Bloomin’ Brands Stock Tanks: What’s Cooking Behind the Crash?
Another casual dining casualty hits the market—Bloomin' Brands just served shareholders a rotten earnings surprise.
The bleeding obvious
Same-store sales wilted faster than week-old Outback lettuce. Margins got squeezed harder than a mid-rare sirloin. And now Wall Street's flipping tables like an angry diner with a well-done steak.
Short-sellers feast
Hedge funds circled like vultures over a bloomin' onion. Short interest spiked 22% pre-earnings—turns out they could smell the kitchen fire before the smoke alarm went off.
The institutional shrug
Three analyst downgrades before lunch. 'Execution risk' suddenly became every PPT deck's favorite euphemism. Meanwhile, the board keeps microwaving that same tired turnaround plan from 2022.
Another quarter, another reminder that casual dining stocks are where money goes to die slowly—with complimentary breadsticks.
Crunching the Q2 numbers and Q3 targets
Bloomin's second-quarter revenues rose 0.3% year over year, landing at $1 billion. Adjusted earnings dropped from $0.51 to $0.33 per diluted share. The trends pointed downward, but analysts still expected worse. Your average Wall Street firm WOULD have settled for earnings near $0.28 per share, on revenues in the neighborhood of $980 million.
But Bloomin's Q3 guidance set up some low near-term targets. The bottom line should show a net loss of at least $0.10 per share, versus the current analyst projection of a $0.05 profit per share.
Image source: Getty Images.
Can Bloomin' Brands cook up a Chili's-style comeback?
The company is taking notes from the(EAT 0.22%) playbook, hoping to reignite lackluster customer interest with a simpler menu and friendlier dining experience. Those are the key ingredients in the Chili's parent's recent success recipe, and I don't mind watching rivals like Bloomin' following a similar path.
But the turnaround won't be easy. Bloomin's adjusted restaurant-level operating margin shrank from 14% to 12% over the last year. Carrabba's Italian Grill is doing OK, but same-store sales growth was flat in the flagship Outback chain and down 5.8% at the Bonefish Grill.
And Bloomin's management isn't acting with confidence right now. The company has an unused share buyback authorization of $96.8 million available. That's about 18% of the stock's current market value, so the buybacks could make a real difference for shareholders.
The bullish MOVE would be to take a loan and use most of that buyback allowance while the stock is cheap -- Bloomin's shares are down by 63% over the last 52 weeks, after all. But the company didn't repurchase and retire any shares at all in the second quarter.
Bloomin' is a hometown hero in the Tampa Bay area, where the company is headquartered and these words were written. I sure hope for the best, but the lack of management courage scares me. So I'll largely watch this Chili's-style turnaround attempt from the sidelines.
