Outback's Turnaround Gains Traction, but Bloomin' Guides to a Flat Fourth Quarter

Outback Steakhouse posted 1.9% same-store sales growth in the third quarter, yet parent Bloomin' Brands guided fourth-quarter growth down to between 0% and 1%, citing calendar shifts and a deliberate refusal to chase discount traffic. Traffic at the chain fell 1.5% in the quarter. Bloomin' shares dropped 4% on Friday morning.

CEO Mike Spanos said Outback will skip some holiday promotions that drove business but "overmixed" last year, complicating comparisons. The strategy, he noted, is to not "chase dilutive traffic" with promotions and discounts.

What is the turnaround delivering?

Customer satisfaction scores improved for the fifth consecutive quarter, according to Bloomin' executives. The gains included plus 3 on service, atmosphere and intent to return, plus 2 on value, and plus 1 on food. The improvements follow investments in steak selection and quality, plus a service model that gives servers fewer tables so they can concentrate on each party.

The turnaround carries a cost. Adjusted restaurant-level margins (profit at the store level before overhead) declined 0.2 percentage points, to 9.3%. That reflects spending on food quality, service, training, manager compensation, new uniforms and advertising, alongside food inflation of 4.6% and labor inflation of 3.5%.

Better productivity and cost controls yielded a 0.6% improvement in restaurant operating expenses, offsetting part of that pressure. Spanos credited HotSchedules software — which replaces manual scheduling — for more efficient staffing, and technology that helps managers keep utility and water usage in check. He also praised the supply chain team for securing better deals on items like the toys in some Outback drinks.

Why hold pricing?

Outback and sister brand Bonefish Grill will delay planned menu price increases this quarter. Prices will already run about 4% higher year over year.

"We just don't feel we need to take more pricing than inflation. It really boils down to that," Spanos said.

He described consumers as resilient but cautious and discerning. Households earning under $75,000 a year have shown signs of curtailing spending. Bloomin' narrowed its full-year same-store sales guidance to 1% to 1.5%, from 1% to 2% previously.

The calendar adds pressure. Halloween fell on a Saturday, Christmas falls on a Friday, and the quarter includes one fewer operating day — together an expected 2-point drag on traffic.

How broad is the remodel program?

Outback has completed more than 60 remodels and will finish about 85 this year, 100 next year, and nearly the entire system by 2028. Each costs $350,000 to $400,000. Early remodels have produced a 1- to 2-point traffic lift over 12 to 18 months.

Marketing is shifting too. Outback expects to double its digital advertising mix to 60% of spend by year-end, with linear TV taking the remainder, allowing better targeting of customer demographics.

How did the other brands perform?

• Carrabba's Italian Grill: same-store sales up 0.6%, traffic down 2.9%.
• Bonefish Grill: same-store sales up 5.3%, traffic down 0.8%.
• Fleming's: same-store sales flat, traffic down 1.9%.

Across all four Bloomin' brands, same-store sales rose 1.9% and traffic fell 1.8%. Total revenue grew 1.7%, to $944.3 million. Net loss narrowed to $1.7 million, from $45.9 million a year ago.

The question for the fourth quarter is whether satisfaction gains and remodel lifts can offset a weaker calendar and forgone promotions — a test of whether full-price traffic can replace discounted volume.