Bloomin' Brands Inc. (BLMN) had a good day on Wednesday. The parent company of Outback Steakhouse, Carrabba's Italian Grill, Bonefish Grill, and Fleming's Prime Steakhouse & Wine Bar saw its stock surge after reporting second-quarter results that beat Wall Street's expectations and raising its full-year outlook.
Here's the headline number: adjusted diluted earnings came in at 39 cents per share, comfortably ahead of the 29-cent analyst estimate. Revenue rose 1.3% to $1.016 billion from $1.002 billion a year ago, also topping the $1.001 billion consensus. On a GAAP basis, diluted EPS from continuing operations increased to 37 cents from 29 cents, while adjusted EPS rose from 32 cents.
Margins Are Getting Fatter
It wasn't just about the top line. Bloomin' Brands showed meaningful margin improvement across the board. GAAP operating margin expanded to 3.8% from 3.0%, and adjusted operating margin rose to 4.0% from 3.5%. The restaurant-level operating margin, a key metric for the industry, climbed to 12.4% from 12.0%.
What's driving that? Higher average checks, productivity initiatives, and lower pre-opening and health insurance costs all helped. But it wasn't all gravy. Higher commodity, labor, and operating costs from inflation, plus increased advertising spending, partially offset those gains. Still, adjusted EBITDA increased to $82.2 million from $77 million, with margin improving to 8.1% from 7.7%.
Same-Store Sales: A Mixed Bag, But Mostly Good
Combined U.S. comparable restaurant sales rose 2.3%, as a 4.2% increase in average check offset a 1.9% decline in traffic. That's a familiar story in the restaurant industry right now: customers are spending more per visit, but visiting less often.
Bonefish Grill was the star, with an 8.1% comparable-sales gain and 4.5% traffic growth. Carrabba's Italian Grill saw a 1.7% increase, Fleming's Prime Steakhouse & Wine Bar was up 1.6%, and Outback Steakhouse managed a 1.4% gain. Notably, Outback's guest metric scores improved for a fourth consecutive quarter, suggesting the brand's turnaround efforts are gaining traction.
U.S. segment revenue increased to $998.6 million from $985.8 million, and adjusted segment operating margin rose to 7.1% from 6.9%. The company ended the quarter with 1,448 systemwide restaurants, after opening five and closing nine.
Turnaround Costs and Balance Sheet
Bloomin' Brands also gave investors some good news on its turnaround spending. The company reduced its planned turnaround investment to about $36 million from roughly $50 million, citing a better investment mix. Productivity savings remained on track at about $30 million, leaving a net investment of just $6 million.
The balance sheet is also looking healthier. Cash totaled $66.6 million, and debt declined to $702.8 million from $787.4 million at year-end and $917.1 million a year earlier. Net debt-to-adjusted EBITDA improved to 2.0x from 2.7x, giving the company more financial flexibility.
Guidance: Raised, But With a Caveat
Looking ahead, Bloomin' Brands raised its full-year GAAP EPS guidance to 85 cents to 95 cents from 70 cents to 85 cents, versus the 85-cent estimate. Adjusted EPS guidance increased to 90 cents to $1 from 75 cents to 90 cents, versus the 87-cent estimate.
But the third quarter might be a bit rocky. The company expects an adjusted loss of 27 cents to 22 cents per share, versus a 19-cent loss estimate, and a GAAP loss of 28 cents to 23 cents, versus an 18-cent loss estimate. That's a seasonal dip, but the full-year picture is brighter.
For the full year, Bloomin' Brands expects U.S. comparable sales growth of 1% to 2%, commodity inflation of 4.5% to 5.5%, and labor wage inflation of 3% to 3.5%. The company also cited tariffs and broader economic conditions as forward-looking risks.
Investors clearly liked what they saw. Bloomin' Brands shares were trading up 32.51% at $11.82 at the time of publication on Wednesday, according to market data.
