Bloomin' Brands, Inc. Third Quarter 2026 Earnings Conference Call - BLOOMIN' BRANDS INC

Financial Performance:

• Q3 2026 total revenue was $944 million, flat year-over-year excluding a $13 million non-cash gift card breakage adjustment.
• U.S. comparable restaurant sales increased 1.9% (190 bps), driven by a 3.7% increase in average check, despite an 1.8% traffic decline.
• Adjusted diluted EPS for Q3 was a loss of $0.17, compared to a loss of $0.03 in the prior year; Q3 adjusted operating margin was 0.3%.
• Adjusted restaurant margin declined 20 bps to 9.3% due to higher COGS (4.6% inflation), labor inflation (3.5%), and increased advertising spend ($4M year-over-year).
• Balance sheet strengthened with net debt at $677 million and a lease-adjusted net leverage ratio of 3.8x; a $1.2 billion revolving credit facility was refinanced to extend maturities.
• Q4 2026 and full-year 2026 adjusted diluted EPS guidance was raised to $0.07–$0.12 and $0.97–$1.02, respectively, benefiting from an expected $14–$16 million tax credit.

Guidance and Future Outlook:

• Full-year 2026 U.S. comp sales guidance is 1.0% to 1.5%, with average check expected to grow ~3.5%.
• Q4 2026 comp sales are guided to 0% to 1.0%, reflecting a ~2% traffic headwind from holiday calendar shifts and a strategic decision to delay pricing actions.
• Capital allocation remains focused on base business investment and debt paydown, with full-year capex expected at ~$185 million.
• Management targets a lease-adjusted net leverage ratio of 3.0x by the end of 2028.
• Outback refresh plans remain on track to complete approximately 85 locations in 2026, with a pipeline of ~100 additional refreshes expected in 2027.

Business Segments and Product Lines:

• Outback: Comp sales up 1.9%; guest scores improved for the fifth consecutive quarter, showing parity or better than competitors; launched "Best Steaks Ever" campaign and reduced server-to-table ratio to 4:1 at peak.
• Carrabba's: Comp sales up 0.6%; focus on in-restaurant execution, Tuesday $6 sangrias, and "Pizza & Poor" Wednesdays; off-premise mix at 34%.
• Bonefish Grill: Comp sales surged 5.3%; driven by better average checks offsetting softer traffic; promotions include Martini Monday and Bang Bang Shrimp Wednesday.
• Fleming's Prime Steakhouse: Comp sales flat; relaunched social hour and opened locations in Atlanta Midtown and Riverside, CA; off-premise mix at 25%.
• OutWest Franchise: 61 restaurants filed for bankruptcy; Bloomin' Brands entered a stalking horse agreement to acquire them, subject to bankruptcy court approval.

Market and Competitive Landscape:

• Management views casual dining as an "affordable luxury" with resilient consumer demand, though households under $75k show check sensitivity.
• Outback steak quality and service scores are now at parity or higher than key competitors, supported by the Technomic guest score improvements.
• Off-premise sales remain a strategic channel for convenience and recruitment (25% of U.S. sales); Outback's off-premise mix was 27%, and Carrabba's was 34%.
• Marketing spend shifted significantly toward digital, now targeting a 60% digital to 40% linear TV split by year-end.
• Beef inflation remains high (high single digits) for 2026, with negotiations expected in February 2027.

Risks and Challenges:

• Ongoing bankruptcy proceedings for OutWest franchisee present uncertainty regarding acquisition timing and potential impacts on franchisee health.
• Traffic trends remain weak (down 1.8% overall), requiring continued focus on driving sustainable foot traffic growth.
• Inflationary pressures on food (4.6%) and labor (3.5%) continue to compress margins despite productivity initiatives.
• Q4 performance faces headwinds from holiday calendar shifts (Christmas on Friday, lost operating day) and lapping of prior year holiday promotions.

Management Commentary and Tone:

• Tone was cautiously optimistic, emphasizing a "sustained turnaround" strategy executed with a focus on consistency of execution and the "what you get for what you pay for" value equation.
• CEO Mike Spanos highlighted the "say versus do quotient," noting that the team is delivering on four strategic pillars: remarkable dining, brand relevancy, ownership culture, and restaurant investment.
• Management expressed confidence that non-guest-facing productivity savings (labor tech, supply chain, utility tools) are nearly self-funding the Outback turnaround.
• Confirmed commitment to balanced pricing strategies, refusing to chase dilutive traffic or take pricing above inflation rates in the near term.

Analyst Questions and Answers:

• Pricing & Q4 Guidance: Management confirmed Q4 comp guidance reflects delayed pricing actions at Outback and Bonefish, a holiday calendar shift, and a decision not to chase dilutive holiday promotions from 2025.
• Social Media Strategy: Executives defended the shift to 60% digital spend, citing improved consumer engagement, precise audience targeting, and strong returns on streaming TV and online video.
• Outback Turnaround Metrics: Q3 service scores improved nearly 2 points YoY, and server compensation remains stable with slight tip percentage increases due to reduced workload stress.
• OutWest Acquisition: Management characterized OutWest's situation as idiosyncratic, noting other franchisees are healthy and the acquisition is expected to close in a few months.
• Remodel ROI: Confirmed lighter refresh initiatives are on track to generate traffic lifts, with early leading indicators (ambiance scores) showing positive movement.

Other Key Points:

• Outback implemented a new service model in August reducing server load to four tables at peak, directly contributing to service score improvements and reduced server stress.
• The "Aussie 3 Course" platform continues to drive value, with 5 consecutive quarters of improved guest value scores.
• A $2 million equity loss was recognized in Q3 from the retained stake in Brazil, with the full-year loss expected at $3–$4 million.
• Ziosk guest feedback scores for steak quality and temperature have improved significantly over the past year.