Bloomin' Brands Results

Bloomin’ Brands Announces 2019 Q3 Diluted EPS of $0.11 and Adjusted Diluted EPS of $0.10

Bloomin’ Brands, Inc. (Nasdaq: BLMN) reported results for the third quarter 2019 (“Q3 2019”) compared to the third quarter 2018 (“Q3 2018”).

Highlights for Q3 2019 include the following:

  • Comparable restaurant sales increased 0.2% at U.S. Outback Steakhouse, representing its 11th consecutive quarter of positive comparable restaurant sales
  • Comparable restaurant sales increased 11.2% for Outback Steakhouse in Brazil
  • Opened eight new restaurants, including five international franchise locations

Diluted EPS and Adjusted Diluted EPS

Our Q3 2019 results include the impact of the new lease accounting standard adopted in Q1 2019. Among its impacts, we no longer recognize the benefit of deferred gains on sale-leaseback transactions, resulting in an increase to Other restaurant operating expense which represents a two cent reduction in earnings per share on the quarter. The following table includes both a reported and a comparable basis that adjusts for this lease accounting change.

The following table reconciles Diluted earnings per share to Adjusted diluted earnings per share for the periods as indicated below.

 

Q3

 

 

 

2019

 

2018

 

CHANGE

Diluted earnings per share

$

 

0.11

 

 

$

 

0.04

 

 

$

 

0.07

 

Adjustments

 

(0.01

)

 

 

0.06

 

 

 

(0.07

)

Adjusted diluted earnings per share

$

 

0.10

 

 

$

 

0.10

 

 

$

 

 

Remove new lease accounting standard impact (1)

 

 

 

(0.02

)

 

 

0.02

 

Adjusted diluted earnings per share on a comparable basis (1)

$

 

0.10

 

 

$

 

0.08

 

 

$

 

0.02

 

 

 

 

 

 

 

______________

See Non-GAAP Measures later in this release.

 

(1)

   

In Q3 2018 both GAAP and adjusted diluted earnings per share include the benefit of deferred gains on sale-leaseback transactions of approximately $0.02. For comparability, we have presented adjusted diluted earnings per share excluding this benefit that we no longer recognize in 2019 as a result of the adoption of the new lease accounting standard.

 

CEO Comments

“Q3 earnings per share increased 25% on a comparable adjusted basis as we focus on building healthy traffic and improving profitability,” said David Deno, CEO. “U.S. comp sales were flat with traffic significantly outperforming the industry. We have intentionally moderated our average check increases to further strengthen our value relative to competition across the portfolio. This pricing discipline combined with sales momentum from investments in the customer experience and off-premises is building, with October trends significantly out-pacing the industry. This strategy combined with disciplined cost management, drove operating margins higher by 60 basis points on comparable adjusted basis versus last year. We remain well positioned to finish the year strong and achieve our earnings commitments.”

Third Quarter Financial Results

As described above, our Q3 2019 results include the impact from adopting the new lease accounting standard, which reduces operating margins by 30 basis points. The following table includes both a reported and a comparable basis that adjusts for the lease accounting change:

 

AS REPORTED

 

COMPARABLE BASIS (1)

(dollars in millions)

Q3 2019

 

Q3 2018

 

CHANGE

 

Q3 2018

 

CHANGE

Total revenues

$

 

967.1

 

 

$

 

965.0

 

 

0.2

%

 

$

 

965.0

 

 

0.2

%

 

 

 

 

 

 

 

 

 

 

GAAP restaurant-level operating margin

 

12.9

%

 

 

12.5

%

 

0.4

%

 

 

12.2

%

 

0.7

%

Adjusted restaurant-level operating margin (2)

 

12.5

%

 

 

12.4

%

 

0.1

%

 

 

12.1

%

 

0.4

%

 

 

 

 

 

 

 

 

 

 

GAAP operating income margin

 

2.3

%

 

 

1.3

%

 

1.0

%

 

 

1.0

%

 

1.3

%

Adjusted operating income margin (2)

 

2.3

%

 

 

2.0

%

 

0.3

%

 

 

1.7

%

 

0.6

%

___________________

(1)

 

To improve comparability in this table, we removed the benefit of deferred gains on sale-leaseback transactions from our Q3 2018 results.

(2)

 

See Non-GAAP Measures later in this release.

  • The increase in total revenues was primarily due to higher comparable restaurant sales in Brazil and the net impact of restaurant openings and closures, partially offset by the impact of domestic refranchising.
  • The increase in reported GAAP operating income margin was primarily due to higher comparable restaurant sales in Brazil, the impact of certain cost savings initiatives, and gains on the sale of certain U.S. surplus properties. This increase was partially offset by commodity, operating and labor inflation, delivery rollout costs, and the impact from adopting the new lease accounting standard as described above.
  • The primary difference between GAAP and Adjusted restaurant-level operating margin is that Q3 adjusted restaurant-level operating margin excludes the benefit related to gains on the sale of certain U.S. surplus properties.

Third Quarter Comparable Restaurant Sales

 

THIRTEEN WEEKS ENDED SEPTEMBER 29, 2019

 

COMPANY-OWNED

Comparable restaurant sales (stores open 18 months or more):

 

 

U.S.

 

 

Outback Steakhouse

 

0.2

%

Carrabba’s Italian Grill

 

0.1

%

Bonefish Grill

 

(2.2

)%

Fleming’s Prime Steakhouse & Wine Bar

 

0.4

%

Combined U.S.

 

(0.2

)%

 

 

 

International

 

 

Outback Steakhouse - Brazil

 

11.2

%

Dividend Declaration

On October 24, 2019, our Board of Directors declared a quarterly cash dividend of $0.10 per share to be paid on November 27, 2019 to all stockholders of record as of the close of business on November 18, 2019.

Fiscal 2019 Financial Outlook

We are updating our 2019 financial outlook for U.S. comparable restaurant sales, commodity inflation, capital expenditures, and our tax rates. Although U.S. comparable restaurant sales across the portfolio have improved in October, we remain cautious on industry sales trends given industry declines in the third quarter. All other aspects of our previously provided full year financial outlook remain unchanged. See the table below for more details.

Financial Results:

Prior Outlook

 

Current Outlook

Adjusted diluted earnings per share (1)

$1.53 to $1.61

 

$1.53 to $1.61

 

 

 

 

GAAP diluted earnings per share (1)

$1.44 to $1.52

 

$1.44 to $1.52

 

 

 

 

GAAP effective income tax rate (1)

6% to 7%

 

5% to 6%

 

 

 

 

Adjusted effective income tax rate (1)

7% to 8%

 

6% to 7%

 

 

 

 

Adjusted operating income margin (1)

4.8% to 5.0%

 

4.8% to 5.0%

 

 

 

 

Other Selected Financial Data:

 

 

 

Combined U.S. comparable restaurant sales

2.0% to 2.5%

 

Approx. 1.5%

 

 

 

 

Commodity inflation

Approx. 2%

 

Approx. 1.5%

 

 

 

 

Capital expenditures

$175M to $200M

 

Approx. $175M

 

 

 

 

Number of new system-wide restaurants

Approx. 20

 

Approx. 20

___________________

(1)

 

The primary difference between our GAAP outlook and our adjusted outlook for diluted earnings per share, effective income tax rate and operating income margin is driven by adjustments through Q3 2019 as reflected in Table 5 of this release, as well as anticipated adjustments in connection with our relocation and restaurant closure initiatives.

Company Exploring Strategic Alternatives

The Company also announced that it is exploring and evaluating strategic alternatives that have the potential to maximize value for our shareholders, including but not limited to, a possible sale of the Company. The Board of Directors has retained BofA Securities, Inc. as its financial advisor.

“Over the past few years Bloomin’ Brands has made significant progress towards its long term objectives to elevate the customer experience, capitalize on the emerging off-premises segment, expand the rapidly growing international business, and improve operating margins. These efforts have created significant market share gains and enhanced profitability,” said David Deno, Chief Executive Officer of Bloomin’ Brands. “However, despite this continued progress, we believe the current stock price does not reflect the value of the Company. That is why the time is right to explore strategic alternatives that have the potential to maximize value for our shareholders. Our Board of Directors is committed to fully evaluating appropriate strategic alternatives while simultaneously supporting the Company’s ongoing progress against our business plan.”

The Company plans to proceed in a timely manner, but has not set a definitive timetable for completion of this process. There can be no assurance that this review will result in a transaction or other strategic alternative of any kind. The Company does not intend to make any further public comment regarding the review unless it determines that disclosure is appropriate or necessary.

About Bloomin’ Brands, Inc.

Bloomin’ Brands, Inc. is one of the largest casual dining restaurant companies in the world with a portfolio of leading, differentiated restaurant concepts. The Company has four founder-inspired brands: Outback Steakhouse, Carrabba’s Italian Grill, Bonefish Grill and Fleming’s Prime Steakhouse & Wine Bar. The Company operates more than 1,450 restaurants in 48 states, Puerto Rico, Guam and 21 countries, some of which are franchise locations.



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