Q2 2024 Bloomin' Brands Inc Earnings Call
Operator: Greetings, and welcome to the Bloomin' Brands Fiscal Second Quarter 2024 Earnings Conference Call. At this time, all participants are in a listen-only mode. A brief question and answer session will follow management's prepared remarks. Please note, this event is being recorded. It is now my pleasure to introduce your host, Tara Kurian, Vice President, Corporate Finance and Investor Relations.
Speaker Change: Greetings, and welcome to the Bloomin' Brands Fiscal Second Quarter 2024 Earnings Conference Call. At this time, all participants are in a listen-only mode. A brief question and answer session will follow management's prepared remarks.
Speaker Change: Please note, this event is being recorded.
Tara Kurian: It is now my pleasure to introduce your host, Tara Kurian, Vice President, Corporate Finance and Investor Relations.
Tara Kurian: Thank you, and good morning everyone. With me on today's call are David Deno, our Chief Executive Officer, and Michael Healy, our Chief Financial Officer and Executive Vice President. By now, you should have access to our fiscal second quarter 2024 earnings release. It can also be found on our website at www.bloominbrands.com in the Investors section. Throughout this conference call, we will be presenting results on an adjusted basis. An explanation of our use of non-GAAP financial measures and reconciliations to most directly comparable GAAP measures appear in our earnings release on our website, as previously described.
Speaker Change: You may begin.
Tara Kurian: Thank you and good morning everyone. With me on today's call are David Deno, our Chief Executive Officer, and Michael Healy, Chief Financial Officer and Executive Vice President.
Speaker Change: By now, you should have access to our fiscal second quarter 2024 earnings release. It can also be found on our website at www.bloominbrands.com in the investors section.
Speaker Change: Throughout this conference call, we will be presenting results on an adjusted basis. An explanation of our use of non-GAAP financial measures and reconciliations to most directly comparable GAAP measures appear in our earnings release on our website as previously described.
Tara Kurian: Before we begin formal remarks, I'd like to remind everyone that part of our discussion today will include forward-looking statements, including a discussion of recent trends. These statements are subject to numerous risks and uncertainties that could cause actual results to differ in a material way from our forward-looking statements. Some of these risks are mentioned in our earnings release, and others are discussed in our SEC filings, which are available at www.sec.gov. During today's call, we'll provide a brief recap of our financial performance for the fiscal second quarter of 2024, an overview of company highlights, and current thoughts on fiscal 2024 guidance. Once we've completed these remarks, we'll open the call up for questions. With that said, I would now like to turn the call over to David Deno.
Speaker Change: Before we begin formal remarks, I'd like to remind everyone that part of our discussion today will include forward-looking statements, including a discussion of recent trends. These statements are subject to numerous risks and uncertainties that could cause actual results to differ in a material way from our forward-looking statements.
Speaker Change: Some of these risks are mentioned in our earnings release, others are discussed in our SEC filings, which are available at www.sec.gov.
Speaker Change: During today's call, we'll provide a brief recap of our financial performance for the fiscal second quarter 2024, an overview of company highlights, and current thoughts on fiscal 2024 guidance. Once we've completed these remarks, we'll open the call up for questions.
David Deno: Well, thank you, Tara, and welcome to everyone listening today. As noted in this morning's earnings release, adjusted Q2 2024 diluted earnings per share was 51 cents.
Speaker Change: With that, I would like to now turn the call over to David Deno.
David Deno: Well, thank you, Tara, and welcome to everyone listening today. As noted in this morning's earnings release, adjusted Q2 2024 diluted earnings per share was 51 cents.
David Deno: U.S. comparable sales were down 10 basis points, which was 20 basis points better than industry sales during the quarter, as measured by BlackBox. The casual dining industry was softer than anticipated in the second quarter. While our comparable sales growth outpaced the industry, we did not meet our expectations. We are focused on navigating the difficult near-term industry headwinds, as well as setting up our back end for long-term success. These near-term challenges, coupled with our Q2 results, are leading us to update our full-year guidance. Michael will go into more detail in a few minutes.
Speaker Change: U.S. comparable sales were down 10 basis points, which was 20 basis points better than industry sales during the quarter, as measured by BlackBox.
Speaker Change: The casual dining industry was softer than anticipated in the second quarter. While our comparable sales growth outpaced the industry, we did not meet our expectations.
Speaker Change: We are focused on navigating the difficult near-term industry headwinds as well as setting up outback for long-term success. These near-term challenges coupled with our Q2 results are leading us to update our full year guidance.
David Deno: On a positive note, we are seeing signs of inflation returning to normal, which creates some immediate opportunities for us. Additionally, interest rates may decline in the near future. Both of these factors will create a more favorable environment for the industry and our company. The key is to recognize that we have a strong business as we navigate the coming months. We are confident in our ability to manage industry trends and take share in the second half and beyond. This thinking has been included in our updated guidance.
Speaker Change: Michael will go into more detail in a few minutes.
Michael Healy: On a positive note, we are seeing signs of inflation return to normal, which creates some immediate opportunities for us. Additionally, interest rates may decline in the near future.
Michael Healy: Both of these factors will create a more favorable environment for the industry and our company. The key is to recognize that we have a strong business as we navigate the coming months.
Michael Healy: We are confident in our ability to manage the industry trends and take share in the second half and beyond. This thinking has been included in our updated guidance.
David Deno: As mentioned on prior calls, thriving same-store sales growth and improving traffic at Outback remain our number one priority. Outback is a power brand, and we are working to strengthen the business across many areas. We've done a significant amount of work on deepening our understanding of our customers, their visit motivations, and how we can further differentiate Outback within the casual dining landscape. We have put some of these learnings into action, and we expect much more progress through the end of the year. There are three primary areas we are focused on.
Michael Healy: As mentioned on prior calls, thriving same-store sales growth and improving traffic at Outback remains our number one priority. Outback is a power brand and we are working to strengthen the business across many areas.
Michael Healy: We've done a significant amount of work on deepening the understanding of our customers, their visit motivations, and how we can further differentiate Outback within the casual dining landscape.
Michael Healy: We have put some of these learnings into action and we expect much more progress through the end of the year. There are three primary areas we are focused on. Number one, consistently delivering great experiences.
David Deno: Number one, consistently delivering great experiences. Number two, improving the menu to offer abundance and value. Number three, building consumer decision-making capabilities and digital marketing into a competitive advantage.
Michael Healy: Number two, improving the menu to offer abundance and value. Number three, building consumer decision-making capabilities and digital marketing into a competitive advantage.
David Deno: Starting with delivering great experiences, we know that consistently delivering great food and service is the key to driving same-store sales growth, and at Outback, that is exactly our goal. We are enhancing our service model to provide even better, more memorable, and welcoming service to our guests. All of our technology and equipment investments, such as new grills and server handhelds, have been rolled out, and we are building on these investments. We've shared in recent quarters that we are seeing significant improvements in our customer satisfaction metrics with regard to execution, and that continues. Over the last year, stake accuracy is up 500 basis points, and consistency of experience is up 500 basis points.
Michael Healy: Starting with delivering great experiences, we know that consistently delivering great food and service is the key to driving same-store sales growth, and at Outback, that is exactly our goal. We are enhancing our service model to provide even better, more memorable and welcoming service to our guests.
Michael Healy: All of our technology and equipment investments, such as new grills and server handhelds, have been paroled out, and we are building on these investments.
Michael Healy: We've shared in recent quarters that we are seeing significant improvements in our customer satisfaction metrics with regard to execution, and that continues.
Michael Healy: Over the last year, stake accuracy is up 500 basis points and consistency of experience is up 500 basis points.
David Deno: This progress is further validated by casual dining industry metrics, which have continued to improve. Friendly service and food quality are now 290 and 40 basis points ahead of our casual dining peers, respectively. We know that over time, these levels of improvements will help drive same-store sales. Moving on to our second area of focus, improving our menu to focus on abundance and value. We are looking at the Outback menu to simplify offerings, reduce the number of items, and target higher satisfaction menu items that resonate with our guests.
Michael Healy: This progress is further validated by casual dining industry metrics, which have continued to improve. Friendly service and food quality are now 290 and 40 basis points ahead of our casual dining peers, respectively. We know that over time, these level of improvements will help drive same-store sales growth.
David Deno: At the same time, we are looking at selectively adding new differentiated items that provide abundant value. Taken together, this will likely result in a more simplified menu at Outback with fewer items and higher value. We do not want to share too much detail for competitive purposes, but work is underway, and we'll be able to share more in the upcoming quarters. Speaking of value, our current LTO offering has an entry price point of $14.99, the lowest offering of the year.
Michael Healy: Moving on to our second area of focus, improving our menu to focus on abundance and value.
Michael Healy: We are looking at the Outback menu to simplify offerings, reduce the number of items, and target higher satisfaction menu items that resonate with our guests.
Michael Healy: At the same time, we are looking at selectively adding new differentiated items that provide abundant value.
Michael Healy: Taken together, this will likely result in a more simplified menu at Outback with fewer items and higher value. We do not want to share too much detail for competitive purposes, but work is underway and we'll be able to share more in the upcoming quarters.
Michael Healy: Speaking of value, our current LTO offering has an entry price point of $1499, the lowest offering of the year.
David Deno: Three courses for $14.99 is an exceptional offer. We are not adjusting our strategy to go after deep discounting; rather, we feel this is best for the strength and the health of a brand in the long term. We are focused on delivering offerings that are only available at Outback. Importantly, they provide attractive value to our customers. They are promotions that we can own that connect with our guests and drive traffic in difficult times. We anticipate LTOs that have similar price points in the near term.
Michael Healy: Three courses for $14.99 is an exceptional offer. We are not adjusting our strategy to go after deep discounting. Rather, we feel this is the best for the strength and the health of a brand long-term. We are focused on delivering offerings that are only available at Outback.
Michael Healy: Importantly, they provide an attractive value to our customers. They are promotions that we can own that connect with our guests and drive traffic in difficult times. We anticipate LTOs that have similar price points in the near term, and we know we must continue to spend on marketing to maintain our share of voice.
David Deno: We know we must continue to spend on marketing to maintain our share of voice. Our last area of focus is building consumer decision-making capabilities and digital marketing into a competitive advantage. Our multi-channel advertising strategy currently leverages analytics to ensure strong returns and maximizes our reach.
Michael Healy: Our last area of focus is building consumer decision-making capabilities and digital marketing into a competitive advantage.
Michael Healy: Our multi-channel advertising strategy currently leverages analytics to ensure strong returns and maximizes our reach. We want to continue to improve this capability and develop a robust way to communicate, engage, and motivate our guests.
David Deno: We want to continue to improve this capability and develop a robust way to communicate, engage, and motivate our guests. We have begun building the foundation in both our team and our tools to further improve our decision making and resource allocation. We are establishing the framework for the long-term success of the Outback brand that will be grounded in our no rules, just right philosophy and will stay true to the irreverent and adventurous spirit of Outback. A great deal of work is underway, and we will discuss our progress in the coming quarters. Now on to some of our other priorities.
Michael Healy: We've started building the foundation in both our team and our tools to further improve our decision making and resource allocation.
Speaker Change: We are establishing the framework for long-term success of the Outback brand that will be grounded in our no-rules, just-right philosophy and will stay true to the irreverent and adventurous spirit of Outback. A great deal of work is underway and we will discuss our progress in the coming quarters.
David Deno: During 2024, we will continue to make investments to upgrade our assets through new openings, relocating, and remodeling rest. We expect to remodel 60 to 65 restaurants and open 40 to 45 new restaurants system-wide this year. Fifteen are new Outback Steakhouse restaurants and one is a new Fleming's that will open in the U.S.
Speaker Change: Now on to some of our other priorities. During 2024, we will continue to make investments to upgrade our assets through new openings, relocating, and remodeling restaurants.
David Deno: In addition, we will open 20 high-returning restaurants in Brazil this year. The balance of the openings will come from our franchise partners. We know that upgrading our assets is a big part of improving traffic trends, especially at Outback. In addition, we are achieving good returns from our new restaurants and relocations. We have a strong pipeline, but we are also seeing increasing costs. As such, we are committed to delivering a great return, and we'll adjust the future pipeline as needed to maintain the returns we are currently seeing. The last priority I'll discuss today is our leading off-premises business, which is 24% of our U.S. sales. We are pioneers in the to-go space, and we continue to see strong demand in this highly incremental opportunity.
Speaker Change: We expect to remodel 60 to 65 restaurants and open 40 to 45 new restaurants system-wide this year.
David Deno: This business has more than doubled since 2019 and is an important sales channel. We need to continue to pursue our off-premises business and grow restaurant sales. Additionally, our catering business is expanding at all of our brands, but particularly at Carrabba's. Their Q2 catering business has increased approximately 180% over the last two years and clearly demonstrates a runway for future growth. Importantly, the sales initiatives I described are supported by strong cash flow and a solid balance sheet.
Speaker Change: Importantly, the sales initiatives I described are supported by strong cash flow and a solid balance sheet. This gives us the ability to invest in our marketing and operations initiatives, our technology plans and asset improvements. These efforts are helping us build a strong business that will thrive for many years to come I want to thank the great teams in our restaurants and restaurant support center. The progress we are making would not.
David Deno: This gives us the ability to invest in our marketing and operations initiatives, our technology plans, and asset improvements. These efforts are helping us build a strong business that will thrive for many years to come. I want to thank the great teams in our restaurants and restaurant support center. The progress we are making would not be possible without all of your hard work.
Speaker Change: Be possible without all of your hard work. Thank you for delivering outstanding hospitality and service to our guests.
David Deno: Thank you for delivering outstanding hospitality and service to our guests. Before I turn it over to Michael, I would like to provide updates on two previously announced matters. The first is on the potential re-franchising in Brazil.
David Deno: We are encouraged by the level of interest in the business, and we are making progress on a possible transaction. We'll provide an update as events warrant. This is a fantastic business with great long-term value. And the second matter is CEO succession. The board has formed a committee, and the process is underway with a leading executive search firm. Importantly, I remain fully committed to leading the company and supporting a transition to the new CEO when they are selected. And with that, I turn to you, Michael, to discuss our Q2 financial performance and updated 2024 guidance. Thank you.
Michael Healy: Thank you, Dave, and hello, everyone. I would like to start by providing a recap of our financial performance for the fiscal second quarter of 2024. Total revenues in Q2 were $1.1 billion, which is down 3% from 2023. This was primarily driven by a decline in comparable restaurant sales, the net impact of restaurant closures and openings, and the loss of the Brazil value-added tax exemption benefit that ended in 2023. U.S. comparable restaurant sales were negative 10 basis points, and traffic was negative 380 basis points.
Michael Healy: We were ahead of the casher dining industry on sales by 20 basis points, though we were behind the industry on traffic by 70 basis points. We know our LTOs must be more value focused to take share in this environment, and our second half promotional calendar reflects that. Average check was up 3.7% in Q2 versus 2023. We are appropriately balancing delivering value to our customers while continuing to support the business in a period of higher inflation. David walked you through some exciting LTOs that bring great value to our guests with very accessible entry prices.
Michael Healy: Q2 off-premises was approximately 24% of total U.S. sales. We have seen an increase in the highly incremental third-party delivery business, now 14% of total U.S. sales, which was up from 12% in Q2 2023, driven by our growth in catering. Our Q2 GAAP diluted earnings per share for the quarter was $0.32 vs. $0.70 in 2023. Our Q2 adjusted diluted earnings per share was $0.51 versus $0.70 in 2023. The primary difference between GAAP and adjusted diluted earnings per share is due to the asset impairment and closure-related charges associated with the decision we made in Q4 last year to close 36 primarily older, underperforming restaurants in the U.S. and the decision this quarter to close 9 restaurants in Hong Kong.
Speaker Change: Earnings per share for the quarter was 32 versus <unk> 70 in 2023.
Speaker Change: Q2, adjusted diluted earnings per share was <unk> 51.
Speaker Change: Versus <unk> 70 in 2023.
Speaker Change: The primary difference between GAAP and adjusted diluted earnings per share is due to the asset impairment and closure related charges associated with the decision. We made in Q4 last year to close 36, primarily older underperforming restaurants in the U S and the decision this quarter to close nine restaurants in Hong Kong.
Speaker Change: I would like to comment on our adjusted share count that has been changed as a result of some SEC comments the shares outstanding for GAAP purposes includes both the shares underlying the convertible notes and the underlying warrants we entered into as part of the hedge transaction and.
Michael Healy: I would like to comment on our adjusted share count that has been changed as a result of some SEC comments. The number of shares outstanding for GAAP purposes includes both the shares underlying the convertible notes and the underlying warrants we entered into as part of the HEDS transaction.
Michael Healy: In our prior presentation of adjusted share count, we had added back the benefit of the hedge to match the economic effect of the underlying instrument. Starting this quarter, we will no longer be making this adjustment and have updated the share count to remove the benefit from the hedge associated with our convertible note. This change negatively impacted our Q1 results by approximately 3 cents, and it will impact our total year by approximately 5 cents. We have also recast the adjusted share count from Q2 last year, which reflects an increase of approximately 5 million shares, or from 92.4 million shares to 97.4 million shares.
Speaker Change: In our prior presentation of adjusted share Count we had added back the benefit of the hedge to match the economic effect of the underlying instruments.
Speaker Change: Starting this quarter, we will no longer be making this adjustment and have updated the share count to remove the benefit from the hedge associated with our convertible notes.
Speaker Change: This change negatively impacted our Q1 results by approximately <unk>.
Speaker Change: And they will impact our total year by approximately <unk> <unk>.
Michael Healy: This reduced Q2 2023 adjusted EPS by 4 cents compared to what we previously reported. Q2 adjusted operating margins were 5.7% versus 7.8% last year. There are a number of factors contributing to the margin decline this quarter. First, we are lapping the Brazil value-added tax benefit, which cost us 40 basis points of margin versus last year. We had an impact on labor, driven primarily from inflation, which drove an additional year-over-year margin unfavorability.
Michael Healy: Labor cost was up in Q2, primarily driven by wage inflation of 4.4%. Other restaurant operating expenses were also up year-over-year, partially due to inflation and partially due to spending $4 million more on advertising this year. Depreciation expense was higher in Q2, consistent with our increased levels of capital spending and our investments in infrastructure to support growth.
Speaker Change: On September 4th.
Speaker Change: Before I get into full year guidance I wanted to provide an update on three external factors impacting our full year guidance first at the end of May Brazil passed a new value added tax exemption into law. This will be a positive benefit for our company and is expected to be a <unk> <unk> benefit on the year almost entirely in the second.
Michael Healy: This was offset by a reduction in G&A. The margin decline was offset by favorable changes in food and beverage costs from pricing benefits and supply chain productivity initiatives. Commodities costs were better in Q2, driven by more modest expectations across dairy, oil, and seafood. We continue to see positive signs within our beef program, but this category remains inflationary. Before I get into full year guidance, I wanted to provide an update on three external factors impacting our full year guidance. First, at the end of May, Brazil passed a new value-added tax exemption into law.
Michael Healy: This will be a positive benefit for our company and is expected to be a 15-cent benefit on the year, almost entirely in the second half. Third, we are seeing four exchange headwinds in Brazil that will negatively impact our second half by approximately 4 cents. Collectively, these factors are a $0.06 benefit on the full year and a $0.07 benefit in the second half. Given the volatility the industry is seeing in traffic trends, we are updating our Just a Diluted Earnings Per Share guidance to be between $2.10 and $2.30.
Speaker Change: Half.
Speaker Change: As a reminder, the benefit recognized in 2023 was 25.
Speaker Change: Second the recast share count as previously discussed negatively impacts our full year adjusted earnings by <unk> with almost all of that impact in the first half.
Speaker Change: Third we are seeing foreign exchange headwinds in Brazil that will negatively impact our second half by approximately <unk> <unk>.
Speaker Change: Collectively these factors are a <unk> <unk> benefit on the full year and a <unk> <unk> benefit in the second half.
Speaker Change: Now turning to our full year 2024 guidance, we are updating our full year guidance to reflect the softer industry environment, which has continued in the start of Q3. As a result, we are updating our comp guidance range to be flat to down 100 basis points.
Speaker Change: We are being very mindful of pricing and have not contemplated pricing actions above prior guidance.
Michael Healy: We are appropriately managing our capital dollars given the current environment. We will continue to balance investing in our restaurants and returning dollars to shareholders. We expect Q3 adjusted diluted earnings per share to be between $0.17 and $0.25.
Operator: In the interest of time, please limit yourself to one question and a follow-up.
Questioner: Your specific plans, and you said more value in the second half, but any concern about driving more unprofitable traffic in response to that? And then I had one follow-up.
Speaker Change: Starting into Q3, I think the industry trends to look at overall where were softer than expected.
Speaker Change: We certainly have adjusted to that.
Speaker Change: We have tried to provide guidance that incorporates that.
Speaker Change: But I think you have to take a look at navigating a challenging near term environment and looking at the overall health of the business and overall health of the brands, which we think is very strong. So what we have here is.
Speaker Change: More.
Speaker Change: A softer environment than say a year ago and what we're trying to do is appropriately built some value into the menu, especially at Outback that is still a good return for the shareholder and we think we've landed on that with the $14 99, three course meal at Outback and it's too early to comment on trends, but where we're happy with what we're seeing so far.
Speaker Change: So youll see more of that the balance of the year and Thats how were trying to address some of the the value and industry issues right now.
Speaker Change: Dave I'd jump in real quick.
Dave: We're able to do is engineer. These these offers so at $14 99 with the engineering. So the economics of it are still very strong. So it's it's a great value for our guests really motivates them to visit but at the same time as good from a flow through perspective.
Speaker Change: Encouraging.
Speaker Change: And then I had one follow up just on the cost side of things you've made a couple of comments in the prepared remarks, one on the cost to build.
Speaker Change: Increases presumably.
Speaker Change: Two on beef. So I'm wondering if you could just provide outlook on each in terms of the cost to build.
Michael Healy: So what we've done, too, is we've built a pipeline so we are able to cherry pick those deals where the economics continue to be fantastic, and we're going to walk away from deals that don't hit the returns that we require. So as far as beef is concerned, I mean beef is still expected to be highly inflationary for us. What we are seeing is some favorability versus how we began the year. As we've shared before, the way that we contract our beef, we're able to share in any market favorability, and we're seeing signs of that, and able to take advantage of some of those dollars. But we're still actively watching it to see where we think we are in the year, but still highly inflationary but more favorable than we thought we'd be at the start of the year.
Alex Slagle: The next question comes from Alex Slagle with Jeffreys. Please go ahead.
Michael Healy: Yeah, I think what we're seeing is the consumer is being, you know, pretty choosy on where they spend their dollars. There's been a lot of speculation: is it the lowering consumer, or who exactly is it? But we believe that, with all the choices out there, people are being more choosy. Once they choose to come to our restaurants, we're not seeing a large trade-down or mixed change or anything like that, but the important thing is to get people in our restaurants and fight for that market share, which is what we're trying to do.
Speaker Change: Tap into something that's larger and more indulgent and so that's that's how we will construct the <unk> going forward, but we know having that opening price point at <unk> 99, as critical as Dave said from a value standpoint, theyre being choosy and so we have to we had to have to hit a price point, that's meaningful and thats.
Speaker Change: The team's focus and the other thing enables to do with it spilt is you start with an opening price point, there's another tier at a higher price point. It to you at a high can take the customer can choose once they come in the door. So we offer that opportunity for our customers.
Speaker Change: Thank you.
Speaker Change: The next question comes from Jeff Farmer from Gordon Haskett. Please go ahead.
Jeff Farmer: Great. Thanks, I appreciate it just following up on the line of questioning as it relates to the <unk>.
Jeff Farmer: The new three course meal at 14 99, So I think historically you guys touched on this it was 16 99, but is that $2 spread.
Speaker Change: Is that enough to I know, it's only been out there a couple a couple of weeks, but is that enough to drive traffic for you guys that $2.
Speaker Change: I can't get into details, Jeff, but yes, we think it is okay and then just along those lines before I move on.
Questioner: Okay, and then just along those lines before I move on, the promotion of the $14.99 offer. I can see stuff out there on social media, but beyond that, is there traditional media involved? How are you getting your customers to know about this pretty good deal?
Questioner: Okay, and then final question for me, as it relates to the Q3 SAMHSA sales guidance, which is down two to flat.
Michael Healy: Yeah, you know, our guide is flat to negative two, and for us, it all comes down to traffic. We've seen a lot of volatility in the industry, and so, you know, we're trying to be appropriate in providing guidance and account for that volatility. You know, from a traffic standpoint, we would expect traffic to be similar to what we saw in Q2. Our average check is holding, and I think one thing we are very confident in is that we will continue to take share.
Michael Healy: You know, we're encouraged by Outback's promotion; we're encouraged by their promotional calendar for the rest of the year. Obviously, the thing we don't have perfect clarity on is where that tide line is, but we're focused on the things that we can control, and that's what the team is working on. Thank you.
Operator: As a reminder, if you have a question, please press star then 1 to be joined into the question queue.
Questioner: Thank you. Just a question on Fleming's. You know, the components of the comp were a little different than the other brands with traffic down a bit more, but check-in. So could you just speak to the dynamics there? Was there an additional price recently? And then just your outlook on fine dining for the rest of the year, if it's much different than casual dining.
Michael Healy: Yeah, fine dining has been a bit more challenged than casual dining, I think partly because of some of the significant gains in prior years, but importantly, Flemings has been taking share versus the fine dining industry, if you look at how things are going. And we continue to offer the guests an exceptional experience, and our goal at Flemings is to elevate food, beverage, and service at Fleming's, and it continues to perform very well.
Michael Healy: So there have been some traffic challenges, but they are taking share in fine dining, and fine dining's been a little bit weaker than casual dining, but we still remain very, very bullish on the business and what the team is doing.
Michael Healy: Okay, thank you. And then a question on Brazil. Thank you for the update on the review process. Just on the business, can you just talk about the outlook for the balance of the year, anything you could offer about the current operating environment or the consumer in Brazil? As you see it now, that would be great.
Michael Healy: Yeah, sure. No, we've got a remarkable business down there. Number one restaurant company by far. You know, the economy there has been a little softer with higher interest rates, and in the quarter, there was, I don't know if you followed the news, but there was very, very significant flooding in the south that impacted our sales. But we will probably see some choppiness and softness in the balance of the year in Brazil because of the interest rate environment and what they're going through.
Michael Healy: But most importantly, the quality of our business and how they come to market and what they look like. You know, for instance, we just remodeled our first restaurant, the total remodel of our first restaurant in Rio, and the reception has been unbelievable. And the sales are way, way, way up. And that's an indication we can roll that remodel going forward, and that's an indication of what it means in that marketplace and how that brand looks.
Michael Healy: So, extremely strong brand, a choppy environment, maybe the balance of the year, but something that the team is trying to address to the best of their ability. Yeah, the only thing I'd jump in is, we're, we're, they're.
Michael Healy: Yeah, the only thing I'd jump in on is they're trying to take as little price as possible. They have their, you know, challenges from a macro perspective from a value perspective, so intentionally taking as little price as possible in that market to continue to support the business. But we're also opening 20 restaurants, right, and continuing to grow rapidly. It remains, you know, one of the strongest brands, you know, even outside of casual dining or dining in general in the country, and so, you know, obviously, we're very excited about that brand, but certainly there are some macro things that the team's working through.
Andrew Strelzik: The next question comes from Andrew Strelzik with BMO. Please go ahead.
Questioner: Hey, good morning. Thanks for taking the questions. My first one, as you think about communicating value to consumers. I'm just curious about your confidence in holding the marketing flat in the back half of the year. It seems like the industry is getting louder from a promotional perspective. So I'm just curious about your thought process there. Does that hold your share of voice? Are you losing share of voice, just any color on how you thought about marketing in the back half of the year?
David Deno: Yeah, a couple things. Yes, we want to hold our share of voice. Also, we can toggle advertising on if we want to. We've got the current outlook. But most importantly, the quality of the offering. And we're pretty pleased with what we've got going on right now at Outback. So the quality offering is strong. And if we decide to toggle up advertising because it looks that way, we'll do that. But we'll also look at the sales and returns we get out of that investment.
David Deno: And we have robust analytics around the returns on our marketing spend, and as those ROIs tick up, we're always, you know, willing to invest dollars to drive traffic and connect with our guests. But, as Dave said, the most important thing is how compelling the offer is, and we think we'll have a strong promotional calendar in the second.
Speaker Change: Enough dollars to drive traffic and connect with our guests, but as Dave said. The most important thing is is how compelling is the offer and we think we will we will have a strong promotional calendar in the second half.
Jeff Farmer: Okay. That's helpful. And then just secondly on the G&A side, you mentioned that coming up in lower for the quarter can you just talk about the dynamics, there and how to think about it for the rest of the year.
Questioner: Okay, that's helpful. And then just secondly, on the GNA side, you mentioned it coming in lower for the quarter. Can you just talk about the dynamics there and how to think about it for the rest of the year? Thanks. Yeah, for Q2, it came in a little lower.
Michael Healy: Yeah, for Q2, we came in a little lower, just a few puts and takes here, nothing overly meaningful, but I think we'll be relatively flat for the year.
Speaker Change: Yes for Q2 came in a little lower just a few puts and takes here nothing overly meaningful but I think it will be relatively flat on the year.
Speaker Change: Great. Thank you very much.
Speaker Change: This concludes our question and answer session I would like to turn the conference back over to David Deno for any closing remarks.
David Deno: This concludes our question and answer session. I would like to turn the conference back over to David Deno for any closing remarks.
David Deno: Well, thank you everybody for listening today. We appreciate your time, and we look forward to updating you later in the fall when we talk about Q3.
David Deno: Well. Thank you everybody for listening today, we appreciate your time and we look forward to updating you later in the fall when we talk about Q3 and have a great day everybody.
Operator: Have a great day, everybody. The conference is now concluded. Thank you for attending.
Operator: The conference is now concluded. Thank you for attending today's presentation. You may now disconnect. Thanks for watching!
Speaker Change: The conference has now concluded thank you for attending.
Speaker Change: During today's presentation you may now disconnect.
Speaker Change: [music].
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Speaker Change: [music].
Speaker Change: [music].