Brinker International Inc. ( EAT ) recently reported
second-quarter fiscal 2013 adjusted earnings of 50 cents per share,
up 6.4% from the year-ago quarter. The annual surge in the earnings
was due to the company's higher margins.
The earnings in the quarter were at the higher end of the
company's guidance range of 48-50 cents per share and it was in
line with the Zacks Consensus Estimate.
During the quarter, revenue has increased 1.2% year over year to
$689.8 million, driven by system-wide comparable restaurants sales
growth of 1.5%. The revenue during the quarter missed the Zacks
Consensus Estimate of $693 million.
The company has previously stated that its comparable
restaurants sales growth in second-quarter fiscal 2013 will be at
or below 2%-3% owing to slow, industry sales and reduced consumer
Based in Dallas, Texas, Brinker International primarily engages
in the ownership, operation, development and franchising of various
restaurant brands under the names of Chili's Grill & Bar
(Chili's) and Maggiano's Little Italy (Maggiano's).
Chili's Grill & Bar restaurant reported revenues of $563.3
million, up 1.2% year over year. The rise was due to the increased
pricing and favorable mix-shift. Comparable restaurant sales at
Chili's Grill & Bar restaurant rose 1.0%.
Maggiano's sales increased 0.6% to $105.8 million in the
quarter, buoyed by effective pricing and mix. Same-restaurant sales
at Maggiano's inched up 0.6% for the 12th time owing to the 2.3%
escalation in menu price and 0.7% favorable mix-shift. However, it
was adversely impacted by a 2.4% traffic decline.
Franchise and Other revenue surged 2.0% to $20.6 million, owing
to the rise in royalty revenues. Comparable restaurant sales at
franchised restaurants were 2.4%, aided by 2.2% and 2.7% growth in
franchised domestic and international comparable restaurant sales,
Restaurant operating margin increased annually by 30 basis points
(bps) to 15.7%.
Restaurant margins at Chili's Grill & Bar expanded on higher
cost of sales. Restaurant margin at Maggiano's also improved,
mainly on better cost of sales neutralizing the increased workers'
compensation insurance costs.
At the end of second quarter of 2013, the company had current
assets of $262.6 million versus $190.6 million in the prior
quarter. Shareholders' equity amounted to $252.9 million, down from
$268.1 million at the end of the previous quarter.
Share Repurchase & Dividend
During the quarter, the company bought-back 1.5 million shares
worth $45.1 million.
During the quarter, the company paid its regular quarterly
dividend of 20 cents per share.
During the quarter, the company opened seven international
franchise restaurants and closed one franchise-owned Chili's
restaurant. At the end of the quarter, Brinker operated 1,593
restaurants, of which 1,275 were Chili's, 44 were Maggiano's and
274 restaurants belonged to the international market.
The company has maintained its guidance for fiscal 2013. The
company expects adjusted EPS in the range of $2.30-$2.45, up 17% to
25% y/y. The targeted growth is expected to come from 2%-3%
same-store sales gains, operating margin improvement of 100 bps and
share count reduction of approximately 6%. Diluted weighted average
shares outstanding are projected between 74 to 76 million in fiscal
Despite slowdown in the restaurant industry, management expects
comparable restaurant sales to increase 2%-3% year over year in
fiscal 2013, with a price increase of 1% to 2% at Chili's.
Franchise revenues are anticipated to increase in the mid-single
digits range, benefiting from the expansion of the restaurant
The company expects to open nearly 32 to 37 international
franchise restaurants in fiscal 2013 with two new restaurants under
Brinker currently retains a Zacks Rank #3 (Hold). Moving ahead,
retail restaurateurs, which are expected to perform well, include
The Cheesecake Factory Incorporated ( CAKE ), Krispy
Kreme Doughnuts Inc. ( KKD ) and AFC
Enterprises Inc. ( AFCE ). All these
stocks carry a Zacks Rank #2 (Buy).AFC ENTERPRISES (AFCE): Free Stock Analysis
ReportCHEESECAKE FACT (CAKE): Free Stock Analysis
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