Dine-In Experience: The steak lineup launched last year continues to score highly in industry benchmarks. A new service model reducing server-to-table ratios to four during peak hours has been rolled out globally, resulting in over 90% positive service scores. Annual steak certification training for multi-unit leaders is being reinstated to ensure product quality consistency.

• Drive Brand Relevancy: The 'Best Steaks Ever' campaign launched in October aims to differentiate Outback through its Aussie roots and affordability. Marketing spend has shifted significantly toward digital channels, targeting a 60/40 split between digital and linear TV by year-end, up from 30/70 previously. Limited-time offers like the $15.99 sirloin are testing price elasticity.

• Reignite Culture of Ownership: An updated compensation model for managing partners was implemented in April to align pay with local market rates and restaurant profitability. This change has been positively received and supports the goal of retaining strong leadership.

• Invest in Restaurants: The company is on track to refresh approximately 100% of Outback locations by 2028. As of late October, 61 refreshes were completed, with a full-year target of 85. Additionally, the Char-Grill expansion rollout across all Outback locations has been finalized to optimize cooking platforms.

• Franchise Update: Bloomin’ Brands entered a stocking horse agreement to potentially acquire 61 restaurants from Out West, a franchisee filing for bankruptcy. Management views this as aligned with their investment strategy, though no material impact on Q4 results is expected.

The company operates four primary restaurant brands. Outback Steakhouse reported U.S. comparable sales growth of 190 basis points, driven by a 370 basis point increase in average check which offset an 180 basis point decline in traffic. Outback contributed the majority of the portfolio's performance, with guest scores improving for the fifth consecutive quarter. Carrabba’s Italian Grill saw comparable sales rise 60 basis points, despite a significant 290 basis point drop in traffic, as the brand focused on experiential dining and value offers. Bonefish Grill achieved the strongest top-line growth with comparable sales up 530 basis points, supported by a 530 basis point check increase that more than compensated for an 80 basis point traffic decline. Fleming’s Prime Steakhouse & Wine Bar posted flat comparable sales, negatively impacted by a 190 basis point traffic decrease.

• Full Year Fiscal 2026 U.S. Comparable Sales: Raised/Guided to be between 1.0% and 1.5%. Previous guidance was lower; the update reflects tighter expectations despite Q3 performance at the upper end.
• Full Year Average Check: Maintained at approximately 3.5%, reflecting pricing partially offset by mix shifts toward affordability offers.
• Full Year Adjusted Diluted EPS: Raised to a range of $0.97 to $1.02, compared to previous guidance of $0.90 to $1.00. This improvement is aided by tax benefits from FICA tip credits.
• Fourth Quarter Fiscal 2026 U.S. Comparable Sales: Guided to be between 0% and 1.0%. This lower expectation is due to holiday calendar shifts (Christmas falling on a Friday), lapping of aggressive holiday promotions from the prior year, and a strategic decision to delay pricing actions at Outback and Bonefish.
• Fourth Quarter Adjusted Diluted EPS: Expected to be between $0.07 and $0.12.
• Capital Allocation: Priorities remain investing in the base business and paying down debt. Full-year capital expenditures are expected to be approximately $185 million.
• Leverage Target: No change to the lease-adjusted net leverage target of 3.0x by the end of 2028, even if the Out West acquisition proceeds.

• Out West Bankruptcy: While management states the specific situation is unique and does not reflect broader franchise health, the bankruptcy process creates uncertainty regarding the potential acquisition of 61 stores. If the bid is not accepted, these assets may not become part of the portfolio.
• Consumer Sensitivity: There is noted sensitivity among households earning under $75k and older demographics regarding check sizes. Consumers are described as cautious and discerning, requiring careful balance between pricing and affordability.
• Beef Inflation: Beef costs remain in the high single-digit inflation range, putting pressure on margins. New labor negotiations are pending, with outcomes expected in February, adding cost uncertainty.
• Execution Risk: The turnaround relies heavily on consistent execution of service models and marketing campaigns. Any deviation in guest experience or failure to deliver on the 'what you get for what you pay' promise could stall momentum.

Q: Analysts asked about the rationale behind tightening full-year guidance and delaying Q4 pricing actions despite a strong Q3. / A: CEO Mike Spanos explained that the delay in pricing at Outback and Bonefish was a conscious decision to avoid chasing dilutive traffic and maintain a balanced approach to revenue management. He emphasized that the company does not need to take more pricing than necessary given current inflationary pressures and consumer caution. The Q4 guidance of 0-1% comp sales also factors in negative holiday calendar shifts and the lapse of aggressive promotional offers from the prior year.

Q: Discussion focused on the effectiveness of the shift to digital marketing and the 'Best Steaks Ever' campaign. / A: Management highlighted that the campaign successfully generated visible conversation around steak quality and brand authenticity. They detailed a strategic pivot to digital, now comprising ~60% of marketing spend, utilizing targeted consumer personas, streaming environments, and auction-based CPMs. Early results show improved consumer engagement and traffic, validating the sequencing of the marketing push after stabilizing operational execution.

Q: Questions addressed the impact of the new service model (4 tables per server) on employee metrics and guest satisfaction. / A: CEO Spanos reported that the new model has led to the fifth consecutive quarter of Technomic service score improvements, placing Outback on parity or above competitors. Importantly, servers are earning equal or slightly higher wages due to better tip shares and reduced stress from lower table counts during peaks. This demonstrates that productivity gains were achieved without compromising service quality or staff compensation.

Q: Analysts sought clarity on the trajectory of beef inflation and upcoming labor negotiations. / A: CFO Eric Christel confirmed that beef inflation remains in the high single digits for the current year, with no immediate relief expected. Regarding labor, he stated that contract negotiations are not yet complete, with final terms expected to be resolved in February. This timeline introduces near-term cost uncertainty, although the company is currently self-funding investments through non-guest-facing productivity savings.

Q: Inquiry was made regarding the Out West franchise bankruptcy and the potential acquisition of their 61 locations. / A: CEO Spanos characterized the Out West situation as idiosyncratic and specific to that group, noting that other franchisees remain healthy. He confirmed that Bloomin’ Brands is acting as a stalking horse for the purchase, viewing it as a strategic investment opportunity. However, he cautioned that the process will take months and there is no guarantee of acceptance, nor any material financial impact expected in the short term.