The Outback Steakhouse parent’s shares fall 10% after higher costs hit the 2022 forecast

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Customers enter a Bloomin ‘Brands outback steakhouse restaurant on the Queens Place Mall in Queens, New York.

Victor J. Blue | Bloomberg | Getty Images

Outback Steakhouse parent Bloomin ‘Brands closed 10% on Tuesday after the restaurant company announced it would cost $ 170 million in additional costs over the next year due to inflation.

Bloomin ‘estimates that commodity prices will increase 10% in 2022, resulting in an additional cost of about $ 100 million. In addition, labor costs are rising in the mid single digits and adding up to around $ 45 million in expenses. In addition, she expects typical inflation costs of around $ 25 million.

To offset the higher costs, customers have to pay more for their meals. The company plans to increase menu prices by 3% in November.

“It is important that we have not taken a course since 2019,” said CFO Chris Meyer to analysts. “So I’m not saying we have all kinds of leeway and opportunities to take the price, but we are certainly in a good position in the industry when it comes to pricing.”

Executives said they would continue to monitor inflation to decide whether to take any further price hikes.

Bloomin ‘also cuts promotions to preserve its margins, such as: In some cases, however, the company is cutting prices to encourage consumers to spend more. For example, the price of an 8-ounce steak in the outback has been reduced so that customers are more likely to choose the larger size over the 6-ounce steak.

Given expectations of higher food and labor costs in the fourth quarter, Bloomin ‘estimates fourth quarter revenue to be at least $ 1 billion and adjusted earnings per share to be at least 50 cents.

Executives said they would provide a more thorough outlook in February when the company releases its fourth quarter results. Bloomin ‘does not make decisions on commodity contracts until the beginning of December.

For the third quarter Bloomin ‘reported adjusted earnings per share of 57 cents, exceeding the estimates of the analysts surveyed by Refinitiv of 55 cents. However, the company’s revenue of $ 1.01 billion fell short of expectations of $ 1.04 billion.

Bloomins stock is up 4% this year for a market value of $ 1.8 billion.

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