Shares of Bloomin’ Brands, the parent company of Outback Steakhouse, experienced a surge of 9% in premarket trading on Friday following the disclosure of an activist investor’s interest in the restaurant company. Starboard Value, the activist investor, has now acquired a 9.9% stake in Bloomin’ Brands, according to a regulatory filing. This news comes amidst a period of slowed sales growth for Bloomin’, prompting speculation about potential changes and interventions from Starboard Value.
Bloomin’ Brands announced in August that its U.S. same-store sales only grew by 0.8% in the second quarter, a marginal increase that reflects a decrease in traffic to its restaurants. This decline in sales growth has been a cause for concern. As the owner of popular restaurant chains such as Carrabba’s Italian Grill, Bonefish Grill, and Fleming’s Prime Steakhouse and Wine Bar, Bloomin’ Brands is now facing pressures to revitalize its business strategy and attract more customers.
Starboard Value’s History of Successful Turnarounds
The entry of Starboard Value into the scene gives hope for Bloomin’ Brands’ future. Starboard Value has a track record of successfully turning around struggling restaurant companies. In 2014, the investment firm took control of Darden Restaurants’ board and implemented various changes that resulted in improved sales and stock performance. One notable example was Starboard Value’s effort to enhance the quality of Olive Garden’s breadsticks, a move that resonated with customers and contributed to the restaurant chain’s resurgence.
While it remains unclear what specific changes Starboard Value plans to implement at Bloomin’ Brands, previous activist investors have highlighted cost-cutting measures and brand spin-offs as potential areas of focus. Jana Partners and Barington Capital Group, both of which have targeted Bloomin’ Brands in the past, have advocated for similar strategies. These suggestions aim to streamline operations, reduce expenses, and increase profitability for the company.
Positive Market Response
The market has reacted positively to Starboard Value’s interest in Bloomin’ Brands, as evidenced by the 27% increase in the company’s share price this year. With a market value now exceeding $2.2 billion, Bloomin’ Brands has the potential for renewed growth and value creation. Investors are hopeful that Starboard Value’s involvement will bring constructive changes and drive the company toward a more robust financial performance.
Bloomin’ Brands, the owner of popular restaurant chains including Outback Steakhouse, has attracted the attention of activist investor Starboard Value. With a history of successful turnarounds in the restaurant industry, Starboard Value’s involvement has generated optimism among investors. As the company faces challenges in sales growth and declining traffic, the potential for strategic changes and interventions from Starboard Value offers a glimmer of hope for a brighter future. The positive market response further underscores the potential value that can be unlocked through this partnership. Time will tell how Bloomin’ Brands will navigate these pressures and emerge stronger in an increasingly competitive landscape.