BLMN TICKING ALONG

Last night, Bloomin’ Brands reported 1Q13 EPS of $0.50, surpassing consensus of $0.44 on 1.6% blended domestic company comparable restaurant sales growth (negatively impacted by 80bps due to Leap Year).

Noise in the Quarter

The bottom-line beat was driven by a lower tax rate, which added ~$0.03 to EPS. Looking forward, management guided to 2Q13 EPS of $0.21, below the consensus estimate of $0.27.  These discrepancies are largely due to noise on the tax line related non-operating items (deferred tax allowance). For the year, BLMN updated EPS guidance to at least $1.10 (from $1.06 prior) which is below consensus expectations of $1.11. While traffic (adjusted for trading day impact) was +3.2% at Outback, the FY13 guidance raise being smaller than the 1Q beat was a disappointment.

The highlight was the impressive same-restaurant sales performance at Outback. 1Q13 comps grew +2.5% versus consensus of 1.1%. In addition, there was one less week of advertising in the quarter. When adjusted for the trading day impact, comps were 3.5% at Outback. This was the 12th consecutive positive comp growth quarter for Outback, supported by continued growth at lunch and new menu initiatives. Fleming’s comps were well above the consensus 2%, and up sequentially, while Bonefish was in line with the Street as it laps very difficult 1H compares. Carrabba's continues to be a laggard.

Sales leverage, labor cost savings, and other cost cutting measures could not help mitigate food inflation as restaurant level margins were down 40 basis points.

BLMN TICKING ALONG - outback pod1

Conclusion


We are staying on the sidelines for now as earnings expectations seem to have limited upside.  Management has demonstrated its capability to grow same-restaurant sales but we believe that the stock is fairly valued at these levels.

BLMN TICKING ALONG - blmn eeg1

Howard Penney

Managing Director

Rory Green

Senior Analyst