Bloomin' Brands (NASDAQ:BLMN) Misses Q3 Revenue Estimates, Stock Drops

Jabin Bastian /
2023/11/03 7:01 am EDT

Restaurant company Bloomin’ Brands (NASDAQ:BLMN) missed analysts' expectations in Q3 FY2023, with revenue up 2.28% year on year to $1.08 billion. Turning to EPS, Bloomin' Brands made a non-GAAP profit of $0.44 per share, improving from its profit of $0.35 per share in the same quarter last year.

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Bloomin' Brands (BLMN) Q3 FY2023 Highlights:

  • Revenue: $1.08 billion vs analyst estimates of $1.08 billion (small miss)
  • EPS (non-GAAP): $0.44 vs analyst estimates of $0.41 (6.39% beat)
  • EPS (non-GAAP) Guidance for Q4 2023 is $0.69 at the midpoint, below analyst estimates of $0.77 (full year guide largely lowered)
  • Free Cash Flow of $58.2 million, up 193% from the previous quarter
  • Gross Margin (GAAP): 15%, up from 14.4% in the same quarter last year
  • Same-Store Sales were down 0.5% year on year (slight miss)
  • Store Locations: 1,477 at quarter end, increasing by 15 over the last 12 months

“We saw strong earnings per share growth in the quarter,” said David Deno, CEO. “We remain focused on driving traffic and maintaining margins as we navigate the near-term sales environment. We are confident that the investments we made in food, service and technology will elevate the guest experience and lead to sustainable, long-term sales and profit growth.”

Owner of the iconic Australian-themed Outback Steakhouse, Bloomin’ Brands (NASDAQ:BLMN) is a leading American restaurant company that owns and operates a portfolio of popular restaurant brands.

Sit-Down Dining

Sit-down restaurants offer a complete dining experience with table service. These establishments span various cuisines and are renowned for their warm hospitality and welcoming ambiance, making them perfect for family gatherings, special occasions, or simply unwinding. Their extensive menus range from appetizers to indulgent desserts and wines and cocktails. This space is extremely fragmented and competition includes everything from publicly-traded companies owning multiple chains to single-location mom-and-pop restaurants.

Sales Growth

Bloomin' Brands is one of the larger restaurant chains in the industry and benefits from a strong brand, giving it customer mindshare and influence over purchasing decisions.

As you can see below, the company's annualized revenue growth rate of 2.57% over the last four years (we compare to 2019 to normalize for COVID-19 impacts) was mediocre as its restaurant footprint remained unchanged, implying that growth was driven by more sales at existing, established dining locations.

Bloomin' Brands Total Revenue

This quarter, Bloomin' Brands's revenue grew 2.28% year on year to $1.08 billion, falling short of Wall Street's estimates. Looking ahead, the analysts covering the company expect sales to grow 4.22% over the next 12 months.

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Number of Stores

When a chain like Bloomin' Brands doesn't open many new restaurants, it usually means there's stable demand for its meals and it's focused on improving operational efficiency to increase profitability. Bloomin' Brands has picked up the pace over the last 12 months, however, opening 15 new restaurants (1.03% annual growth) to reach 1,477 total locations in the most recently reported quarter.

Bloomin' Brands Operating Retail Locations

Taking a step back, Bloomin' Brands has kept its locations more or less flat over the last two years compared to other restaurant businesses. A flat restaurant base means Bloomin' Brands needs to boost foot traffic and turn tables faster at existing restaurants or raise prices to generate revenue growth.

Same-Store Sales

Bloomin' Brands's demand within its existing restaurants has generally risen over the last two years but lagged behind the broader sector. On average, the company's same-store sales have grown by 5.31% year on year. Given its flat restaurant base over the same period, this performance stems from increased foot traffic or larger order sizes per customer at existing locations.

Bloomin' Brands Year On Year Same Store Sales Growth

In the latest quarter, Bloomin' Brands's year on year same-store sales were flat, or negative 0.5%. By the company's standards, this growth was a meaningful deceleration from the 1.4% year-on-year increase it posted 12 months ago. One quarter fluctuations aren't material for the long-term prospects of a business, but we'll watch Bloomin' Brands closely to see if it can reaccelerate growth.

Key Takeaways from Bloomin' Brands's Q3 Results

With a market capitalization of $2.05 billion, Bloomin' Brands is among smaller companies, but its $86.6 million cash balance and positive free cash flow over the last 12 months give us confidence that it has the resources needed to pursue a high-growth business strategy.

It was encouraging to see Bloomin' Brands slightly top analysts' EPS expectations this quarter. On the other hand, full year guidance was lowered for same store sales and EPS. Overall, this was a mediocre quarter for Bloomin' Brands. The company is down 6.7% on the results and currently trades at $21.99 per share.

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The author has no position in any of the stocks mentioned in this report.