The worst is over for Bloomin' Brands (BLMN -1.71%). The parent company of casual-dining chains like Outback Steakhouse and Bonefish Grill struggled when the coronavirus reached the Americas. Most of its restaurants are in the U.S., and restrictions for dining-room seating set its business back.

In its last reported quarter, Bloomin' Brands was able to generate positive cash flow thanks to improving sales trends. We'll look at how the company survived 2020. Additionally, we'll see if investors should buy the stock now that the worst is over.

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Surviving the pandemic

To recap 2020, COVID-19 wasn't declared a pandemic until March 11. Shortly thereafter, people were encouraged to stay home, and in-store traffic (including indoor dining) started to see restrictions. Sales at Bloomin' plummeted -- over the subsequent four weeks, weekly comparable-restaurant sales across all of the company's chains were down between 69.5% and 55.9%. 

Of course, it could have been much worse for Bloomin'. For example, in the four weeks following the pandemic declaration, weekly comps were down over 75% at Applebee's (owned by Dine Brands). And for the same period, weekly comps at Darden Restaurants' Olive Garden chain were down between 71.1% and 53.6%. As bad as things were for Bloomin' Brands, these comparisons show its results were at least in line with some peers and ahead of others.

The company also made a decision many competitors did not: It didn't lay off or furlough any employees. The move was costly, as it had a net loss of $126.8 million in the first half of 2020 alone. But it strongly positioned the company to recapture lost sales as demand began to pick back up.

To be clear, revenue for Bloomin' Brands is still way down. The company reported third-quarter results in October, and revenue was down 20% year over year. That said, the company returned to positive cash flow in the quarter and even managed to pay down some debt. In short, business has stabilized for the company.

A waiter serves four women at a restaurant.

Image source: Getty Images.

Going forward

A lot has changed in our world, but if we turn back the clock to 2019, we can see what Bloomin' Brands looked like during normal times. That's important because investors should buy stocks for the long term, and long term, I expect a return to normal times.

In 2019, Bloomin' Brands generated revenue of $4.08 billion and had net income of $131 million. Revenue was up less than 1% for the year, because the company wasn't opening many new restaurants, and restaurant traffic was falling. Despite top-line challenges, management was able to grow earnings per share 27%, supporting ongoing dividend payout growth.

This is what Bloomin' Brands looked like in stellar economic conditions. Therefore, it's safe to assume it doesn't get much better than that for the company going forward. Investors can expect meager revenue growth and hope management makes good choices to fuel earnings.

That said, among casual-dining restaurants, Bloomin' Brands should be considered one of the least likely to lose shareholders a lot of their investment. That's because with four main concepts and 1,450 locations, it's a large, diverse company presenting less downside risk. Furthermore, while the dividend is currently on hold, it paid $0.40 per share annually before the pandemic. Right now, the stock trades around $22 per share. If Bloomin' returns to its previous payout of $0.40, its dividend yield would be 1.8% -- not high-yield but decent nonetheless.

Moreover, there's a final wild card for Bloomin' Brands. According to the Independent Restaurant Coalition, independent restaurants were expected to generate sales of $653 billion in the U.S. in 2020. But an unprecedented number of these businesses closed during the pandemic, and many will likely never reopen. The circumstances are heartbreaking, but it's possible companies like Bloomin' Brands will experience sales growth in 2021 and beyond with less competition.

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The final verdict

While I don't advocate investing with a short-term thesis, perhaps one could have bought Bloomin' Brands stock as a recovery play while it was still down in early 2020. But as we've seen, the company has now recovered, and its stock price fully reflects this: It's only down 11% from five-year highs!

Because of everything we've seen, I don't believe Bloomin' Brands stock will beat the market -- it's not a buy in my opinion. Investors should watch the company's sales growth this year to see if reduced competition helps it gain casual-dining market share, which would give me reason to reconsider my position. Otherwise, dividend investors should wait for it to reinstate its payout. Once reinstated, investors can determine what the yield will be and see if investing for the dividend makes sense.