MOST RECENT CONFERENCE CALL TRANSCRIPT
MOST RECENT CONFERENCE CALL TRANSCRIPT
UPDATED CORPORATE DESCRIPTIONS FOR: BLOOMIN’ BRANDS, KRISPY KREME, TEXAS ROADHOUSE, CRACKER BARREL, ARK RESTAURANTS AND NOODLES – with conference call transcripts
BLOOMIN’ BRANDS (BLMN)
KRISPY KREME (DNUT)
TEXAS ROADHOUSE (TXRH)
CRACKER BARREL (CBRL)
ARK RESTAURANTS (ARKR)
UPDATED CORPORATE DESCRIPTIONS – SHORTLY WILL INCLUDE VIRTUALLY EVERY PUBLICLY HELD RESTAURANT COMPANY – to be updated each quarter
The summaries we show, while not complete in detail and involve a number of approximations, provide a good starting point for our own investment banking activities and will hopefully do the same for our readers.
FEEDBACK FROM BLOOMIN’ BRANDS (BLMN) – REGARDING OFF PREMISE SUCCESS AND CORPORATE BREAK EVEN POINT
We continue to look for new data points that will help us understand which restaurant chains have the best chance to survive, then prosper, and when.
We’ve previously asked the question as to how much of the new off-premise business will be retained as the dining room activity rebuilds, and that jury is still out. We’ve suggested that store level margins will suffer as dining rooms are only 25-50% open and operating expenses (especially labor and new sanitizing requirements) burden the bottom line. Our article in mid-May, describing developments at Darden (Olive Garden and Longhorn Steakhouse) suggested that YTY same store sales have to get back to something like down 25% to approximate corporate cash flow break even. All of that is confirmed by commentary from Bloomin’ Brands on May 5th, as well as highly qualified Michael Halen, at Bloomberg Intelligence, just this morning, 5/29.
From Management Conference Call, May 5th:
“Have to get back to down 20-25% to be cash flow breakeven…. For our brands, we talked a lot about Outback and things and Carrabba’s on off-premises. But Bonefish and Fleming’s have taken it from virtually nothing. Bonefish had some, Fleming’s had hardly anything…..So I think at Bonefish, we’ve seen it. We’ll see what happens at Fleming’s…As of May 5th: 2/3 takeout, 1/3 delivery (half and half third party/in house).”
As described below by Michael Halen, off-premise revenues at Outback and Carabba’s had tripled, from an average of 18%, so we figure overall sales were running down YTY an average of approximately 46%. Management also confirmed, above, that sales have to recover to roughly a negative 20-25% to approximate corporate cash flow breakeven.
Per: Michael Halen at Bloomberg Intelligence, on 5/29/20
“Bloomin’s same-store sales may drop double digits in 2020 as dining-room closings and high unemployment hurt sales, yet a strong off-premise business at Outback will mitigate losses. We see Outback’s in-house delivery service as a competitive advantage as it has wider margins, control of service and access to customer data.
“Off-Premise Sales as % of Total Before Coronavirus
(Bloomin’ Brands)Outback Steakhouse 15% & Carraba’s 21%, Cheesecake Factory 17%, Cracker Barrel 9%,Applebee’s 13%, IHOP 10%,Olive Garden 17%, Brinker (Chili’s&Maggiano’s 17% Texas Roadhouse 7%
“Bloomin’s decision to prioritize direct delivery over third-party aggregators created a competitive advantage over casual-dining peers, as we see it. This includes wider margins, access to customer data — which allows for personalized marketing — and significantly faster delivery times (35 minutes). According to management, 74% of customers prefer self-delivery for the superior service and safety it provides. “Delivery is profitable, with more than 630 units offering the service. Bloomin’s recent partnership with DoorDash complements the existing self-delivery platform and expands the company’s reach to new customers.
“Delivery sales are now split evenly between in-house and third-party providers. Off-premise sales almost tripled from the beginning of March into the end of April. (05/29/20)”
Aside from the typical description of off-premise sales building rapidly through April and early May, and the confirmation of corporate breakeven for full service casual diners around a negative 20-25%, we think the movement to self-delivery may prove to be an important new development. We are all aware of the extra expense, management challenge and corporate liability of self-delivery. However, control of “the last mile”, more complete customer interaction and the elimination of delivery charge from third parties could make self-delivery an increasingly attractive option. The 74% surveyed preference of customers toward self-delivery could prove to be “anecdotal” but might also be an important indicator. Self delivery might especially appeal to regional chains, as opposed to multi-national giants, for whom The Brand is an important competitive advantage.