TAMPA Fla. The hits just keep on coming for the casual-dining sector.
Late Wednesday, OSI Restaurant Partners LLC, which operates the Outback Steakhouse chain and other brands, reported that sharply negative same-store sales, the current recession and reduced expectations for future earnings will lead the company to take a goodwill charge of as much as $540 million in its fourth quarter.
Systemwide same-store sales for the quarter ended Dec. 31 fell 9.5 percent at Outback Steakhouse, 7.4 percent at Carrabba’s Italian Grill, 14.0 percent at Bonefish Grill and 19.6 percent at Fleming’s Prime Steakhouse and Wine Bar.
Fourth-quarter corporate revenues fell 10.2 percent to $928.3 million.
The results, which were filed Wednesday with the Securities and Exchange Commission as a corporate update to bond holders, followed last week’s news of negative sales trends at other large casual-dining companies like The Cheesecake Factory, California Pizza Kitchen and P.F. Chang’s China Bistro. Full quarterly results for Tampa-based OSI are expected later this month.
The company, which operates or franchises about 1,500 restaurants, making it one of the largest in the segment, went private in a leveraged buyout in late 2006 and has struggled since then against the rapidly deteriorating U.S. economy. Most chains in the casual-dining segment have reported losses in customer visits as consumers chose to spend less by either dining at fast-food outlets or eating at home.
Outback’s parent company initially went private to orchestrate a turnaround away from the scrutiny of the public capital markets. The price of the buyout, at about $3.2 billion, dumped a tremendous amount of debt on OSI and because of the meltdown in financial markets and the depression of restaurant values, the company’s public notes have traded well under par for some time.
This week, OSI said it would start a tender offer for as much as $73 million of the 10-percent senior notes that are due June 15, 2015, to reduce its debt load and improve its financial position relative to financial covenants. The offer will be handled via a modified “Dutch auction” through March 18, with an acceptable bid price range of $225.00 to $275.00 per $1,000 principal amount of the notes, the company said.
The principal balance of senior notes outstanding at Dec. 31, 2008, was $488.2 million. According to the company’s prior quarterly statement, OSI’s long-term debt stood at $1.8 billion.
Also this week, Outback Steakhouse introduced a new menu, with 15 meals under $15, including the chain’s signature steaks and baby-back ribs as well as new pork, shrimp and seafood entrees. The new menu follows Outback's move last year to offer a 6-ounce sirloin with two sides for $9.99.
Other chains in the casual-dining sector are using discounts and specials in an attempt to reverse falling traffic trends. T.G.I. Friday's and Ruby Tuesday, for example, are currently promoting coupons that offer a free entree with the purchase of another. Earlier this month, P.F. Chang's introduced its Chang's for Two promotion, which offers a four-course dinner for two for $39.95. Applebee's also targeted parties of two last fall with a limited-time offer of two entrees and one appetizer for $20.
Contact Sarah E. Lockyer at [email protected].
