Cabot Turnaround Letter Issue: June 25, 2025

Bloomin’ Brands (BLMN): The Early Blossoms of a Turnaround

Few things are more enduring than America’s love of a good hamburger. Indeed, the iconic sandwich is so much a part of the country’s pop cultural heritage that, according to numerous opinion polls, it’s one of the first things foreigners mention when asked to name the most American symbol they can think of.

Perhaps due to its legendary status in the halls of Americana, it’s particularly troubling that hamburger sales across the nation have been slowing in recent years. A combination of rising beef costs, combined with the rising popularity of chicken sandwiches, has resulted in food outlets that specialize in hamburgers and other beef products facing increased challenges to growth.

One such purveyor of high-quality steaks and hamburgers that has struggled with those headwinds is Bloomin’ Brands (BLMN). The parent company of the well-known casual dining chain Outback Steakhouse and other restaurants has faced several such challenges, including declining sales (particularly at Outback), along with increased competition from lower-priced fast food venues. A pullback in consumer spending has also contributed to the firm’s sales decline, as customers have been more cautious about discretionary spending in the wake of tariffs and persistent inflation.

Further contributing to the company’s weakness of the last few years was heightened pressure from casual dining competitors like Darden Restaurants’ (DRI) LongHorn Steakhouse and Texas Roadhouse (TXRH). Both restaurants were able to offset the slower traffic trends that have plagued the industry with above-average check-per-guest growth, while Bloomin’ lagged behind.

The overall result is reflected in the stock price performances for all three companies over the last five years—a comparison that needs no further explication.

Before diving deeper into the why and wherefore of Bloomin’s sales woes, it will help us to take a look at the company’s overall structure. The Tampa-based company owns a portfolio of well-known restaurants aside from Outback, including Carrabba’s Italian Grill, Bonefish Grill and Fleming’s Prime Steakhouse & Wine Bar. All are casual dining concepts with a diverse range of cuisines, from steak and seafood to Italian fare.

By annual sales, Outback is the star performer for Bloomin’, with annual sales of approximately $4 billion in 2024 and average sales per unit of $4 million in the U.S. dining market. Carrabba’s comes next with just under $700 million in sales last year ($3.6 million per unit), followed by $520 million in sales for Bonefish Grill ($3.2 million per unit), with Fleming’s bringing up the rear with $383 million in revenue for 2024. (While Fleming’s has the lowest annual sales, the upscale steakhouse boasts the firm’s highest per-unit sales of around $5.8 million.)

Key reasons for last year’s share price collapse were big hikes in menu prices, along with a notable decrease in profit margins due to rising labor and food costs, plus higher advertising expenses and weak customer traffic at key brands like Outback and Bonefish Grill. Specifically, the outfit’s restaurant-level operating margin dropped from 16% in Q4 2023 to 12% in last year’s Q4, owing to higher labor, operating and commodity costs and largely driven by persistent inflation.

As a result, foot traffic at both restaurants has suffered declines in recent quarters, which have been blamed on budget-conscious consumers cutting back on dining out spending.

To counteract these pressures, Bloomin’ has introduced several strategic initiatives to boost sales, including increased marketing efforts and last year’s introduction of value-focused menu options.

The latter marketing effort, known as the “Aussie Aussie Aussie” deal, was first introduced last year starting at $16.99, but it now starts at $14.99 as of mid-2025 and stands as the chain’s lowest-priced offering of the past year—as well as one of the most aggressively priced promotions it has rolled out recently.

Designed to attract budget-conscious customers, it features a three-course meal that includes a soup or salad, a choice of a select entrée served with one steakhouse side, and a slice of New York-style cheesecake. (Entrées include various steak, hamburger, chicken and shrimp options.)

Management views the Aussie 3-Course value promotion as a potential key driver for future sales growth—particularly in the second half of this year. Additionally, Bloomin’ is focused on further value offerings, simplifying operations and other long-term turnaround efforts to address the operational challenges of the last couple of years.

Commenting on those efforts, management told investors in May that it anticipates a multiyear turnaround, which it sees as being in its early stages. CEO Mike Spanos (formerly an executive with Delta Airlines) warned investors that its efforts would likely pressure short-term margins, but expressed confidence that the measures will result in stronger revenue longer term, adding: “We will meet the guests where they are with abundant everyday value to drive profitable in-restaurant traffic.”

Among those efforts were the shuttering of underperforming stores, which included the closing of 36 underperforming Outbacks last year, most of which were older restaurants with leases from the 1990s and early 2000s.

Another strategic initiative involves menu item reductions—"streamlining menus” in the company’s words—both on and off-premises, by removing items with low sales mix, low satisfaction scores or items that do not travel well. On that score, Outback’s April menu had approximately 10% fewer items, and by the end of this year, the Outback team will have reduced menu items by about 15%.

Meanwhile, for Carrabba’s, the May menu had 10% fewer items, while at Bonefish, the menu had 20% fewer items. Fleming’s summer menu would reduce items by about 10%.

The menu reductions are being aided by the recent rollout of the tabletop self-paying Ziosk platform that is now seen across all Outback restaurants. The top brass said it’s receiving “positive guest and Outbacker feedback” on this technology, with over 85% of customers using the tabletops to pay at the table, which has increased table turns on average by about five minutes.

Outback is also looking at staffing levels, server-to-table station ratios, and role definitions, with an emphasis on having managing partners coaching employees and interacting with guests during peak hours to improve both the guest experience and throughput, with a goal of improving the overall guest experience. The latter goal, said management, will be “the foundation for our turnaround.”

Another key aspect of the turnaround plan involves the refranchising of 67% of its underperforming Brazilian Outback Steakhouse restaurant operations to the Brazilian private-equity firm Vinci Partners in a $243 million deal. Outback Brazil encompasses around 172 restaurants, many of which are in shopping centers that have already been remodeled from the “Joey” prototype (which are typically one-third smaller than legacy units).

Bloomin’ is retaining 33% ownership of the Brazilian business, plus an option to sell the remaining interest in 2028, with management commenting that “combining powerful classic brands with local capability and expertise is the optimal business model to maximize future growth.”

Also integral to the turnaround is Bloomin’s investment in remodeling many of its locations, with a dedicated $40 million budget for remodels entering 2026 and beyond. The idea here is to remodel stores with lower spend and higher-impact scopes, which yield better returns and higher traffic. The store transformations are expected to ramp up in the second half of this year.

Finally, the firm is leveraging a digital marketing and analytics strategy aimed at improving communication and engagement with its customers. This cross-platform, omnichannel approach to meet customers via mobile apps, social media or loyalty programs aims to be present and relevant across all touchpoints.

On that score, Outback Steakhouse alone has acquired over 314 million impressions and $94 million in earned media, thanks to the recent digital and social media strategies. Bloomin’ is also evaluating its technological capabilities so that it can better manage demand during peak dinner hours.

Providing additional impetus for the company’s revival plans is the presence of the well-known activist investor Starboard Value, which remains actively involved with Bloomin’ Brands. Starboard holds a 10% stake in the company and was instrumental in appointing Jon Sagal, a partner at Starboard, and Dave George, a former Darden COO retained by Starboard, to Bloomin’s board.

The partnership with Starboard includes a cooperation agreement with customary standstill and voting provisions, indicative of Starboard’s sustained access and influence on the brands. Moreover, an operating committee was created on the board, including Starboard-linked appointees, to pursue operational and financial improvements.

In view of these initiatives—and with indications that the overall U.S. casual dining outlook is improving—I see Bloomin’ Brands as a worthwhile addition to the portfolio for participants with a medium-to-long-term outlook.

Recommendations

Purchase Recommendation: Bloomin’ Brands (BLMN)

2202 N. West Shore Blvd., Ste. 500
Tampa, FL 33607
Website: https://www.bloominbrands.com/

Symbol: BLMN
Market Cap: $810 Million
Category: Small-Cap
Business: Restaurants
Revenues (2025e): $3.9 Billion
Earnings (2025e): $102.8 Million
6/24/25 Price: 9.50
52-Week Range: 6.10-21.45
Dividend Yield: 6.3%
Price target: 20

Background:

BLMN made its Nasdaq debut in 2012 at 11.50 per share, rising to 17 by that year’s end before eventually topping out around 27 in 2013. It then spent several years churning in a 12-point lateral range before the Covid-related shutdowns of 2020 collapsed the stock and sent it all the way down to 5.

The bottom early that year was swift in coming, however, as the share price recovered in swift fashion and zoomed to a peak price of 32 in 2021, bolstered by a significant increase in digital sales and curbside pickup during the Covid era (with digital channels accounting for some 70% of total U.S. off-premise sales in 2021).

However, the “bloom” came off the rally once the country began to unlock later that year, with the post-Covid era ushering in a return to normalcy. The stock still managed to hover close to its all-time high up until early last year, when the realization set in that revenue was declining due to the factors discussed earlier, including lower comparable sales and the net impact of restaurant closures and openings.

It’s clear the company is currently in the early stages of its turnaround, and I view downside risk as being somewhat limited, with plenty of room for a favorable re-rating should financial results improve.

I estimate the window for a successful turnaround to be in the two-to-three range. Accordingly, I’m placing the initial upside target for this stock at 20 (more than double current levels, if realized).

Analysis:

Bloomin’s Q1 results weren’t exactly inspiring, although the quarterly report did offer some useful insights on the turnaround’s progress. Revenue of just over $1 billion was 2% lower on a year-on-year basis, but 8% higher compared to Q4, while earnings of 59 cents slightly beat estimates and improved sequentially.

Comparable restaurant sales in the U.S. were down 0.5%, with traffic decreasing by 4%. Average check increased by 3.4%, aligning with expectations. Off-premises sales in Q1 were 23% of total U.S. sales, while third-party delivery revenue was 11% of total U.S. sales.

CEO Spanos noted that the organizational redesign delivered higher-than-expected savings, guiding for general and administrative expenses of around $215 million for 2025, down $10 million from initial projections.

While acknowledging the “choppy macro environment,” Spanos said, “We continue to make progress on our operating priorities to simplify the business and consistently deliver a great guest experience while balancing our longer-term priorities to turnaround Outback and drive sustainable sales and profit growth.”

Bloomin’ is attractive as measured by multiple valuation metrics, including forward P/E, forward EV/Sales, forward EV/EBITDA and forward price/sales—all of which are significantly below the sector median.

And while the EV/EBITDA metric is not as bullish as it was earlier this year when it was a sterling 5x, at the current 8.6x it’s still considerably below the sector average. Given that Bloomin’ is still in the early stages of its turnaround, I regard the current discount as offering upside (assuming execution improves and sentiment shifts).

Speaking of investor sentiment, it’s anything but sanguine on a short-term basis. But this is where I think Bloomin’ shares can potentially receive a near-term boost from a contrarian perspective, as expectations are quite low for the brand right now. Indeed, analysts revealed palpable skepticism over the company’s turnaround plans during the latest earnings call (due mainly to concerns over competitive challenges and macro headwinds).

Perhaps not surprisingly, short interest in the stock is well above the 10-year average with around 11% of the float currently sold short. With a negative sentiment backdrop like this, it wouldn’t take much, in my estimation, to kickstart a potentially meaningful short-covering rally. (It should be added by way of caveat that this is strictly a speculative consideration with minimal implications for the longer-term recovery outlook.)

In conclusion, while choppy revenue is an ongoing concern, I believe there are strong reasons for expecting a successful execution of the company’s turnaround plan over the next two to three years, with the Wall Street consensus expecting top- and bottom-line stabilization by next year. BUY

The chief analyst of the Cabot Turnaround Letter does not yet personally hold shares of every company on the Current Recommendations List, but that will change over time subject to the following guidelines. The chief analyst may purchase securities discussed in the “Purchase Recommendation” section or sell securities discussed in the “Sell Recommendation” section but not before the fourth day after the recommendation has been emailed to subscribers. However, the chief analyst may currently hold and may purchase or sell securities mentioned in other parts of the Cabot Turnaround Letter at any time.

Performance

The following tables show the performance of all our currently active recommendations, plus recently closed out recommendations.

Notes to ratings:
1. Based on market capitalization on the Recommendation date.
2. Total return includes price changes and dividends, with adjustments as necessary for stock splits and mergers.
* Indicates mid-month change in Recommendation rating. For Sells, price and returns are as-of the Sell date.
** BNT return includes spin-off value in BAM shares.
*** GE total return includes spin-off value of GEHC shares at January 6, 2023 closing price to reflect our sale.
**** Indicates a partial sell.

The next Cabot Turnaround Letter will be published on July 30, 2025.

Copyright © 2025. All rights reserved. Copying or electronic transmission of this information without permission is a violation of copyright law. For the protection of our subscribers, copyright violations will result in immediate termination of all subscriptions without refund. Disclosures: Cabot Wealth Network exists to serve you, our readers. We derive 100% of our revenue, or close to it, from selling subscriptions to our publications. Neither Cabot Wealth Network nor our employees are compensated in any way by the companies whose stocks we recommend or providers of associated financial services. Employees of Cabot Wealth Network may own some of the stocks recommended by our advisory services. Disclaimer: Sources of information are believed to be reliable but they are not guaranteed to be complete or error-free. Recommendations, opinions or suggestions are given with the understanding that subscribers acting on information assume all risks involved. Buy/Sell Recommendations: are made in regular issues, updates, or alerts by email and on the private subscriber website. Subscribers agree to adhere to all terms and conditions which can be found on CabotWealth.com and are subject to change. Violations will result in termination of all subscriptions without refund in addition to any civil and criminal penalties available under the law.