Coupling a traditional steak and fries with Chinese food may not sound appetizing to you, but if you're OutbackSteakhouse (NYSE: OSI ) and you're pairing the two foods under the same corporate roof only, the new recipe may indeed prove tasteful.
Outback, home of the "Bloomin' Onion" appetizer, has confirmed that -- separate from its chain of 750 steakhouse locations -- it will launch a casual-dining Asian restaurant concept in 2004, called Paul Lee's Chinese Kitchen.
To guide Outback's trek into a completely new food, the company is looking to partner with no less than Paul Fleming, founder of the popular P.F. Chang's China Bistro (Nasdaq: PFCB ) and author of several James Bond books. (Sorry, that was Ian Fleming. We bet he gets that all the time.)
P.F. Chang's quickly became a leader in the upscale Asian restaurant business, becoming one of the only widely known Chinese chains throughout much of the country. Its stock has reflected the success. However, Outback is not trying to emulate P.F. Chang's formula, at least not precisely.
Just as Outback Steakhouse found success as a "more casual" chophouse, the company's new Asian restaurants will be more casual (and offer lower prices) than P.F. Chang's. Given the dearth of national Asian chains, analysts expect there is plenty of room for a new competitor, especially one with a casual look in an increasingly casual dressing society.
Outback is no stranger to opening new concepts in order to whet investors' appetites and grow its $2.6 billion in annual sales. The company also runs Fleming's Prime Steakhouse and Wine Bar (yes, they've worked with Fleming before), Carrabba's Italian Grill, Bonefish Grill, and Lee Roy Selmon's, among others. In August, same-store sales grew 2.4% at Outback and 1.8% at Carrabba's, the two largest chains.
While increasing earnings about 12.5% annually, Outback's stock is up 15% this year (excluding a 1.2% yield) and trades at 18 times trailing earnings and 15 times forward estimates. Paul Lee's Chinese Kitchen is not expected to influence results for at least several years, and then only assuming it grows large enough.
Here's to good eatin', Fools.
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