Big steaks and bigger stakes were fit to be featured this past week. Let's take a closer look.
Not such a g'day, mate
Shares of Outback Steakhouse
I won't dissect the numbers -- Stephen Simpson did that already -- but I would like to voice my displeasure at the company's announcement during its conference call that it's testing a value menu as a way to pick up sluggish unit-level performance. The CEO indicated that it has resulted in "promising traffic trends" out in the Midwest, but didn't McDonald's
It wasn't until Mickey D's gave up on emphasizing its "Dollar Menu" and started beefing up its offerings with premium salads and grilled chicken breast sandwiches that it really started to turn its fortunes around.
I haven't seen the Outback value menu, but I'd venture to say it's probably a lose-lose situation. If the company is marking down some of its regular menu items to be on the value menu, then margins will take a lick. If it's introducing cheaper, lower-quality grub into the mix, then it will dilute the company's brand. There are things far worse than an empty table at an Outback. Satisfied clients are like boomerangs in that they come back for more. Pitching itself as a haven for cheaper eats may run off regulars, and the lower average tabs will also hurt the company in the long run.
Spooking the jukebox
Poor Warner Music Group
Thanks to a 176% spike in digital revenue -- the fat margin elixir that should be exciting its investors -- Warner is in pretty good shape. I would much rather be growing on that end instead of the stodgy CD business, with the various layers of expenses (like pressing, packaging, stocking, and shipping the discs).
Yes, there was more to the Warner report than that. However, with more and more companies launching digital music download and subscription services, this is a growth area for Warner, and it's not worth discounting.
Until next week, I remain,
Longtime Fool contributor Rick Munarriz loves to look back, even if it means he falls on his face going forward. He does not own shares in any of the companies in this story. The Foo l has a disclosure policy. Rick is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early.