Same-store sales fell 4.6 percent in the second quarter at Bonefish Grill, prompting parent company Bloomin’ Brands Inc. to halt development of the casual-dining chain until sales come back, the company said on Tuesday.
Bonefish’s sales decline was driven entirely by traffic, which fell more than 7 percent in the quarter ended June 28. Bloomin’ Brands executives on the company’s earnings call suggested same-store sales would take some time to come back, predicting they’d decline at least 5 percent the rest of the year.
“Our priority is always to grow what we own,” Bloomin’ Brands CEO Liz Smith said on the call, noting that development will restart once the brand’s sales return. “We’re confident we’re making decisions for the long-term health of the brand.”
Smith on the call blamed two issues for the problems at the 207-unit Bonefish: Promotions last year and menu complexity.
A year ago, Smith said, the chain used a number of traditional casual-dining restaurant promotions to get customers in the door. Bonefish this year has shifted away from those promotions, returning to its “polished casual-brand heritage.”
That shift, she said, has put pressure on same-store sales and the impact “exceeded our expectations.”
“We strayed too far from our casual-dining roots,” Smith said, noting that the chain has shifted away from discounts and buy-one, get-one promotions. “That kind of traffic wasn’t as profitable. It wasn’t consistent.”
But Smith also said that the chain added complexity when it refreshed its core menu last year. In addition to the core menu, Bonefish added a seasonal and bar menu.
While the menu and the extra menu items all tested well, they compromised service when expanded systemwide, according to Smith. The result: A “meaningful decline in customer satisfaction scores.”
“We overloaded the system with ancillary innovation,” Smith said. She added that the chain took those menus out, and returned its focus to core execution. Customer satisfaction scores have started to improve. In March, Bloomin’ named Gregg Scarlett the concept president at Bonefish.
Still, Smith said, “reengaging lapsed users will take time.”
The decline in sales and traffic at Bonefish came as sales at Bloomin’s other three concepts, Outback Steakhouse, Fleming’s Prime Steakhouse & Wine Bar and Carrabba’s Italian Grill, all improved.
Carrabba’s, the Italian chain that had previously been struggling, reported a same-store sales increase of 0.9 percent and traffic improvement of 1.4 percent. Carrabba’s used value to drive frequency at the chain, and sales and traffic numbers have improved for three straight quarters, the company said.
The chain is getting ready to launch a new menu in the fourth quarter aimed at serving lighter options to increase everyday dining.
Same-store sales at Outback increased 4 percent in the quarter, though traffic fell 0.8 percent. The 800-unit concept supported its new lunch business in the quarter with a national ad campaign. “Lunch continues to grow and perform well and we get good feedback,” Smith said.
The company doesn’t break out between sales at lunch or sales at dinner at Outback, but executives did acknowledge that sales at dinner softened during the quarter — in part because the chain didn’t renew a $10.99 to $11.99 promotion this year. “Dinner remains our No. 1 priority,” Smith said. “We’re excited about our initiatives.”
Advantages of diversification
Same-store sales at Fleming’s, meanwhile, rose 3.2 percent in the quarter. Combined, Bloomin’s four brands reported 2 percent same-store sales growth in the period.
The company did lower its same-store sales projections for the year for its combined concepts, to 1.5 percent from “at least 1.5 percent.” CFO Dave Deno noted that the company is also running up against strong comparisons in the second half.
Stock in Bloomin’ Brands rose 1 percent in morning trading.
“Second half (same-store) sales will be lower because we lapse an elevated level of performance from a year ago,” Deno said.
Net income rose 19 percent in the quarter, to $33.1 million or 26 cents per share from $27.7 million or 21 cents.
Total revenues in the quarter fell 1 percent in the period, to $1.1 billion from $1.11 billion in the same period a year ago. The decline in revenue was due to foreign currency translation as well as the sale of Roy’s Restaurant.
The sales struggles at Bonefish, following the sales issues at Carrabba’s, do place a focus on the number of concepts Bloomin’ operates. Smith, on the earnings call, said that owning all four brands enables the chain to take the steps necessary to improve each brands for the long term.
The diversification insulates the chain from the problems that a sales decline at a single concept can generate.
“We have four brands that can scale to $1 billion,” she said. “We see diversification in huge segments of (casual dining) as being a real advantage. Diversification helps us do the right things by the brands in the short, medium and long term.”
Contact Jonathan Maze at [email protected].
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