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Shares of Outback Steakhouse parent Bloomin’ Brands tumbled more than 11% in Tuesday morning trading after the restaurant company said it’s expecting an additional $170 million in costs next year due to inflation.
Bloomin’ estimates commodity prices will rise 10% in 2022, adding about $100 million in costs. It is also seeing labor costs climb at a mid-single digit pace, accounting for roughly $45 million in additional spending. On top of that, it expects typical inflationary costs of about $25 million.
To offset higher costs, customers will have to pay more for their meals. The company plans to hike menu prices by 3% in November.
“Importantly, we haven’t taken price since 2019,” CFO Chris Meyer told analysts. “And so I’m not saying that we’ve got all kinds of headroom, and opportunity to take price, but we certainly are in a good position in the industry on the pricing front.”
Executives said they would continue to monitor inflation to decide if they need to add more price increases.
Bloomin’ is also slashing promotions to preserve its margins, like killing Outback’s steak and lobster deal. In a few cases, however, the company is lowering prices to encourage consumers to spend more. For example, it lowered the price of an eight-ounce steak at Outback so customers are more likely to choose the larger size over the six-ounce steak.
Executives said they would provide a more thorough outlook in February, when the company reports its fourth-quarter results. Bloomin’ doesn’t decide on commodity contracts until early December.
For the third-quarter, Bloomin’ reported adjusted earnings per share of 57 cents, topping estimates of 55 cents from analysts surveyed by Refinitiv. However, the company’s revenue of $1.01 billion fell short of expectations of $1.04 billion.
Bloomin’s stock has risen 4% this year, giving it a market value of $1.8 billion.