Bloomin' Brands Inc. Outlook Revised To Stable From Negative On Improving Performance; Ratings Affirmed

  • S&P Global Ratings expects U.S.-based Bloomin' Brands Inc. will maintain positive operating trends at its core Outback Steakhouse concept (about 60% of total revenue) while stabilizing its Brazil operations, resulting in overall sales growth in the next 12 to 18 months.
  • We are revising our outlook on Bloomin' to stable from negative. At the same time, we are affirming all ratings, including the 'BB' issuer credit rating.
  • The stable outlook reflects our expectation that sales and margin will modestly improve in 2019, supporting moderate free cash flow generation and stable credit metrics.
NEW YORK (S&P Global Ratings) March 12, 2019--S&P Global Ratings today took 
the rating actions listed above. We expect continued revenue growth in 2019 
driven by positive same-store sales at the core Outback Steakhouse, while 
operations in Brazil (about 10% of sales) continue to stabilize. The company's 
focus on store remodeling, relocations, and ongoing investments in off-premise 
capabilities should also support better overall sales trends across brands. In 
addition, we expect sales leverage will largely offset commodity, labor, and 
transportation related inflationary headwinds, resulting in a modest increase 
in adjusted EBITDA margins in 2019. We also forecast the EBITDA coverage ratio 
to remain in the low-4x range and debt to EBITDA to be around 4x at the end of 
fiscal 2019. 

The stable outlook reflects our expectation that Bloomin's results will 
continue to improve in 2019, with modest credit metric improvement from EBITDA 
expansion rather than from meaningful debt reduction. We forecast the EBITDA 
coverage ratio to remain in the low-4x range and debt to EBITDA to be around 
4x at the end of fiscal 2019.

We could lower the ratings if we believe the EBITDA coverage ratio will 
decline to below 4x and debt to EBITDA will increase towards 4.5x for a 
sustained period. This could occur if sales contract at a low-single-digit 
rate and adjusted EBITDA margins decline by about 100 basis points (bps) in 
2019 compared with our projection of 14.2%, due to persistent comparable sales 
weakening at Outback and other major brands, and/or significant commodity and 
labor costs increase.

We could raise the ratings if Bloomin' consistently executes on key operating 
initiatives with most of its major brands displaying consistent positive sales 
trends while profitability continues to improve, resulting in an EBITDA 
coverage ratio improving to 5x and above, and debt to EBITDA in the low-3x 
area. This could occur if sales increase at a high-single-digit rate and 
margins expand by at least 200 bps when compared with our forecast, while debt 
remains generally flat.
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