Bloomin’ Brands Inc., parent to the Outback Steakhouse and Carrabba’s Italian Grill chains, downgraded expectations for the year Tuesday after reporting disappointing second-quarter results that reflected declining dinner traffic.

Macroeconomic headwinds in Korea, one of Outback’s largest international markets, also took a toll during the quarter. However, the casual-dining steakhouse is going strong in Brazil, where the company plans to start building sister brand Carrabba’s next year.

Liz Smith, chairman, president and chief executive of Tampa, Fla.-based Bloomin’ Brands Inc., said the company expected a recovery in the second quarter, following a rough first quarter that was hindered by severe winter weather. However, the recovery didn’t happen.

Instead, the multiconcept operator saw sales shift from dinner to lunch, as Outback, Carrabba’s and Bonefish Grill — which previously only offered dinner — continue to roll out offers for midday meals.

At the end of the quarter, about 56 percent of Outback locations and 51 percent of Carrabba’s units offered weekday lunch. All Bonefish Grill locations now offer lunch on Saturdays.

Smith said a certain amount of cannibalization was expected, and lunch is performing well. The company may add the daypart to more than the 50- to 60-percent of locations originally scheduled to offer lunch.

Still, strategies are in place to address declining dinner traffic, she said.

“Success at dinner in this category is about balancing high-quality, craveable cuisine that we do better than anyone else, whether it’s steak, Italian or seafood, with menu innovation and variety to drive frequency,” said Smith. “We have strong brands, high customer loyalty and the right strategy to restore our dinner business momentum.”

At Outback, for example, the company plans to double down on “maintaining our steak authority,” with new limited-time offers, plate presentations and marketing, she said.

At Carrabba’s, the new menu introduced earlier this year has been well received by customers, but did not significantly impact traffic, she said.

“It is clear that we did not go far enough in the menu relaunch to address consumers’ desire for lightness and variety on weekday dining occasions,” said Smith. “We were more cautious than we should have been and are rectifying that with additional menu enhancement.”

Bonefish Grill introduced a new menu in early July, and more changes are planned for the bar menu, Smith said.

Meanwhile, the company continues to build its presence overseas, in Brazil, Korea and, more recently, China.

The joint venture acquisition of restaurants in Brazil, a booming market for Outback, is paying off, said Smith. The company plans to double the number of steakhouse restaurants there over the next three years.

In addition, Bloomin’ Brands will bring Carrabba’s to Brazil for the first time, with the first restaurant scheduled to open in 2015.

China is another “big opportunity,” Smith said. Over the last 18 months, three restaurants have opened there, with another two scheduled to open this fall.

However, economic trouble in Korea has hurt sales there. Casual dining as a whole has seen sales plummet 20 percent during the second quarter in Korea, at a time when the number of casual-dining restaurants built over the past six years has grown by 88 percent, resulting in aggressive discounting in a battle for market share.

“We recognize that to differentiate ourselves in this environment, we must undergo a major brand refresh focused on value, innovation and investment in our restaurants,” said Smith.

For the second quarter ended June 29, Bloomin’ Brands reported net income of $27.7 million, or 21 cents per share, compared with $76.5 million, or 58 cents per share, a year ago.

Revenue increased 9 percent, to $1.1 billion, boosted in part by a 0.6-percent increase in same-store sales among company-owned domestic concepts, though traffic was flat.

At company-owned Outback Steakhouse locations in the U.S., same-store sales rose 0.9 percent, while traffic inched up 0.3 percent.

Bonefish Grill reported a same-store sales increase of 0.3 percent, despite a 0.4-percent decline in guest traffic.

Same-store sales fell 1.2 percent at Carrabba’s domestic company-owned locations. Traffic fell 1.2 percent.

Higher-end Fleming’s Prime Steakhouse & Wine Bar recorded a 3.6-percent increase in same-store sales. Traffic climbed 0.8 percent.

For the year, Bloomin’ Brands expects same-store sales for company-owned domestic locations to be flat to up 1 percent. Previously, the company projected an increase between 1 percent and 2 percent.

Bloomin’ Brands operates and franchises more than 1,500 restaurants in 48 states, Puerto Rico, Guam and 21 foreign countries.

Contact Lisa Jennings at lisa.jennings@penton.com.
Follow her on Twitter: @livetodineout