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OSI Restaurant Partners on 1Q sales drivers

Outback parent swings to 1Q profit on positive same-store sales across 4 main brands

OSI Restaurant Partners LLC cited effective promotions, gift card redemptions and remodeling efforts at its flagship Outback Steakhouse chain as it swung to a profit in the first quarter from a year-ago loss.

The Tampa, Fla.-based company said net income for the March 31-ended quarter totaled $46.9 million, compared with a year-ago loss of $978,000. Revenue in the latest quarter rose 5.7 percent to $1.0 billion, from $947.5 million in last year’s first quarter.

Systemwide same-store sales increased 4.1 percent at Outback Steakhouse, 3.9 percent at Carrabba’s Italian Grill, 9.6 percent at Bonefish Grill and 11.4 percent at Fleming’s Prime Steakhouse and Wine Bar.

Dirk Montgomery, OSI’s chief financial officer, told securities analysts in a conference call Friday that gift card redemptions, promotions and menu improvements drove the increased sales. He noted about 60 percent to 70 percent of the gift cards purchased in the fourth quarter of 2010 were redeemed in the first quarter of this year.

At Outback, a long Valentine’s Day weekend plus TV and social media commercial spots also helped sales, while the restaurant also drew attention for recognizing the contributions of U.S. military personnel, he said.

Sales at Bonefish were boosted in the quarter by weekday promotions, Montgomery said, while Carrabba’s used a Postcards from Italy promotion to drive sales. The Postcards promotion offered customers a free dessert or appetizer with the purchase of an entrée, $5 off any Signature Pasta Meal and 20 percent off when placing a car-side carryout order.

On the cost side, Montgomery acknowledged increased commodity costs, including rising beef costs, but he said OSI benefited from commodities deals that carried over from 2010. He noted that 85 percent of the commodities costs for 2011 are locked in

During the call, Montgomery reiterated OSI’s plans to spend $125 million to $150 million in infrastructure upgrades, remodeling projects and restaurant development for its core brands in 2011.

He said the company remodeled 27 Outbacks during the first quarter as part of plans to revamp as many as 150 restaurants in the chain this year. The remodeling effort, which costs $250,000 to $300,000 per Outback unit, was paying off in sales increases of 3 percent to 5 percent renovated sites, he said.

OSI operates or franchises 968 Outback Steakhouses, 152 Bonefish Grills, 233 Carrabba’s Italian Grills, 64 Fleming’s units and 22 Roy’s Hawaiian Fusion locations in 49 states and 23 countries.

Contact Alan Snel at [email protected].

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