Bloomin’ Brands, Inc. — FY2023 Form 10-K
Reporting period: Fiscal year ended December 31, 2023. The year comprised 53 weeks, versus 52 weeks in FY2022; the additional week contributed approximately $83.5 million of revenue and $0.15 of diluted EPS. This annual filing includes results through year-end, not a standalone Q4 report.
Business context and key financial metrics
Bloomin’ Brands operates Outback Steakhouse, Carrabba’s Italian Grill, Bonefish Grill and Fleming’s Prime Steakhouse & Wine Bar. At year-end, it operated 1,189 company-owned restaurants and franchised 291 across the U.S. and international markets.
| Metric | FY2023 | FY2022 |
|---|---|---|
| Total revenue | $4.671 billion | $4.417 billion |
| Operating income / margin | $325.1 million / 7.0% | $330.4 million / 7.5% |
| Net income attributable to Bloomin’ Brands | $247.4 million | $101.9 million |
| Diluted EPS | $2.56 | $1.03 |
| Operating cash flow | $532.4 million | $390.9 million |
| Capital expenditures | $334.2 million | $236.5 million |
Restaurant-level operating margin, a company-defined non-GAAP measure, was 16.2%, up from 15.6%; adjusted restaurant-level margin was 16.1%, versus 15.7%. U.S. comparable sales rose 1.4%, with traffic down 3.1% and average check up 4.5%. Brazil Outback comparable sales rose 5.5%, excluding currency and tax-exemption effects. U.S. and international operating margins were 9.3% and 13.6%, respectively.
Cash and cash equivalents were $111.5 million. Long-term debt, net, was $780.7 million, including $381.0 million drawn on the revolving facility, $104.8 million of 5.00% convertible notes due 2025 and $300.0 million of 5.125% notes due 2029. The company reported $599.2 million of unused revolver capacity, net of letters of credit, and compliance with debt covenants. Operating lease liabilities totaled approximately $1.307 billion. Working capital was negative $659.0 million, substantially reflecting unearned gift-card revenue and current lease liabilities.
Changes versus FY2022
- Revenue increased 5.8%, supported by the additional fiscal week, higher comparable sales, openings, currency translation and Brazil tax exemptions; closures partly offset growth.
- Operating income declined despite higher restaurant-level margins. Wage and commodity inflation, utilities and advertising costs, depreciation, and restaurant impairment and closure charges weighed on results.
- Attributable net income and diluted EPS increased substantially, largely because FY2022 included losses related to the partial repurchase of convertible notes and had a higher effective tax rate. FY2023 also benefited from Brazil tax legislation; the 53rd week added $0.15 to diluted EPS.
- Operating cash flow increased by $141.5 million. Capital expenditures rose, and the company’s 2023 cash dividends increased to $0.96 per share from $0.56.
Outlook, commentary, risks and unusual items
- Management’s 2024 priorities include improving the guest experience, value and sales; remodeling and developing restaurants; productivity and cost savings; international growth; and returns to shareholders. The filing estimates 2024 capital expenditures of $270–$290 million, approximately 15 additional U.S. Outback openings, and 40–45 new system-wide locations, about half in Brazil.
- Management anticipated 3%–4% commodity inflation in 2024; approximately 70% of estimated 2024 food purchases were under fixed-price contracts at year-end. U.S. labor cost inflation was 5.3% in 2023. Management cautions that pricing, traffic and commodity costs remain exposed to macroeconomic conditions, inflation and consumer confidence.
- The company recorded $33.6 million of impairment and restaurant-closing provision in 2023. It decided to close 36 predominantly older, underperforming U.S. restaurants and five Aussie Grill locations; the remaining planned closures were completed in February 2024. It expected another $8–$11 million of related severance and closure costs in Q1 2024.
- A Brazilian subsidiary received an unfavorable court ruling in January 2024 concerning eligibility for tax exemptions and plans to appeal. The company expected to deposit approximately $45–$50 million with the court in the first half of 2024; it had not recorded an expense or liability for the disputed amounts, citing its expectation of prevailing. Brazil tax benefits contributed approximately $23.6 million in FY2023; the company became subject to certain taxes again in Q4 2023 and to Brazilian income tax beginning in 2024.
- Material risks include consumer traffic and discretionary spending, labor availability and wage increases, commodity and supplier concentration, competition, food safety, cybersecurity, foreign currency exposure, franchisee financial health, litigation and leverage. More than 95% of U.S. beef purchases and more than 80% of Brazil pork purchases came from four suppliers in each market.
- Other notable items: a $350 million repurchase authorization was approved in February 2024, with the company noting it could provide flexibility around the 2025 notes’ maturity. The CFO notified the company of his intention to retire during 2024; the COO of casual dining restaurants was scheduled to leave on March 15, 2024.
PwC issued an unqualified opinion on the financial statements and concluded internal control over financial reporting was effective as of December 31, 2023. The audit identified insurance-reserve valuation as a critical audit matter.
Important facts for investors to verify
- Separate underlying sales and earnings trends from the 53rd week, Brazil tax benefits, currency translation and other adjustments; review reconciliation details for non-GAAP measures.
- Track U.S. traffic, comparable sales, pricing and restaurant-level margins as wage, commodity and operating costs evolve.
- Confirm the timing and cash impact of the Brazilian judicial deposit, appeal outcome and post-exemption tax burden.
- Assess cash generation and capital allocation against debt maturities, lease obligations, planned investment, dividends and the new repurchase authorization.
- Monitor execution and returns from restaurant openings, remodels and closures, and developments affecting franchisees, suppliers and key management roles.