Bear of the Day: Bloomin' Brands (BLMN)

Bloomin’ Brands Company Overview

Zacks Rank #5 (Strong Sell) stock Bloomin’ Brands (BLMN) is one of the world’s largest casual and upscale dining restaurant operators. Founded in 1988, Bloomin’ Brands manages and operates nearly 1,500 restaurants in the United States and internationally. BLMN’s casual dining concepts include ‘Outback Steakhouse,’ an Australian themed steakhouse, and ‘Carrabba’s Italian Grill,’ a casual Italian eatery. On the upscale side, Bloomin’ Brand’s operates ‘Bonefish Grill,’ a seafood restaurant, and ‘Fleming’s Prime Steakhouse & Wine Bar,’ a fine dining steakhouse concept.

Bloomin’ Suffers from Slowing Traffic

Although US inflation numbers are relatively normal currently, households with incomes under $100k have been splurging on restaurants less often and are remain in a tough financial position as excess COVID-19 savings runs out. Lower income families are not only cutting back on eating out, but also ordering less appetizers and desserts when they do. Meanwhile, Bloomin’ Brands faces cutthroat competition in the casual dining arena from restaurant chains such as Chipotle (CMG), Cracker Barrel Old Country Store (CBRL), Texas Roadhouse (TXRH), and Darden Restaurants (DRI). As a result, Zacks Conensus Analyst Estimates predict stagnant top-and-bottom line growth through 2026.

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Bloomin’ Brands Margins are Shrinking

To keep up with rising competition, BLMN has had to spend more on advertising. Additionally, rising labor costs, maintenance costs, and food-input inflation are squeezing BLMN’s margins. In a troubling trend, BLMN gross margins have slid from nearly 50% in late 2024 to 37.15% currently.

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BLMN: Relative Price Weakness

Despite the strong bull market in US equities, BLMN shares are down nearly 40% year-to-date – a troubling sign of relative weakness. In addition, BLMN shares are stuck below the 200-day moving average. As Paul Tudor Jones warns, “Nothing good happens below the 200-day moving average.”

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Health-Conscious Trends Pose Challenge for Bloomin’ Brands

With the advent of health-conscious podcasts and more health information available than ever before, consumers are growing more health-conscious, avoiding indulgent items on Bloomin’ Brands menu such as the deep fried ‘Bloomin Onion.’ Younger demographics increasingly favor lighter, cleaner menu options.

Bottom Line

Bloomin’ Brands faces numerous challenges, from slowing traffic and shrinking margins to evolving consumer preferences.

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This article originally published on Zacks Investment Research (zacks.com).

Zacks Investment Research