Bloomin’ Brands, Inc. (BLMN) shares took a dive on Friday, plummeting over 10% in pre-market trading, after the restaurant company reported disappointing third-quarter earnings that missed analyst expectations and a lowered full-year outlook.
The company’s adjusted earnings per share came in at 21 cents, slightly beating the street estimate of 20 cents. However, quarterly revenues of $1.038 billion, a 3.8% decrease from the previous year, fell short of the analyst consensus of $1.042 billion. The decline in revenue was attributed to several factors, including lower comparable restaurant sales, the impact of foreign currency fluctuations, and the net effect of restaurant closures and openings.
The company also reported a decline in adjusted restaurant-level operating margin, which decreased to 12.5% from 14% in the previous year, driven by lower restaurant sales and increased labor, operating, and commodity costs, primarily due to inflationary pressures. Adjusted operating income margin in the quarter also decreased to 3% from 5.3% in the year-ago period, primarily due to closure costs from the closure of nine restaurants in Hong Kong.
Despite the challenges, Bloomin’ Brands ended the quarter with a healthy cash position of $83.632 million.
Shifting Focus and Strategic Sale:
In a move that signals a shift in strategy, Bloomin’ Brands announced the sale of a 67% stake in its Brazilian operations to Vinci Partners for R$1.4 billion (approximately $243 million). This transaction values the business at R$2.06 billion, reflecting a multiple of 6.5x trailing twelve months EBITDA, net of royalties. Bloomin’ Brands will retain a royalty stream and has the option to sell the remaining stake in 2028.
“As I continue listening and learning during this evaluative period, it is clear to me that our path to sustainable sales and profit growth will be enabled by our team members executing a consistent and elevated guest experience, focusing first on Outback Steakhouse,” said Mike Spanos, CEO.
Dismal Outlook and Price Action:
The company’s lowered FY24 outlook also contributed to the stock’s decline. Bloomin’ Brands now expects adjusted EPS to be between $1.72 and $1.82, down from its previous forecast of $2.10 to $2.30. The street view currently pegs at $2.08.
For the fourth quarter, Bloomin’ Brands projects adjusted EPS to range from $0.32 to $0.42, significantly below the $0.67 analyst consensus, and anticipates U.S. comparable restaurant sales to decline by 2% to 1%.
BLMN shares closed the day down by 10.6% at $15.00 per share in pre-market trading, signaling investor concerns about the company’s future prospects.
