Tuesday turned out to be a fairly solid day for one interesting restaurant name, but not so great for a vacation ownership company that has been hammered by a series of recent events.
Post-market trading was favorable for Bloomin' Brands Inc. (BLMN) , which includes such brands as Outback Steakhouse, Bonefish Grill, Carrabba's Italian Grill and Fleming's Prime Steakhouse & Wine Bar. Shares rose 6% after hours as BLMN was added to the S&P SmallCap 600 Index to replace Travelport Worldwide Ltd. (TVPT) , which is being acquired.
Bloomin' Brands has been range-bound for several years and the subject of some activist investor interest. It also remains among the cheapest restaurant names available in terms of forward price-to-earnings (P/E) ratio, trading at nearly 12x next year's earnings estimates. Being added to the S&P 600 does not guarantee success but may provide at least a temporary boost for Bloomin' Brands as index funds and ETFs tracking the index acquire BLMN shares.
It was a different story for timeshare name Bluegreen Vacations (BXG) , which fell 19% after Bass Pro Shops announced that it was ending a marketing agreement with the company due to alleged breaches by BXG. According to Bass Pro, the company was at odds with BXG's "high-pressure" sales tactics. In a news release on Tuesday Bluegreen Vacations stated that any monetary damages from legal action by Bass Pro would be "less than $20 million." Sales of BXG "vacation ownership interests" (VOIs) related to Bass Pro represented 9% of Bluegreen Vacations' 2018 revenue and 29% of sales to new customers.
While the end of the agreement was not a total surprise, the news came on the heels of last Thursday's announcement that BBX Capital Corp. (BBX) , which owns 90% of Bluegreen Vacations, was backing out of a merger with BXG. Shares of BXG fell nearly 31% in the wake of that announcement and are down nearly 45% over the last week.
This story seems like a conundrum wrapped in an enigma set in a "Catch 22." BBX Capital previously stated in March that it was re-evaluating the merger with BXG due to the possibility that Bass Pro would pull the plug on the marketing agreement, so none of the actions that have taken place over the last week are a surprise. Yet Bluegreen Vacations' stock price has reacted as though the company was blindsided.
Interestingly, BBX, which in addition to its 90% stake in Bluegreen Vacations has other real estate interests and owns specialty candy retailer IT'SUGAR (100 locations in 25 states), fell about 6% on Tuesday and is about 10% over the last week.
While I've been watching both BBX and BXG for months, I've remained on the sidelines. This environment generally has not been positive for lower-quality names or those that have some fleas. In other words, dumpster-diving is not working at this point in the market cycle as value -- especially what is considered distressed value -- is being shunned.
There's likely more dust to settle for Bluegreen Vacations and BBX, and I don't have the stomach for it, at least at this point.