This week’s Stock of the Week is getting smaller and stronger.
Bloomin’ Brands, Inc. (BLMN) owns and operates the casual-dining chains Outback Steakhouse and Carrabba’s Italian Grill, upscale seafood chain Bonefish Grill and Fleming’s Prime Steakhouse & Wine Bar.
Unlike other restaurant firms, which are opening new locations, Bloomin’ Brands is culling its store base and will have net closures for the next two to three years. As a result, revenue will be essentially flat. It was $4.21 billion in 2017 and will likely be reported as $4.13 billion for 2018 and $4.24 billion in 2019. However, year-over-year comparable-store sales are improving, so earnings are going up. And the company is boosting margins by streamlining corporate overhead—which has been higher than at competitors—while investing in technology to help with productivity, scheduling, centralized ordering and other back-office tasks.
The company owns more than 1,000 restaurants and franchises only about 165, so it benefits directly from the software improvements in which it is investing. The dividend of $0.36/share/yr. recently yielded 1.9% and appears secure.
Fiscal year: December. Earnings per share: 2019 est./$1.67…2018 est./$1.53…2017/$1.36.
William E. Costello, CFA, is senior vice president and senior portfolio manager, Westwood Holdings Group, Dallas, which manages $21.6 billion, including the $323 million Westwood SmallCap Value Fund (WHGSX). WestwoodGroup.com