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01/10 19:42
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Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
The earnings call reveals several challenges: declining revenues, negative comparable sales, and lower operating margins. Management's cautious outlook and lack of concrete guidance further dampen sentiment. Despite some operational improvements and a dividend declaration, inflationary pressures and consumer pullbacks are concerning. The Q&A highlights strategic pricing issues and unclear management responses, adding to uncertainties. Given the company's small market cap, the stock is likely to react negatively, falling between -2% to -8%.
Total Revenues $1.05 billion, down 1.8% from 2024 due to net impact of restaurant closures and openings and a decrease in comparable restaurant sales.
U.S. Comparable Restaurant Sales Negative 50 basis points, with traffic down 390 basis points, below the casual dining industry.
Average Check Increased by 3.4% in Q1 versus 2024, in line with expectations.
GAAP Diluted Earnings Per Share $0.50, compared to negative $1 in 2024.
Adjusted Diluted Earnings Per Share $0.59, down from $0.64 in 2024, within guidance range of $0.55 to $0.60.
Adjusted Operating Margins 6.1%, down from 7.8% last year, driven by a 160 basis point decline in adjusted restaurant level margin.
COGS Inflation Approximately 1.5%, in line with expectations.
Labor Inflation 3.7%, reflecting inflationary pressure on wages.
Total Debt Net of Cash $860 million at the end of Q1.
Leverage Metrics 2.5 times on a net debt to adjusted EBITDA basis and 4.0 times on a lease adjusted net leverage basis.
Quarterly Dividend $0.15 a share, payable on June 4th, 2025.
Remaining Share Authorization Program $97 million.
Menu Item Reduction: Outback's April menu has approximately 10% fewer items, with a target of 15% reduction by the end of 2025. Carrabba's and Bonefish also reduced menu items by 10% and 20%, respectively.
Aussie 3 Course Offer: The Aussie 3 Course is being executed as an everyday value offer, expected to drive stronger traffic in the back half of the year.
Market Share Performance: The company underperformed the industry and lost market share as defined by Black Box.
Consumer Trends: There has been a consumer pullback with a softer Easter holiday than anticipated, impacting sales.
G&A Cost Reduction: Expected to be about $10 million lower in G&A for the total year, totaling approximately $215 million.
Ziosk Rollout: Ziosk tablets have been successfully rolled out across Outback restaurants, improving table turns by about five minutes.
Turnaround Strategy for Outback: The company is in the early stages of a multiyear turnaround for Outback, focusing on food quality, value, and guest experience.
Consulting Engagement: A third-party consulting firm has been hired to assist with strategy and cost-saving initiatives.
Competitive Pressures: The company underperformed the industry and lost market share, indicating competitive pressures affecting sales.
Regulatory Issues: The Brazil tax benefit was extinguished, leading to an expected negative impact of $5 million to $7 million on earnings for the year.
Supply Chain Challenges: The tariff situation remains volatile, with potential impacts of 20 to 40 basis points on restaurant level margins in 2025.
Economic Factors: The company is experiencing a choppy macro environment and cautious consumer behavior, affecting sales and traffic.
Operational Challenges: The company is in the early stages of a multi-year turnaround for Outback, indicating ongoing operational challenges.
Inflationary Pressures: Labor inflation was reported at 3.7%, contributing to higher operating expenses.
Consumer Behavior: There has been a noted consumer pullback, particularly during key holiday periods like Valentine's Day and Easter.
Operating Priorities: Focus on simplifying the agenda, delivering consistent execution, and turning around Outback.
Cost Savings: Expect to save about $10 million in G&A for the total year, totaling approximately $215 million.
Menu Streamlining: Reducing menu items by approximately 15% at Outback by the end of 2025.
Technology Implementation: Ziosk rollout across Outback restaurants to enhance guest experience and increase table turns.
Consulting Engagement: Hired a third-party consulting firm to assist with strategy and cost-saving initiatives.
Debt Management: Commitment to reduce debt leverage below 3.0 times lease adjusted net leverage.
Q1 2025 Revenue: Total revenues were $1.05 billion, down 1.8% from 2024.
Q2 2025 Guidance: Expect U.S. comparable restaurant sales between negative 250 and negative 150 basis points.
Full Year EPS Guidance: Expect to be at the low end of adjusted diluted EPS range of $1.20 to $1.40.
Capex Guidance: Expect capital expenditures to be between $190 million and $210 million.
Impact of Brazil Ownership: Expect a negative impact of approximately $5 million to $7 million on earnings due to extinguished tax benefits.
Q2 2025 EPS Guidance: Expect adjusted diluted EPS to be between $0.22 and $0.27.
Quarterly Dividend: The Board declared a quarterly dividend of $0.15 a share, payable on June 4th, 2025.
Share Repurchase Program: There is $97 million remaining under the share authorization program, but the company does not plan to execute share repurchases at this time.
The earnings call reflects mixed signals. Financial performance and strategic updates are positive, with consistent Q4 trends, successful marketing initiatives, and no further closures. However, challenges persist with flat traffic at Outback, potential beef inflation, and lack of specific guidance on remodel costs and manager compensation. The company's market cap suggests moderate sensitivity to news. Overall, the sentiment is neutral, with no strong catalysts for significant stock movement in either direction.
The earnings call summary presents a mixed picture with several negative factors outweighing positives. Financial performance is weak, with declining revenues, EPS, and operating margins. The guidance is also negative, expecting further declines in sales and EPS. Despite some positive elements like increased average check and off-premises sales, the market strategy and financial health are concerning, with high debt and inflation pressures. The Q&A section reveals early-stage turnaround efforts and lack of clarity in management responses, further dampening sentiment. Given the small-cap nature, stock is likely to see a negative reaction.
The earnings call reveals several challenges: declining revenues, negative comparable sales, and lower operating margins. Management's cautious outlook and lack of concrete guidance further dampen sentiment. Despite some operational improvements and a dividend declaration, inflationary pressures and consumer pullbacks are concerning. The Q&A highlights strategic pricing issues and unclear management responses, adding to uncertainties. Given the company's small market cap, the stock is likely to react negatively, falling between -2% to -8%.
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